Distribution management - PowerPoint Presentation

Slide1

Distribution management & Marketing Mix

Chapter :- 8Slide2

Distribution refers to bringing the product to the market and giving it to the final consumerAccording to Mossmam & Norton “distribution is the operation which creates time,place & form utility through the movement of goods and persons from one place to another”.

Meaning and definitionSlide3

Are sets of interdependent organizations involved in the process of making a product or service available for use or consumptionDistribution Channels DefinedSlide4

Right product in Right quantity in Right condition at the Right time and Right place for the Right customer atRight cost

7 RsSlide5

5Distribution ChannelsAre intermediaries or middlemen

Exist because producers cannot reach all their consumers

Multiply reach and provide efficiency to the marketing process

Facilitate smooth flow and create time, place and possession utilities

Have the core competence and reach

Provide contact, experience,

specialisation

and scales of operationSlide6

6The Marketing MixProduct

Place

Price

Promotion

Distribution channels help in the

‘place’

aspect of the marketing mix

Distribution provides

place, time and possession utility

to the consumer Slide7

7Example

Consumer wants to buy a tube of toothpaste

Made available at a retail outlet close to her residence –

place

Made available at 8 pm on a Tuesday evening when she wants it –

time

She can pay for the toothpaste and take it away –

possession

The company distribution function has made all this possible.

The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motorSlide8

Spatial discrepancy :- the difference between the location of a producer and the location of widely scattered marketsTemporal discrepancy:- a situation that occurs when a product is produced but a customer is not ready to buy itNeed for breaking the bulk Need for assortment

Discrepancies and Distribution channelSlide9

9Distribution Channel StrategyDerived from

the corporate strategy and the marketing strategy

Steps for designing

the distribution strategy are:

Defining customer service levels

Distribution objectives and steps

Set of activities

The distribution organization

Key performance indicators

Critical success factorsSlide10

10Customer Service LevelsDefined by the nature of the industry, the products, competition and market shares.

Affordability

also decides the service level

It should at least

match competition

.

Customer

expectations

have no limit Slide11

11Distribution Objectives Influenced by the customer expectations

Defines the

extent of time, place and possession utility

which the customer can expect out of the channel network

Set of activities….Slide12

12Set of Activities

Manner

in which the company and its marketing channels go about achieving the customer service levels

Some of these

steps

could be:

Sales forecasts

Despatch plans

Market coverage beat plans

Journey plans for service engineers

Collection of sales proceeds

Carrying out promotional activities

The company also decides as to

who is to perform which task

Organization….Slide13

13Distribution OrganizationExtent of company support and outsourcing

to be decided

Budget

for the cost of the distribution effort

Select suitable

channel partners

– C&FAs, and distributors

Setting clear

objectives

for the partners

Agree on level of

financial commitments

by the channel partners.

Policy and procedure..Slide14

14Policy & ProcedureDefine policy and implementation guidelines through

Operating Manuals

Policy

guidelines

include

Code of

conduct

for channel members

System for redressal of

complaints

Any additional

subsidies

etc

Handling

institutional business

Service policy

for engineering products

KPIs….Slide15

15Key Performance IndicatorsFor measurement of effectiveness

. Some of these could be:

Consistent achievement of

targets

by product groups, periods and territories

Achievement of

market shares

Achievement of

profitability

Zero complaints

from customers

No stock returns

Ability to handle

emergencies

and

sudden spurts in demandSlide16

16Key Performance IndicatorsFor measurement of effectiveness. Some of these could be:

Balanced sales achievement

during a period – no period end skews

Market coverage

with ready stocks

Excellent management of

accounts receivables

Minimize

losses

on account of

stock-outs

Minimize

damages

to products

CSFs…Slide17

17Critical Success Factors

The distribution strategy also needs the

support and encouragement of top management

to succeed

Some of the CSFs could be:

Clear, transparent and unambiguous

policy and procedure

Serious

commitment

of the channel partners

Fairness

in dealings

Clearly defined

customer service policy

High level of

integrity

Equitable distribution

at times of shortage

Timely

compensation

of channel partnersSlide18

18Listing of Channel Members

C&FAs and CSAs

Distributors, dealers,

stockists

, value-added re-sellers

Agents and brokers

Franchisees

Electronic channels

Wholesalers

Retailers Slide19

19C&FAs / C&SAs

C&FA

: carrying and forwarding agent and

C&SA

: carrying and selling agent – both are on contract with a company

Both are

transporters

who work between the company and its distributors

Collect products from the company, store in a central location, break bulk and despatch to distributors against indents

Goods belong to the company

C&SA

also sells the goods

on behalf of the company but remits proceeds after saleSlide20

20Distributors, Dealers, Stockists, Agents

Name denotes the

extent of re-distribution

done by them

Distributors invest in the products –

buy

products from the company

Are on commission, margins or

mark-up

May or may not

get credit – but extend

credit

Distributors cover the markets as per a

beat plan

. All others merely finance the business.

Distributors

could be exclusive for a company

Agents

bring

buyer and seller

together

Slide21

21WholesalersOperate out of the main markets

Deal with a number of company products of their choice

Are

not on contract

with any company

Sell to other wholesalers, retailers and institutions

Negotiate about 15 days

credit

from company distributors – also provide credit to their customers

Operate on

high volumes and low marginsSlide22

22RetailersThe final contact

with consumers

Operate

out of their shops

and sell a large assortment and variety of goods

Located

closest

to consumers

Buy from company, distributors or wholesalers

Highest margins

in the network

Provide

personalised services

to their customersSlide23

23Industrial Products

Producer

Producer

Industrial Distributor

Industrial Customer

Industrial Distributor

Industrial Customer

Agent/middleman

Customers may also direct from company sales forceSlide24

24Consumer Products

Producer

Producer

Producer

Customer /

consumer

Retailer

Distributor

Distributor

Retailer

Customer/

Consumer

Wholesaler

Customer/

Consumer

Retailer

Retailers may also direct from company sales forceSlide25

25Patterns of DistributionDetermines the intensity

of the distribution

Intensity decides the

service level

provided

Types

of distribution intensity:

Intensive

Selective

Exclusive Slide26

Intensive distribution:- a form of distribution aimed at having a product available in every outlet where target customers might want to buy it.Selective distribution:- a form of distribution achieved by screening dealers to eliminate all but a few in any single areaexclusive distribution:- a form of distribution that establishes one or a few dealers within a given areaSlide27

27Distribution IntensityIntensive: distribution through every reasonable outlet available – FMCG

Selective

: multiple, but not all outlets in the market – pharma, frozen food

Exclusive

: may be only one outlet in a market - car dealersSlide28

28Intensive DistributionStrategy is to make sure that the product is available in as many outlets as possible

Preferred for consumer, pharmaceutical products and automobile sparesSlide29

29Selective DistributionA few select outlets will be permitted to keep the productsOutlets

selected in line with the image the company

wants to project

Preferred for

high value products

Tanishque jewelry

Keeps distribution costs lowerSlide30

30Exclusive DistributionHighly selective choice of outlets – may be even one outlet in an entire market

Could include outlets set up by

companies

– Titan, Bata

Producer wants a

close watch and control

on the distribution of his products.

Channel strategy…