Introduction to Distribution Management Prof. Suvendu Kr. Pratihari spratihari@mimts.org Prof. Suvendu Kr. Pratihari 1

Prof. Suvendu Kr. Pratihari Learning Objectives To discuss how distribution channels play a vital role in value delivery. (RN-P-505) To discuss the factors that governs the development of the Distribution Channel (Gupta-P-427) To understand the major roles of the distribution channel Prof. Suvendu Kr. Pratihari

What is Distribution Channel (Ref – Stanton-413/14E) A Distribution channel consists of a the set of people and firms involved in the transfer of title of a product as the product moves from producer to the ultimate consumer or business user. It is the management of all activities which facilitates the movement and co-ordination of supply and demand in the creation of time and place utility. Prof. Suvendu Kr. Pratihari

Channel Flow (Ref. Saxena-P-449/4E) Physical Flow Input Supplier Transporter & Warehouses Manufacturer Transporter & C and F agents or Company Warehouse Customer Retailer Transporter Title Flow Supplier Manufacturer Wholesalers/Dealers Retailers Customers Payment Flow Supplier Bank Wholesalers/Dealers Retailers Customers Manufacturer Information Flow Prof. Suvendu Kr. Pratihari

Prof. Suvendu Kr. Pratihari Factors that governs the development of the Distribution Channel (Ref.- Gupta P-427/2E) Market Factor Customer Preference -The channel which is most preferred by customers. Organizational Customers – They have buying habits that are different from the other consumers. Geography – Consumer location is one of the major factor in developing the distribution channel. Competitor Analyzing the competitors’ channel and finding one’s own channel is the most challenging task for the marketer. Prof. Suvendu Kr. Pratihari

Prof. Suvendu Kr. Pratihari Factors that governs the development of the Distribution Channel …Contd. Nature & Availability of the intermediary It is important to find out the intermediary that can handle the product capably and provide adequate service to the final customers. Product Factor Product Life Cycle Complexity Value of the product (Low cost & High Cost) Size and Weight Customer perception about the product Nature of the product itself Prof. Suvendu Kr. Pratihari

Major Role of Distribution Channel Reducing the Distance between the producer & the consumer Speeding up in meeting the requirement of the customer Reduce large quantities in to acceptable lot size Provide variety to the consumers Helps fund the activities of reaching the product to the customer Prof. Suvendu Kr. Pratihari

Types of Middleman/Intermediary (Ref. R Saxena-P-448/4E) There are three types of middlemen, that facilitate the flow of goods and services from the manufacturer to the consumer. Merchant Middleman : Take title of the goods and services and resell them. E.g. Distributor, Dealers, Retailers, they share the risk with the manufacturer. Agent: They don’t take title to the goods or services, but help in identifying potential customers and even in negotiation. E.g. C&F agent, broker etc. Facilitator: These are the independent business units. Facilitate the flow without taking a title or negotiation on behalf of the producer. E.g. Transport Companies, Banks, Independent warehouses. They are being paid for their services. Prof. Suvendu Kr. Pratihari

Different Types of Intermediaries (Ref. RN-P-509) C&F Agent Wholesaler/stockiest/distributor Retailer/Dealer Reseller Broker Franchise Authorized Representative Commission Agent Consignment Agent Transporter Prof. Suvendu Kr. Pratihari

Functions of Intermediaries Making the Product Available: Provide for storage and physical movement of the goods. Minimizing the Distribution Cost: Believing in routine and simplified transactions and work with a large no of products (at the wholesaler and retailer level), so that the distribution cost get minimized. Providing Information: Collect the information about customers, competitors and any other entities which can affect he company’s marketing effors. Prof. Suvendu Kr. Pratihari

Functions of Intermediaries…contd. Helping customers in taking the purchase decision: They do the actual selling. They are the link for transfer of ownership of the goods from one party to another. Reducing the no of touch points: The company will not be able to meet the demands of thousands of its customers directly and hence need intermediation. Prof. Suvendu Kr. Pratihari

Functions of Intermediaries…contd. They finance the inventories after the goods leave the manufacturer till they reach the end user. They also provide credit facilities to their buyer. Helping the manufacturer to effectively run trade and consumer promotions. Prof. Suvendu Kr. Pratihari

Intensity of Distribution Intensive Distribution The product is made available in as many outlets as possible. Exp-FMCG sector Selective Distribution Few select outlets. Exp- Tanishq Jeweler Exclusive Distribution Here the producer is interested in keeping a close watch and control on the distribution of his products. Exp-Bata Showroom, Raymond showroom, Exclusive women apparels Prof. Suvendu Kr. Pratihari

Prof. Suvendu Kr. Pratihari Channel System Vertical Marketing Channel System Horizontal Marketing Channel System Multi-Channel Marketing System Prof. Suvendu Kr. Pratihari

Vertical Marketing Channel System It is the conventional marketing system of a producer, distributor and retailer. Each of the channel members including the company act independently and trying to run a profitable business. When all these entities were to act together to provide service to the end user, it would be called Vertical Marketing System (VMS) Prof. Suvendu Kr. Pratihari

Horizontal Marketing System This system operates between two or more unrelated companies, but arrangement of working together provided benefits to both, Commonly known as “tie-ups” Each companies has seen their respective strength, which can be exploit to its advantage. Example – Supermarkets and airports having ATM of leading banks Exp – Big hotels having CCD outlets, Cell Phone outlets etc. Prof. Suvendu Kr. Pratihari

Multichannel Marketing Here, companies use two or more marketing channels to reach different customer segments. Prof. Suvendu Kr. Pratihari

Thank You Prof. Suvendu Kr. Pratihari suvendupratihari@gmail.com 18