Distribution strategies

Channel Decisions
Channel Design
Designing the network (who is on the team and what each should do)

Channel Management
Managing the network

Distribution Strategies
1. 2. 3. 4. 5. 6. Channel Structure Strategy Distribution Scope strategy Multiple Channel strategy Channel modification strategy Channel control strategy Conflict Management strategy
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1-Channel Structure Strategy

Refers to the number of intermediaries that may be employed in moving goods from manufacturers to customers
Direct Distribution Strategy- A company may undertake to distribute its goods to customers or retailers without involving any intermediary Indirect Distribution Strategy- goods pass through one or more intermediaries

Typical Channel Structure- Consumer Products

Typical Channel Structure- Industrial Products

2-Distribution Scope strategy

The strategic alternatives here are 1. Exclusive distribution 2. Intensive distribution 3. Selective distribution

Exclusive distribution
One particular retailer serving a given area is granted sole rights to carry a product Exclusive distribution is especially relevant for products that customers seek out.- Rolex watches, Gucci bags etc Exclusive distribution has its own advantages & disadvantages and is suitable for products having characteristics of high price, high margin and low volume.
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Intensive distribution
Makes a product available at all possible retail outlets
This may mean that the product is carried at a wide variety of different and also competing retail institutions in a given area

The advantages are increased sales, wider customer recognition and impulse buying This strategy is more suitable for FMCG /convenience products rather than consumer durables.

Selective distribution
Is the strategy in which several but not all retail outlets in a given area distribute a product Shopping goods- goods that consumers seek on the basis of the most attractive price or quality characteristics are frequently distributed through selective distribution. Ex- chain of furniture stores etc Manufacturers also select those retail outlets who can provide after sales and repair & maintenance services

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Market Coverage Intensity

Convenience good Intensive

Shopping good Specialty good

Selective

Exclusive

3-Multiple Channel strategy

Refers to a situation in which two or more different channels are employed to distribute goods & services The market must be segmented so that each segment gets the services it needs and pays only for them, not for the services it does not need There are two types of multiple channels of distribution- Complementary and Competitive
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Complementary Channels
When each channel handles a different noncompeting product or noncompeting market segment

Objective is to reach market segments that cannot otherwise be served

Eg Avon products ,besides MLM also sold through departmental stores Dell selling through dealers as well as internet HUL toiletries to Hotels,Hospitals,Airlines etc.
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Competitive Channels
Competitive channels exist when the same product is sold through two different and competing channels.
Ex- Prescription drugs are today available in Chemist shops as well as Shopping Malls.

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4-Channel modification strategy

Introduction of a change in existing distribution arrangements based on evaluation and critical review

Channels should be evaluated on an ongoing basis so that appropriate modification may be made as and when necessary
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Channel modification strategy

A shift in existing channels may become desirable for any of the following reasons
1. 2. 3. 4. 5. 6. 7. Changes in consumer markets & buying habits. Development of new needs in relation to service, parts or technical help. Changes in competitors perspectives Changes in relative importance of outlet types Changes in a manufacturers financial strength Changes in the sales volume level of existing products Changes in product, price or promotion strategies.
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5-Channel control strategy

Channel arrangements traditionally consisted of loosely aligned manufacturers, wholesalers & retailers, all trying to serve their own ends regardless of what went on elsewhere in the channel structure Control is a necessary ingredient in running a successful system
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Channel Integration & Systems

Vertical Marketing Systems (VMS)

Comprises of Producer, Wholesalers & Retailers acting as unified system

Corporate Marketing systems

Corporate VMS A) A corporate VMS combines successive stages of production and distribution under single ownership.
Ex- BPCL owns petroleum refineries as well as many petrol pumps.

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Administered Vertical Marketing systems

Administered VMS coordinates successive stages of production and distribution through the size and power of one of the members
Manufacturers of a dominant brand are able to secure strong trade cooperation and support from resellers

Kodak, Gillette & HUL are able to command high levels of cooperation from their resellers in connection with displays, shelf space, promotions and price policies
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Contractual Vertical Marketing Systems

Consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone.

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Franchise system
The traditional system is the manufacturer-sponsored retailer franchise.-Ex Ford appoints dealers for cars
Another is the manufacturer-sponsored wholesaler franchise.coca cola licenses bottlers A new system is the service-firm-sponsored retailer franchiseHospitals(Apollo group),Fastfood business( Dominos)

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Horizontal Marketing systems

Horizontal Marketing Systems Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.
Ex- Post office selling life insurance policies HUL & Pepsi for bottling & distributing Lipton range of beverages.

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Multichannel Marketing Systems

When a single firm uses two or more marketing channels to reach one or more customer segments Benefits
Increased market coverage Lower channel cost selling by phone rather than personal visits to small customers Customized selling technical sales force to sale more complex equipment

Multichannel Marketing Systems

Demand generation tasks
Lead generate presales Close sales Post sales Account mgt

Internet Marketing channels National account Direct sales Telemkt Direct mail

and Methods

Retail stores
Distributors

Sources of Channel conflicts

Differences in Goals
Manufacturer and distributor each focused only its own sale
Internet sale manufacturer views as expansion ,whereas distributor sees as cannibalizing his sale Distributor incorporates manufacturers product with lines from other manufacturers

Understanding of proper scope of activities

Function each party will carry out Target population for whom parties will carry out these functions Distributors sees companys job to open new accounts, whereas company expects distributor sales force to be cold calling Geographically defined area assigned to distributor, but a key institution in that area serviced by company

Perceptions
Distributor may see performance gap developed in eyes of customers between manufacturers products and competitors Manufacturer still believes it is delivering superior quality

Channel conflicts
Change in marketing channel
Compaq sale via internet

Can arise even at set-up stage

Firms perceives 2 segments

Price sensitive

Service sensitive

Served through no-frills channel to keep costs low

Served through service intensive channel at high cost

Conflicts arise when there is leakage