Distribution Channels

Module 5

Meaning:
It indicates the path in which the goods and services
flow or move from producers to consumers.
Nature:
Movement of goods/services from producers to consumers
Set of interdependent organizations
Affect market decisions
Competitive advantage

Definition:
Distribution channel can be defined as a set of
interdependent marketing institutions, participating in
the marketing activities involved in the movement or
flow of goods or services from the primary producer to
ultimate consumers.

What is a Distribution
Channel?
A set

of interdependent organizations
(intermediaries) involved in the process
of making a product or service available
for use or consumption by the consumer
or business user.
Channel decisions are the most
important decisions that management
faces and will directly affect every other
marketing decision.

Why To Use Marketing

Intermediaries?
Producers establish marketing channels for a
variety of reasons:
Producers lack financial resources necessary for
direct marketing
Direct marketing is not feasible for many offerings
Using channels frees money for investment in main
business
Intermediaries are more efficient

Advantages Of Using Intermediaries

Selling through wholesalers and retailers usually is
much more efficient and cost effective than direct
sales
Intermediaries achieve superior efficiency in making
goods widely available and accessible to target
markets.
Through their contacts, experience, specialization and
scale of operation, intermediaries offer the firm more
than it can achieve on its own.

Matching

Negotiation

Financing

Promotion

Physical
Distribution

Contact

Information

Risk Taking

Distribution Channel
Functions

Distribution Channel
Functions

Information: gathering and distributing

marketing research and intelligence
information about the marketing
environment

Promotion: developing and spreading

persuasive communications about an
offer

Distribution Channel
Functions

Contact: finding and communicating

with prospective buyers

Matching: shaping and fitting the offer

to the buyers needs, including such
activities as manufacturing, grading,
assembling, and packaging

Distribution Channel
Functions

Negotiation: agreeing on price and

other terms of the offer so that
ownership or possession can be
transferred

Physical distribution: transporting and

storing goods

Distribution Channel
Functions

Financing: acquiring and using funds

to cover the costs of channel work

Risk taking: assuming financial risks

such as the inability to sell inventory
at full margin

Consumer Marketing Channels and Levels

0-Level

1-Level

2-Level

3-Level

Business Marketing Channels

0-Level

1-Level
M

2-Level

3-Level

Indirect

Ind
Dist

Ind.
Cust

Components of Distribution
Channel

All kinds of merchants middlemen such as

wholesalers & retailers.

All kinds of agent middlemen such as

commission agents, brokers, warehouse
keepers & so on.

All other facilitating agencies such as

bankers, advertising agencies & so on.

Nature Type Of Middlemen

1.

2.

Merchant Middlemen: These are the middlemen

who take the title of goods and resell them. These
get the bonuses and margin as compensation. They
share the risk with manufacturers. They are of 2
types:
i. Wholesalers
ii. Retailers
Agents: They do not take the title of goods and
services but help in identifying the potential
consumers and negotiating. They act on behalf of the
producers by prospecting, warehousing etc and do
not take risk. They earn commissions. Some type of
agents are brokers, jobbers etc.

3.

Facilitators: These are independent

business units that facilitate the flow of
goods and services from the producer to
the customer without taking a title to them
or negotiating on the behalf of the
producer. These institutes are paid service
charges. Some of the institutes are
transport companies, banks and
independent warehouses.

Middlemen or Intermediaries

Intermediaries play an important role in

moving the product in a market. Making the
product available to the customers is done
by the intermediaries.
They buy in large quantities and compete
with other middlemen in the market hence
they fix prices to the product at an
affordable level. If there were no middlemen
then the prices of the product would have

Role of Middlemen or
Intermediaries in
distribution
1.

Provide information: Middlemen provide

information about the market to
manufacturers about the changes in
demography, psychographs, media habits
and the entry of new competitors in the
market.

2.

Price Stability: Maintaining a price

stability in the market is another function.
Even though at times when there is an
increase in prices in the product, they
continue to charge the same old prices to
the customers.

4.

Financing: They finance the

manufacturers by providing working
capital in the form of advances for goods
and services.

5.

Title: Most of the middlemen take title to

the goods and services and trade in their
own name in order to reduce the risk
between manufacturers and the
middlemen. It also enables them to have
the physical possession of goods and meet
consumers demand whenever needed.

Wholesaling
Wholesaling is concerned solely with
the distribution of large quantities of
goods received directly from the
manufacturers and sold in small quantities
to the retailers. The wholesalers form an
important first link in the field of
distribution.

Characteristics Of A Wholesaler

i.

ii.

iii.

iv.

He deals in large quantities & generally

sells goods to the retailers.
His business is a specialized one because
he deals with a particular commodity.
Sometimes he also arranges to warehouse,
finance, transport etc and render services
to manufacturers & retailers
The wholesaler is mainly concerned with
assembling and dispensing function in
marketing.

Retailing
It involves all the activities involved in
selling products or services directly to the
final consumers for their personal and non
business use. The Wal-Mart, Home Depot and
target are some of the retailers. The retailing
is done in retail stores.
There are some non-retail stores which
sell to the final customers through direct mail,
catalogues, telephone, internet, door-to-door
contact, etc.

Types of Retail Stores

1.

Specialty Stores: These are the ones

which carry a narrow product line with a
deep assortment within that line.

2.

A store like Shoppers Stop that retails ready made

garment for their family is a single-line store.
Raymond show shops that retail men clothing &
accessories is a limited line store.

Department Stores: These stores carries

several product lines required by a
household. They may be the provision
stores or the departmental stores etc.

3.

Supermarkets: This is a relatively large,

low cost, low margin, high volume, self
service operations designed to serve the
customers need for food, household
maintenance products. Some of these
similar kinds of stores exists in India like
Foodland, etc.

4.

Convenience Stores: These are food

stores relatively smaller than supermarkets
and are located near residential areas.
These are opened for long hours, seven
days a week. In Indian context these are the
food stores, grocery stores etc.

5.

Discount Stores: These are the ones which

sells the standard merchandise at lower
prices than conventional merchants or
stores by accepting lower margins but
pushing for higher sales volume. These
stores usually sells reputed brand. Wal-Mart
are good examples.

Channel Levels
A channel level is a distinctive layer or tier
of marketing intermediary which functions
as a channel member ,doing fully or
partially the work of bringing products and
their ownership closer to the customer.
The number of intermediary levels
indicates the length of a channel.
The channel level is short if there is only
one intermediary and long if there are
more levels.

Types of Channels of
Distribution
Zero Level or Manufacturer:
Consumer ChannelE.g.: Bata shoe company showrooms. This is the shortest
channel and its popular in industrial goods mostly.

One Level Channel:

Manufacturer-Wholesalers/Agents-Customer
For e.g the Government, educational institutes, hospitals,
business houses, etc.

Manufacturer-Retailer-Customer

E.g.: Cement industry where sometimes the goods are

distributed directly to the retailers

Types of Channels of
Distribution
Two Level or Manufacturer:
Wholesaler-Retailer-Consumer.
Ex: This is a regular & a popular channel used for the
distribution of groceries, drugs & other consumer
goods.

Three Level or Manufacturer:

Agent-Wholesaler-Retailer-Consumer.

Types of Channels of
Distribution
1.

Zero Level or Manufacturer-Consumer Channel:

There are 3 alternatives in a direct sale to consumers.
They are:
i). Sale through advertising.
ii). Sale through traveling sales force.
iii). Sale through retail shops of manufacturers.
E.g.: Bata shoe company showrooms. This is the
shortest channel and its popular in industrial goods
mostly.

Representation of ZeroLevel Distribution

Manufacturers

Consumers

One Level
a. Manufacturer-WholesalersCustomer
A wholesaler may
bypass a retailer when
there are large &
institutional buyers.
For e.g the Government,
educational institutes,
hospitals, business
houses, etc.

a.

Manufacturers

Wholesalers/
Agents

Customers

One Level Channel

b. Manufacturer-RetailerCustomer
b.

This is a channel
where there are no
wholesalers and the
customers buy from the
retailers directly
E.g.: Cement industry
where sometimes the
goods are distributed
directly to the retailers

Manufacturers

Retailers

Customers

3.

Two Level or Manufacturer-Wholesaler-RetailerConsumer:

This is a regular & a popular channel used for the
distribution of groceries, drugs & other consumer
goods.
Its suitable for the producer in the following
conditions:
a. If he has a narrow product line.
b. If he has a limited finance.
c. If there are wholesalers who are specialized
and can provide a strong promotional support.
d. If products are durable & are not subjected to
physical deterioration.

Representation of Two level

Distribution
Manufacturers

Wholesalers/
Dealers

Retailers

Consumers

4.

Three Level or Manufacturer-Agent-WholesalerRetailer-Consumer:

In this channel the producer uses the services of an
agent middlemen for the initial distribution of goods.
The agent in turn distributes to the wholesalers who in
turn sells it to the retailers. Agent middlemen generally
operate at the wholesale level. They are common in
agricultural marketing

Representing Three Level

Distribution
Manufacturers

Agents

Wholesalers

Retailers

Consumers

Physical Distribution System

or Marketing Logistics
Management of distribution is called third P (place) in marketing.
This involves processes to place finished goods from a manufacturer
to a customer for final consumption and usage.
This encompasses flow of goods and ownership from a manufacturer
to a customer.

Component Functions Of
Physical Distribution /
Marketing Logistics

Transportation.

Warehousing.

Inventory Management.

Warehousing

Warehousing management has two distinct &

equally important parts :
i). The physical job of creating & running the
network of storage points.
ii). The managerial task of controlling inventory
levels without sacrificing service levels.

Importance of Physical
Distribution System
1.

Ensures the physical flow of the products from the

producer to consumer.

2.

Confers place and time utility of the products.

3.

Helps build clientele.

4.

Where production locations & markets are distanced,

physical distribution becomes crucial.

5.

A promising area for cost reduction.

Steps Involved in Designing

a Physical Distribution
System.
1.

Articulating distribution objectives &

specifying the minimum service level desired in
product delivery.

2.

Finding out what consumers want: The

expectations of consumers should be identified
and also products should be delivered on time.

3.

Finding out what competitors do: The firm must

also find the advancements of the competitors,
their levels of service in product delivery.

4.

Optimizing Costs: The firm has to evolve an

economical system without sacrificing the minimum
guaranteed service in delivery. Service level & cost
should be taken in broad sense & its feasible to
measure distribution service levels.

5.

Keeping the System Flexible: Marketing is never

static & it keeps changing. Hence physical
distribution should be flexible. Even at the cot of
economy, some flexibility must be retained.

Steps Involved In Designing A Channel System

Formulating
channel objectives
*Effective coverage
of he target market.
*Efficient and costeffective distribution.
*Partnering the firm in
financing and subdistribution costs.

Identifying
Channel
functions
*It must be
identified in
specific context
of the firm

Linking
channel
design to
product
characteristics.
*Match the
channel system
with the product
best.

Evaluation of
competitors
channel designs

Evaluation of the
distribution
environment.

Matching the
channel design
to company
resources

Evaluation of
competitors
channel designs

Evaluating the
alternatives and
selecting the
best.

1. Formulating channel objectives

Ensuring that consumers incur minimum
exertion in procuring the product.
Helping the firm carry on manufacturing
uninterrupted, confident that the channels
will take care of sales.
Partnering the firm in financing and subdistribution costs.

2.Identifying channel functions

Identification of the functions to be
performed by the channel . The channel
functions must be identified in specific
context of the firm in order to get practical
direction in designing the channel system.
3.Linking channel design to product
characteristics.
The firm should analyze the characteristics
of the product and choose the channel system
that matches the product best.

4.Evaluation of the distribution

environment.
While selecting the channel design, the firm should take
into account the distribution environment obtaining in the
country/territory.

5.Evaluation of competitors channel

designs
The firm should also study the competitors channel
patterns before deciding its channel design. Quite a
number of firms do settle down for a follow the leader
policy in channel design but this deprives them of a
chance to score an edge over competition through the
channel strategy.

6.Matching the channel design to company

resources.

Choice of channel is also governed by the resources

available with the organization.
Firms with limited resources settle for conventional
channels.
Firms with larger resources have more options.

7.Evaluating the alternatives and selecting

the best.

The firm must choose the alternative designs available

and choose the best among them .There are two
alternatives:Economic evaluation
Conceptual evaluation

Factors Influencing
Distribution Decisions
Company

Market
characteristics
(Automobile
servic-24/7 basis)

Middleman
characteristics
(negotiations,
storage, contract
and credit)

Product
characteristics
(precious
stones )

Intensity of
competitiondistb varies

characteristics
(selective
distribution)

Environmental
characteristics
(government
policies)

Market Characteristics
.For example, if the customer wants a high level of service, the
manufacturer will have to ensure that its channel members are
able to provide it or else the firm will have to provide it. The
latter alternative may be costly but may ensure a high level of
customer confidence.
Customer characteristics also involve attitude towards waiting
time, expectations with regard to special convenience and
preference
for
buyingfor
inexample,
a comfortable
andmanufacturer
more relaxed
In
an automobile
dealership,
the automobile
insists on
environment.
investment
in tools, equipments, and manpower training ensuring a high level of
precision in servicing.
Therefore, the manufacturer trains the dealers employees in servicing the automobiles.
Likewise, firms have today opened call centers which respond to customers service
calls on a 24/7 basis. Not only so, they have appointed independent service agents who
receive these calls in a seamless manner.

Product Characteristics

The key issues for analysis are product value, perceived risk,
and the nature of the product.

If the product value and the perceived risk is high, as in the

case of capital equipment, precious stones and gems, shorter
channel or rather direct marketing is the most preferred
alternative.

Here the firm sells product through its own sales force.
Likewise, if the product is perishable in nature direct
distribution or shorter channel is advisable. For example milk,
bread, fruits, flowers etc.

Company Characteristics

The next variable is the company characteristics and objectives. The

channel design is influenced by the company's long term objectives,
financial resources manufacturing capacity, marketing mix and even
its philosophy.

For example, if the firms manufacturing capacity can meet only

25% of the total market demand it may be well advised to either
follow selective distribution, i.e. distribute only through selected
outlets in few markets or adopt an intensive distribution, i.e. cater to
all outlets in a given geographical market or exclusively distribute it
all over the country.

Middleman Characteristics

This refers to middlemans aptitude for

service,
promotion
and
handling
negotiations, storage, contract and
credit. Channel design reflects the
strength and weakness of different
intermediaries.

Intensity Of Competition
The nature and intensity of competition in the industry will
determine the distribution pattern adopt by a firm. Some firms
may adopt an intensive distribution strategy and be indifferent to
multiple brand outlets. Here, these firms aim at getting the highest
share from such outlets. Other firms may have the policy of
exclusive distribution, i.e. insisting that the intermediary deals in
no other brand.

Environmental Characteristics
Environmental characteristics like government policies, statutory
provisions, state of the economy, technological and infrastructure
developments also affect distribution in the firms.

Distribution Alternatives

The three major distribution alternatives are:

Intensive distribution
Selective distribution
Exclusive distribution

Intensive Distribution

This alternative involves all the possible outlets that

can be used to distribute the product.
This is employed when the price of the product is low,
frequency of buying is more and brand switching is a
common phenomena.

Intensive Distribution
This method generally secures high sales,
wide consumer recognition and
considerable impulse purchasing.
This is particularly useful in products like
soft drinks where distribution is a key factor
of success. Here, the soft drink firms
distribute their brands through multiple
outlets to ensure their availability at an
arms length to the customer.

Selective Distribution

This alternative is the middle path approach to

distribution. Here, the firm selects few outlets to
distribute its products.
This alternative helps focus the selling effort of the
manufacturing firms on a few outlets rather than
dissipating it over countless marginal ones.

Selective Distribution

Selective distribution has a limited number

of middlemen, they can spend more on
sales promotion and offer maximum cooperation in the promotion campaign.
Selective
distribution
can
help
the
manufacturer
gain
optimum
market
coverage and more control but at a lesser
cost than intensive distribution.

Exclusive Distribution

When the firm distributes its brand through just one

or two major outlets in the market who exclusively
deal in it and not all competing brands, we can say
that the firm is using an exclusive distribution
strategy.

This is a common form of distribution in

products and brands that seek high
prestigious image.

Exclusive Distribution
Exclusive distribution offers tremendous
loyalty of dealers and substantial sales
support from the dealers.
Typical examples are designer wares, major
domestic appliances, and even automobiles.
By giving exclusive distribution rights, the
manufacturer hopes to have control over
the intermediaries price, promotion, service
policies etc.

Franchise Selling

Franchise means a privilege or an exceptional

right granted to a person.
It is term to describe with effect to selective or
exclusive distribution policies.
Franchise selling is any contract under which
independent retailers or wholesalers are
organized to act in close co-operation with each
other or with the manufacturer to distribute
given products or services.

Franchise Selling
The franchiser i.e.. the parent company
provides equipment, the products or services
to the franchisee who is the owner of a
business unit. Under this system the owner of
the product issues a license to the
independent dealers in certain areas and
encourages them to make profit for
themselves.
The owner retains the control over the
technique or style with which the goods or
services are sold.

Vertical Marketing
System

It is a distribution channel structure in which

producers, wholesalers and retailers act as
a unified system .

One channel member owns the others, has

contracts with them, or has so much power
that they all cooperate

Vertical marketing systems are of three types

namely
1. Corporate vertical marketing systems
2. Administered vertical marketing systems
3. Contractual vertical marketing systems

1. Corporate vertical marketing

systems

In the corporate VMS, the successive

stages from production to
distribution are under single
ownership of any of the channel
members
Vertical integration is achieved
through forward or backward
integration Example: Bata and
Carona

2. Administered vertical
marketing systems
Administered

VMS seeks to control the

successive stages from production to
distribution not through ownership but
through the size and power of one of the
channel members
Brand leaders or firms that are market
leaders are able to obtain trade cooperation

Ex. HUL, Lipton, Proctor and Gamble,

Nestle, TELCO, Maruthi are able to get
shelf space and promotional support
and also support for price policies from
the trade mainly because their brands
are market leaders.

3. Contractual vertical
marketing systems

This

consists of independent firms at

different levels of production and
distribution integrating their programs on a
contractual basis to obtain larger economies
of scale and or sales impact they could
achieve alone

Horizontal Marketing
Systems

Two or more companies at one level join

together to follow a new marketing
opportunity

By working together, companies can

combine their financial, production, or
marketing resources to accomplish more
than any one company could
alone

Multichannel Marketing
Systems
In the past, many companies used a
single channel to sell to a single market or
market segment . But now firms have been
realizing that one system or a single
channel system is not able to deliver the
desired results.
Here the firm uses two or more channels to
reach one or more market segments.

CHANNEL CONFLICT
Channel conflict refers to the disagreement

among the channel members over goals,

roles and rewards.
They should understand & accept their
roles, coordinate their activities & cooperate
to attain overall channel goals.

To manage channel conflict

a marketer has to
understand:
The type
Nature or the cause
Magnitude of the conflict

He should also understand that conflict

cannot be totally eliminated. It can only be
minimized.

TYPE OF CONFLICT :
In any channel arrangement there can be
three types of conflict :
1. Vertical level conflict
2. Horizontal level conflict
3. Multichannel level conflict

Vertical level conflict :

This conflict occurs when the channel
member at one level is in conflict with
another member at the higher or lower
level.
Eg: A conflict between the wholesaler & the
manufacturer.
1.

Horizontal level conflict :

This occurs at the same level between the
channel members.
Eg: Conflict among the retailers on issues like
pricing.
2.

Multichannel level conflict :

Sometimes the middlemen come in
conflict with the manufacturer using
both direct & indirect means of
distribution.
Eg: When a firm retails larger range of
products through its own outlet than
the wholesalers

3.

NATURE OR CAUSES OF
CONFLICT:
A major factor causing conflict between

manufactrers & wholesalers is the preceived

goal incompatiablity between them.
As For a manufacturer, his goals are to be
market share & profit maximization in the
long run, for wholesalers their goals to be
sales maximization & inturn profit
maximization.

 Many a time conflict has occurred because of

role ambiguity. This is a common cause in

multichannel conflict. Lack of role clarity of
any of the channel members can be a source
of potential conflict.
Different perceptions of the market &
economy may also create a conflict between
the manufacturer and the middlemen.

MAGNITUDE OF THE
CONFLICT:
This refers to the seriousness of the conflicts.
At times the conflict may not be of a
magnitude demanding the manufacturers
attention.
Eg: inter-dealer conflict in the territory over
prices.
moreover, a highly serious conflict will
effect his market share in the territory.

MANAGING THE CONFLICT:

To minimize the conflict, the manufacturer
may take the following steps:
1. COMMUNICATION: One of the effective way
to minimize channel conflict is to have
regular communication between the
manufacturer and the channel members.

Dealer councils: Another way to resolve a

conflict is through formation of dealer
councils. Such councils can resolve issues in
horizontal level & vertical level conflict.
Eg: The dealers join together & form a council
to tell out their problems which they are
facing with the respective manufacturers.
2.

3.

4.

Superordinate goals: Another way of

resolving the conflict is to evolve
superordinate goal of maximising customer
satisfaction.
Arbitration & Mediation: The conflict can be
resolved through arbitration & mediation
among the channel members. In case of
vertical or horizontal conflict, the
manufacturer can resolve the conflict.

Channel-Design
Decisions
Designing a marketing channel system
involves analyzing customer needs,
establishing channel objectives, identifying
major channel alternatives, and evaluating
major channel alternatives.

Evaluating
Evaluating the
the Major
Major Alternatives
Alternatives and
and
Selecting
Selecting the
the suitable
suitable one
one
Exclusive
Exclusive
Distribution
Distribution

Selective
Selective
Distribution
Distribution

Intensive
Intensive
Distribution
Distribution

Identifying
Identifying Major
Major Alternatives
Alternatives
Setting
Setting Channel
Channel Objectives
Objectives &
& Constraints
Constraints
Analyzing
Analyzing Consumer
Consumer Service
Service Needs
Needs

Channel Design
Decisions

Analyzing consumer service

Needs
In designing the marketing channel the
marketer must understand the service
output levels desired by target customers.
Channels provides five service outputs.
These are :

1.Lot Size Lot size refers to the total number of

units of a product that a customer acquires
during a transaction period.
Ex: A car rental agency prefer a channel from
which it can buy a large lot size, on the other
hand individual customer would prefer to
purchase a car in a lot size of one. So car
manufacturing companies provide different
distribution channels to meet the demand of
these different sets of customers.

2.Waiting and delivery time:

The time for which customer must wait to receive
the product or service. Normally customers
prefer faster delivery channels. This in turn
necessitate higher service levels.
3.Spatial convenience :
The degree to which the marketing channels
makes it easy for customers to purchase the
product.
Ex: Marutis wide dealer network allows it to offer
greater spatial convenience than its competitors
and helps the customers to save a lot on search
and transportation cost.

4.Product variety:
Marketing channels offers a wide variety of
products to its customers. Normally customers
prefer a greater assortment (Collection of
different products) because more choices
increases the chances of finding what they
need.
Ex: Super markets They not only carry a wider
assortment of products but also offers a greater
variety in each product category.

5.Service Back up
It refers to the value added services offered
by the channel members. Services such as
credit facility, free home delivery,
installations, repairs etc.

Setting the channel objective and

Constraints

Companies channel objectives and

constraints are influenced by the
characteristics of product, company size,
middlemen, and environmental factors.
Characteristics of product Ex: If the product
is highly perishable in nature or having high
unit value or custom-built products etc the
company will sell directly to the customers.

Company Size- A manufacture who is new to

the industry might want to initially serve a
limited market with few intermediaries. But a
large firm may use different categories of
intermediaries to serve different market.
Middlemen- While designing a channel system
a manufacturer must conduct SWOT analysis
of its prospective intermediaries in terms of
sales volume, product portfolio, managerial
capabilities, attitude etc.

Environment factors A manufacturer must

consider the environment factors while
designing the channel.
Ex: When economic conditions are depressed
it is wise for a manufacturer to go for
shorter channels.

Identifying Major Alternatives

Identify the major alternatives in terms of
types of middlemen, Number of marketing
intermediaries ( intensive, selective,
exclusive distribution), and
Responsibilities of channel members.

Intensive Distribution :Stocking the products in

as many outlets as possible.
Ex: FMCGs
Selective Distribution : The use of more than
one, but fewer than all of the intermediaries who
are willing to carry the companys product.
Ex : Home appliances, Branded menswear like
color Plus, Arrow, Zodiac etc.
Exclusive Distribution : Giving a limited number
of dealers the exclusive right to distribute the
companies products in their territories.
Ex : Automobiles, Branded diamonds and watches
etc.

Responsibilities of channel members :

The producer must determine the rights and
responsibilities of participating channel
members.
The trade- relation mix consists of
Price policies
Conditions of sales
Territorial rights
Mutual services and responsibilities

Evaluating the Major Alternatives

and
Selecting the suitable one
A company should select those channels
which will best satisfy its long term
objectives. The firm must evaluate each
alternative against
Economic criteria
Control Criteria
Adaptive Criteria

Evaluating
Evaluating
FEEDBACK

Training
Training and
and
Motivating
Motivating

Selecting
Selecting
Channel Management Decisions

Selecting channel members :

Recruiting and selecting the right channel
partners is a crucial managerial aspect of
any firm. The manufacturer should do the
selection process on the basis of various
parameters like
Number of years in business
Financial strength, growth and profit record
Cooperativeness, service reputation ,sales
efficiency, product knowledge, number of
product line carried etc.

Training :
Training of the channel members is important
since they are the actual people who deals
with the end customers. Hence most of the
manufacturers offer distributor training
programs to help the channel members
increase their efficiency in performing the
various business activities.

Motivating:
The various strategies used to motivate the
channel members are providing
training the distributors sales force
market research programs
Commission on higher sales
Advertising allowance
Payments for displays etc

Evaluating channel members:

Manufacturers must periodically evaluate the
intermediaries performance against certain
standards like sales-quota attainment, cooperation in promotional and training
programs, customer delivery time etc. In
this process good performers should be
rewarded and underperformer need to be
counseled, retrained, motivated or
terminated.

Modifying channel arrangements:

Manufacturer must periodically review and
modify its channel arrangements.
Modification becomes necessary when the
distribution channels is not working as
planned, consumer buying patterns change,
the market expands, innovative channels
emerge etc.

Component Functions Of Physical

Distribution / Marketing Logistics

Transportation.

Warehousing.

Inventory Management.