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UNIT – 5C

PLACE
Distribution Decisions
 Concept and Importance
 Role of Marketing Channels
 Channel of distribution & types of distribution
 Logistics Decision & Modification Decision
Channels of Distribution /
Marketing Channels
 Distribution is one of the four major elements of
the marketing mix.
 An organization or set of organizations (go-
betweens) involved in the process of making a
product or service available for use or
consumption by a consumer or business user.
 Distribution is a very important component of
Logistics, Inventory, Material Management &
Supply Chain Management.
Role of Distribution
 To act as a viable between demand and the supply
in consideration of time, place and possession.
 Art and science of assumption of requirement, its
availability, acquisition, distribution and finally to
maintain in operational ready condition.
 Movement of finished product from production line
to the customer and the user.
 It also refers movement of raw materials from
supply source to the beginning of production line
(B2B).
 It also includes storage, transportation and C&FA
sometimes necessary feedback for action and
extends to ERP process.
Channel of Distribution
Channel of distribution is a chain of business or
intermediaries through which a good or service
passes until it reaches the end consumer.
It can include wholesalers, retailers, distributors
and even the internet itself.
Channels are broken into direct and indirect
forms, with a "direct" channel allowing the
consumer to buy the good from the
manufacturer, and an "indirect" channel
allowing the consumer to buy the good from a
wholesaler or retailer.
Types of Distribution
Intensive Distribution: Where the majority of
resellers stock the 'product' with their
convenience. Price competition may be evident.
E.g. FMCG and convenience Products
Selective Distribution: This is the normal
pattern in both consumer and industrial markets
where suitable resellers stock the product.
E.g. Consumer durables.
Exclusive Distribution: Only selected resellers
or authorized dealers. In general only one per
region are allowed to sell the product.
E.g. Bata, McDonalds etc.
Importance of Distribution
• To establish a viable between demand and supply.
• To minimize the distribution cost for competence.
• To share information to both buyer and sellers.
• To recommend the best value purchase.
• To provide feedback and suggestion to the company.
• To update about the business environment.
• To maintain favorable relations with the local lobbyists.
• To guard company about the expiry date of inventory.
• To inform about the inspection by the authorities.
• To minimize the number of touch point in reaching the
customers.
• To simplify the distribution function in terms of cost
and efforts.
Selection of Distribution Channel
• Depends on the nature of product & company.
• A ratio of direct and indirect distribution modes.
• Overall business objective and strategy.
• The variant nature of the consumer & customer.
• The expectation and extent of credit facility.
• The company capabilities (SWOT).
• The need to speed up the customer reach.
• To capture the desired market share.
• Nature and competition available in the market.
• In absence of adequate channel partners.
• Long term decision thus a company strategy.
Drawbacks of Channel Partners
• Unskilled to explain the product feature & use.
• More concern for the commission and mark ups.
• Lack of commitment in contrast to the company.
• Inability in translating prospect into customers.
• Product demonstration if required is cumbersome.
• For highly technical product not suitable.
• Not to handle queries efficiently and effectively.
• Lack of communication on time.
• Reluctant for new product introduction.
• Not equipped to cater all services under one roof.
• Incompetent overall work force.
Distribution Partners

Upstream Downstream
♦ Close to the company and
the producer. ♦ Close to the customers and the
users.
♦ Company C&FAs and
Stockiest ♦ Distributors, Dealers,
Wholesalers, retailers etc.
Channel Conflicts
1. Spatial Discrepancy
♦ Due to the distance between the production
point and the intermediary location.
♦ Intermediaries involved: C&FA, Transporters,
Inventory, distributors, wholesalers, retailers etc.
♦ Nature to throw ownership & responsibility.
♦ Inadequate communication facilities.
♦ Incompetent intermediary workforce.
♦ To avoid this must have multi-location and
regional distribution hubs by company.
♦ To ensure competency of the intermediary.
Channel Conflict
2. Temporal Discrepancy
♦ Due to inability to forecast demand and the
supply.
♦ Intermediary involved: Distributors and
transporters
♦ Cause to failure with the meeting the
requirement of the product.
♦ Inability to speed up in meeting the need.
♦ To avoid this must have regional stock hubs.
♦ Self dependent transportation by the
intermediary.
Channel Conflicts
3. Breaking Bulk Discrepancy
♦ Due to need of breaking bulk in convenient
consumable quantity.
♦ Intermediary involved: C&FAs, transporters,
distributors, wholesalers and retailers.
♦ The C&FAs collects payment from all the
distributors and remits to the company.
♦ Cause to increment in the production cost
and hence the price. Large volume low price.
♦ India is unique as you can get even one
tablet of medicine.
Channel Conflict
4. Assortment Discrepancy
♦ Due to difference in remuneration in product
line and product width of the same company.
♦ Intermediary involved: Distributors, stockiest
and retailers.
♦ A forced compulsion to cater the needs of
brand loyal customers.
♦ In FMCG a customer expects all the brand
under one retail outlet to compare with.
♦ A uniform mark up across the product class.
♦ This is unavoidable.
Channel Conflicts
5. Financial Support Discrepancy
♦ This discrepancy is mostly in India and
developing countries.
♦ Due to difference in the financial capabilities
of channel partners involved in distribution.
♦ Due to variation in the credit period and
demand for more credit time.
♦ Intermediary involved: Preliminarily
Distributors, stockiest, wholeseller and
retailers but all involved channel partners.
♦ Greedy human nature and thus unavoidable
Channel of Distribution
Manufacturer : that makes a good through a
process involving raw materials, components,
or assemblies, usually on a large scale with
different operations divided among different
workers. Commonly used interchangeably with
producer.
Wholesaler : Person or firm that buys large
quantity of goods from various producers or
vendors, warehouses them, and resells to
retailers. Wholesalers who carry only non-
competing goods or lines are called distributors.
Channel of Distribution
 Distributor : An entity that buys noncompeting
products or product lines, warehouses them, and
resells them to retailers or direct to the end users
or customers. Most distributors provide strong
manpower and cash support to the supplier or
manufacturer's promotional efforts. They usually
also provide a range of services (such as product
information, estimates, technical support, after-
sales services, credit) to their customers.
 Retailer : A business or person that sells goods to
the consumer, as opposed to a wholesaler or
supplier, who normally sell their goods to another
business.
Channel of Distribution
 C & F Agent : C & F means carrying and
forwarding agency. Manufacturing or marketing
companies kept their goods at one place and
distribute them when the dealers or wholesalers or
customers. There is a huge scope and possibility
to do C&F Agent Through Various certification or
specialization in Logistics & Supply Chain.
C&F agents are one of the essential parties of
export-import transaction process. In export
shipment, their main jobs are to manage
document assessments and approval for
export/import from customs.
Retail Functions
 The term retail is derived from the French word “retailer”
which means ‘a piece of‘ or ‘to cut up‘. This implies the
breaking of bulk quantities of the retailer.
 The retailer acquires large quantities of the products and
cuts them up into smaller quantities and sells them to
individual consumers.
 However, a comprehensive retail marketing function
requires a combination of many activities.
 Retailers plays a significant role between manufacturers,
wholesalers, suppliers and consumers. They perform
functions like sorting, breaking bulk, holding stock, as a
channel of communication, storage, advertising and certain
additional services.
Functions of Retailers
 To break bulk: Retailers break up large quantities into
smaller units such as individual canes, bottles, packets,
appropriate for consumer use.
 To create place utility: Retailers create place utility by
transporting goods to the point of consumption.
 To stock varieties of goods: Retailers buy varieties of
goods from various manufacturers or wholesalers. Thus, a
retailer provides a wide range of choice enabling the
consumers to select the products of their choice.
 To provide credit facilities to customers: Retailers grant
credit facilities to consumers and thus increase their short-
term purchasing power.
Functions of Retailers
 To provide information to customers and wholesalers:
Retailers act as a link between the buyers and wholesalers /
manufacturers. Retailers remains in direct contact with
customers and gives market information to manufacturers
either directly or through wholesalers.
 To estimate demand and purchase of the product:
Retailers create demand for products by communicating with
their customers. This demand creation is quite helpful for
manufacturers and wholesalers.
 To act as consumer’s guide: The retailers access the
need of the consumers and then offers the right kind of
goods at a reasonable price. Their job is to make the
consumer’s buying as easy and convenient as possible.
Functions of Retailers
 To do marketing functions: Retailers perform several
marketing functions such as sales promotion, advertising and
point of purchase display. They induce customers to buy
products of reputed companies.
 To offer connecting link: The retailers are the connecting
link between the wholesaler and the ultimate consumer.
 Additional Services: This includes such as,
● To provide product guarantees
● To offer after-sales service
● To deal with consumer complaints & grievances
● To offer credit and hire-purchase facilities
● To answer queries and provide additional information