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Introduction to
Distribution Management

Meaning
• PLACE…one of the 4Ps in Marketing Mix,
which makes the right product in right place
to the right customer in the right time.
• Distribution Channels help in place aspect of
Marketing Mix.
• Behind every product that reaches to target
customers there is a significant role played by
distribution channels.

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Definitions
• A distribution channel or Marketing channel is
a set of independent individuals and
organisations involved in the process of
making a product or service available to the
end-user for use or consumption.
• American Marketing Association defines
Marketing Channels as a Structure of intra-
company organization units and extra-
company agents and dealers, wholesaler and
retailer through which a product or service is
marketed.

utility
Distribution channels provide Time, Space and
Possession Utility to the customers.
Ex: A Customer wants to purchase a medicine.
• Place: A Medical Shop nearer to his home.
• Time: He wants to purchase at midnight 12 O’
Clock.
• Possession: By paying money he can posses
the required medicine.

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significance

Fig 18.1: No. of Transitions in a

Market without an Intermediary

Fig 18.2: No. of Transitions in a

Market with an Intermediary

significance
• Distribution Channels will try to see that transfer of
titles/ownership from one organization or person to a person.
They are responsible for smooth flow of the products from
producers to consumers.
• They will participate in marketing research function and
gather information about potential customers and
competitors in the market.
• Distribution Channels provide space for temporary storage of
products in distribution point/wholesaler warehouse/retail
outlet until movement of products takes place towards
customers.
• When many producers are not able to carry out direct
marketing like telemarketing, mail order, catalogue, one-to-
one marketing, opening a manufacturer retail outlet in the
market etc, the existence of distribution channels play
significant role.

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An effective Channels help

Distribution in physical
Channel must distribution of
reduce the cost the products to
of the customer different local
by decreasing markets and
money, time also assist in
and efforts selling those
invested by products to the
customer to get target
the product. customers.

Functions of Channels
Manufacturer related Customer related Self related
functions functions functions
Promotion of products Availability Invoice
Producer Advisory Adequate stock Warehousing
Boards Bulk Breaking & Transportation
Participating in test Sorting Risk Management
marketing Negotiation Transfer of
Financing and Buying Information Exchange ownership
Negotiation Guaranties / Exchange of
Market Coverage Warranties Damaged goods
Market Development After Sales Service Achieving targets
Marketing Research Technical Support Reporting
Fig 18.3: Functions of Distribution Channels

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Structure of Marketing Channel

Marketing
Channel
Structure

The format or
shape or
model that a
marketing
channel
undertakes to
make products
available to
consumers is
called as a
marketing
channel
structure.
Fig. 18.4: Model of Marketing Channel Structure

Determinants of the Marketing

Channel Structure
• Channel
Length
• Types of
Middlemen
• Channel
Intensity

Fig. 18.5: Determinants of Channel Structure

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Determinants of
Marketing Channel
Structure

Factors determining the

Channel Length channel length

Types of Middlemen

Channel Intensity Product Variety

Order size

Size of the Market

Service Requirement

Determinants of Marketing
Channel Structure

Types of Middlemen
Channel Length

Types of Middlemen

Channel Intensity
Sales Channels

Delivery Channels

Service Channels

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Sales Channels: Manufacturer Salesman, Distributor Salesman,

Retailer Salesman, Door-to-door Salesman etc.

Delivery Channels Service Channels:

Service channels
C&F Agents, C&S Agents provide services to
customers that are
Distributors, Dealers
linked to the
Stockists products.
Ex: after sales
Brokers services, maintenance
operations,
Agents, Facilitating Agents
processing warranties
Value Added Resellers etc.
Wholesalers
Retailers

Determinants of
Marketing Channel
Structure

Channel Length

Types of Middlemen

Channel Intensity

Channel Intensity

Intensive
Distribution
Selective
Fig 18.6: Channel Intensity
Distribution
Exclusive
Distribution

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Types of Channels
The Channels can be classified in the following categories –

• Classification of Middlemen based on type of product

• Classification of Middlemen based on number of levels
• Classification of Middlemen based on interaction

Types of Channels
Based on Type of Product

Based on Number of levels

Based on Interaction

Types of Channels

Based on Type of Product

Based on Number of levels

Based on Interaction

Types of Channels
Based on Product type

Channels for
Consumer goods
Channels for Industrial
goods
Channels for Services

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Types of Channels

Based on Type of Product

Based on Number of levels

Based on Interaction Types of Channels

Direct Marketing Indirect Marketing

Channels Channels
-Zero Level Channel -One level Channel
-Two level Channel
-Three level Channel
-Four level Channel

Producers / Manufacturers
Agents
Whole
Retailers Salers

Whole
0 level 1 level 2 level Salers 3 level
Channel Channel Channel Channel
Retailers
Ex. Ex. Ex.
Ex.
Bata, Milk, TV, PCs, Retailers Soaps,
Raymonds News Consumer Shampoos
Papers Durables FMCG

Customers / Consumers
0  Producer – Customer
1  Producer – Retailer – Customer
2  Producer – whole Saler - Retailer – Customer
3  Producer – Agent - whole Saler - Retailer – Customer

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Types of Channels

Based on Type of Product

Based on Number of levels

Types of Channels
Based on Interaction Based on Interaction

The knowledge of the

customer about the High Touch
product is low then the
producer can
Channels
implement high touch
channels.
The knowledge of the
customer about the Low Touch
product is high then
the producer can Channels
implement low touch
channels.

Channel Design Process

Identify Analyze Identifying
Establishing Evaluating
Target Customer’s Major
Channel The Major
Customers Buying Habits Channel
Objectives alternatives
alternatives
*Availability
*Quantity • Company Sales Force
• Middle Men Select
*Quality
• agent / broker Channel
*Faster Delivery
• Whole Saler Member
*After Sales Service
*Finance and Credit • Retailer
*Installation • Distributor
*Maintenance • Dealer
• Value added Reseller •Economy
• Merchants •Control
•Adaptability

1. Availability of Product in the Target Market.

2. Smooth Movement of Product from the Producer to the Customer.
3. Cost Effective and Economic Distribution.
4. Evaluating the Major Alternatives

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Levels of Channels

• Channel Design for Consumer Goods

• Channel Design for Industrial Goods
• Channel Design for Services

Channel Design for Consumer Goods

Producers / Manufacturers
Agents
Whole
Retailers Salers

Whole
0 level 1 level 2 level Salers 3 level
Channel Channel Channel Channel
Retailers
Ex. Ex. Ex.
Ex.
Bata, Milk, TV, PCs, Retailers Soaps,
Raymonds News Consumer Shampoos
Papers Durables FMCG

Customers / Consumers
0  Producer – Customer
1  Producer – Retailer – Customer
2  Producer – whole Saler - Retailer – Customer
3  Producer – Agent - whole Saler - Retailer – Customer

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Channel Design for Industrial Goods

Producers / Manufacturers
2 level
Industrial Channel
Agents Agents
Distributor

1 level
0 level
Channel Whole
Channel
Salers

1 level
Channel

Customers / Consumers
0  Producer – Customer
1  Producer – Industrial Distributor – Customer
1  Producer – Agent – Customer
2  Producer – Agent – Whole Saler - Customer

Channel Design for Services

Producers / Providers

Agents

1 level
0 level
Channel
Channel

Consumers
0  Producer – Consumer
1  Producer – Agent - Consumer

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Listing of Channel Members

• Company own sales team
• C&FAs and CSAs
• Distributors, dealers, stockists, value-added re-sellers
• Agents and brokers
• Franchisees
• Electronic channels
• Wholesalers
• Retailers

ROLE of C&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 sale

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ROLE of Distributors, 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

ROLE of Wholesalers
• Operate 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 margins

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ROLE of Retailers
• The 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 customers

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