Channel of Distribution

 Marketing
intermediaries like Sole
Selling Agents, C & F
agents, Wholesalers,
Distributors, Dealers,
Retailers, Franchisees
etc who take product
to users, constitute the
distribution channel.
 It renders services
directly related to the
purchase and/or sale
of a product as it flows
from producer to
consumer either by
owning a product or
by actively aiding in
transfer of ownership.
“Middlemen are necessary evils”
Role of a Middleman
Sales specialist for
Producer
 Provides market Info
 Interprets consumer wants
 Promotes product
 Creates Assortments
 Stores Products
 Negotiates with customer
 Provides Finance
 Owns product
 Shares risk
Purchasing agent
for buyers
 Anticipates wants
 Breaks bulk
 Stores product
 Transports product
 Creates Assortments
 Provides Finance
 Makes product available
 Guarantees product
Components of Channel
 Sole Selling Agents
 C & F Agents/Liasoning Agents/Associates
 Wholesaler/Stockist/Distributor
 Retailer/Dealer
Importance of Channels
 Channels provide distribution efficiency to manufacturer
 Brings together maker and user in an efficient and economic
manner
 In mass consumption products, because of the need of large
resources like men, money and materials, manufacturer
takes help of channels
 Intermediaries minimize the number of contacts the firm has
to make to sell its product
 Channels offer products in assortments
Manufacturer typically
produce large quantities of
limited variety, whereas
consumer needs limited
quantity of a wide variety.

 Channels provide vital input of salesmanship

 Channels provide pre,during and post sales service
 Use their goodwill
 Promote the product
 Provide Market Intelligence
 Give feedback
 Help in Merchandising
 Reinforce the awareness about the product among the target
customers
 Help in implementing Price Mechanism
 Look after Physical Distribution function
 Look after Financing function
 Negotiates, Gives credit, Installments etc.
 Channel decisions have a vital bearing on other areas
of Marketing
 Pricing
 Sales Force – Type, Size, number etc.
 Marketing department
 Advertising etc.
Major Channels of
Distribution
 Consumer Goods
 Business Goods
 Services
Managing Dealer Network

 Mutually beneficial, profitable and healthy relations

 Dealer Compensation/Margins
 Dealer Induction
 Different schemes
 Efficient and Quick service
 Dealer Training
 Dealer Appraisal
 Review and corrective action in the dealers and
network
Channel Conflict
Example on deciding Channel
Structure (CD Company)

 Collect data from potential customers

regarding their expectations from the
DC, like:
 The max distance customer would travel to
look at household appliance is 3-5 Kms. To
travel more, customer has to be
compensated with superior features,
attractive price etc.
 One of the key influencing factor is
presentation by the salesperson at the outlet
 Max thrust on post sales service
 If the stock is not available, customer will shift.
Eg Continued..

 The next step is to find out what competitors

were offering in their channel output
 Retailers were not in a position to take the
full truck load, where as, it was economical
to dispatch in full truck load from factory.
This is one reason for one level in between
Mfr and retailer.
 Cities with more than 100000 population was
to be targeted. So 400 such cities.
 For product to be available at a radius of 3-5
Kms, based on the geographic spread, 5000
retail outlets.
Eg contd…

 If the waiting time has to be zero, then

 Retailer to keep minimum one week stock
 That stock to be replenished within one week
 One level above retailer would be company depot or
distributor. This to have min 2 weeks stock, keeping in
mind time taken to get from company and distribute to
the farthest.
 200 retailers by one distributor/depot, so 25 such
distributors/depot. If we consider 5/6 working days a
week, then one ditributor per day would serve 35-40
retailers.
 This would give a guideline about cost and other details.
Eg Parle Agro

 Parle caters to approx 13000 outlets in Pune

 This includes A, B and C outlets
 A type are large outlets, B type are Grocery stores type and C are small
Pan stalls etc
 A – 1000 approx, B – 5000 and C – 7000 in Pune
 These 13000 retailers are catered by 25 distributors in Pune
 Each distributor has A,B and C retailers to cater to. He covers some of the
standalone malls as well Eg Dorabjee. Whereas large chains have their
depot outside octroi, say at Wagholi, company supplies to this depot
directly and they have their own transport arrangements to all their outlets.
 Each distributor caters to 40-50 outlets/day/vehicle, so more are the no. of
vehicles, more are the retailers covered.
 So each distributor would cover 300 – 1200 outlets
 Thumb rule for such FMCG product, no. of outlets to be covered are approx
1 retailer/300 people (popullation of Pune approx 40 lacs/13000 outlets),
the same may be in CD would be 1 retailer/10000 people.