Marketing bán hàng - Chapter 8: Distribution management & the marketing mix

Chapter 8Distribution Management & The Marketing Mix1Learning ObjectivesRole of distribution management in the marketing mixWhy distribution channels are requiredDistribution channel strategyOverview of distribution channel membersIntensity in the distribution effortSDM- Ch 82Tata McGraw Hill PublishingThe Marketing MixProduct Place PricePromotion Distribution channels help in the ‘place’ aspect of the marketing mixDistribution provides place, time and possession utility to the consumer SDM- Ch 83Tata McGraw Hill PublishingExample Consumer wants to buy a tube of toothpasteMade available at a retail outlet close to her residence – placeMade available at 8 pm on a Tuesday evening when she wants it – timeShe can pay for the toothpaste and take it away – possessionThe company distribution function has made all this possible.The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motorSDM- Ch 84Tata McGraw Hill PublishingPlayers InvolvedThe company and its distribution networkDirect company to consumerCompany to a C&FA / distribution center to distributors to retailersDistributor to wholesaler to retailerAll these intermediaries help the process of ‘exchange’ of the product or service. What is distribution management?SDM- Ch 85Tata McGraw Hill PublishingDistribution ManagementManagement of all activities which facilitate movement and co-ordination of supply and demand in the creation of time and place utility in goodsThe art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire life.A distribution channelSDM- Ch 86Tata McGraw Hill PublishingDistribution Channels DefinedAre sets of interdependent organizations involved in the process of making a product or service available for use or consumption – Stern & AnsaryWhether selling products or services, marketing channel decisions play a role of strategic importance in the overall presence and success a company enjoys in the marketplace.SDM- Ch 87Tata McGraw Hill PublishingDistribution ChannelsAre intermediaries or middlemenExist because producers cannot reach all their consumersMultiply reach and provide efficiency to the marketing processFacilitate smooth flow and create time, place and possession utilitiesHave the core competence and reach Provide contact, experience, specialisation and scales of operationSDM- Ch 88Tata McGraw Hill PublishingTypes of ChannelsSales: motivates buyers, shares information between company and its consumers, negotiates fair bargains for consumers and finances the transactionsDelivery channel meant only for physical part of the distributionService channel – performs after sales serviceChannel membersSDM- Ch 89Tata McGraw Hill PublishingListing of Channel MembersCompany own sales teamC&FAs and CSAsDistributors, dealers, stockists, value-added re-sellersAgents and brokersFranchisees Electronic channelsWholesalersRetailers SDM- Ch 810Tata McGraw Hill PublishingC&FAs / C&SAsC&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with a companyBoth are transporters who work between the company and its distributorsCollect products from the company, store in a central location, break bulk and despatch to distributors against indentsGoods belong to the companyC&SA also sells the goods on behalf of the company but remits proceeds after saleSDM- Ch 811Tata McGraw Hill PublishingDistributors, Dealers, Stockists, AgentsName denotes the extent of re-distribution done by themDistributors invest in the products – buy products from the companyAre on commission, margins or mark-upMay or may not get credit – but extend creditDistributors cover the markets as per a beat plan. All others merely finance the business.Distributors could be exclusive for a companyAgents bring buyer and seller together SDM- Ch 812Tata McGraw Hill PublishingWholesalersOperate out of the main marketsDeal with a number of company products of their choiceAre not on contract with any companySell to other wholesalers, retailers and institutionsNegotiate about 15 days credit from company distributors – also provide credit to their customersOperate on high volumes and low marginsSDM- Ch 813Tata McGraw Hill PublishingRetailersThe final contact with consumersOperate out of their shops and sell a large assortment and variety of goodsLocated closest to consumersBuy from company, distributors or wholesalersHighest margins in the networkProvide personalised services to their customersSDM- Ch 814Tata McGraw Hill PublishingIndustrial ProductsProducerProducerIndustrial DistributorIndustrial CustomerIndustrial DistributorIndustrial CustomerAgent/middlemanCustomers may also direct from company sales forceSDM- Ch 815Tata McGraw Hill PublishingConsumer ProductsProducerProducerProducerCustomer /consumerRetailerDistributorDistributorRetailerCustomer/Consumer WholesalerCustomer/Consumer RetailerRetailers may also direct from company sales forceSDM- Ch 816Tata McGraw Hill PublishingPatterns of DistributionDetermines the intensity of the distributionIntensity decides the service level providedTypes of distribution intensity:IntensiveSelectiveExclusive SDM- Ch 817Tata McGraw Hill PublishingDistribution IntensityIntensive: distribution through every reasonable outlet available – FMCGSelective: multiple, but not all outlets in the market – pharma, frozen foodExclusive: may be only one outlet in a market - car dealersSDM- Ch 818Tata McGraw Hill PublishingIntensive DistributionStrategy is to make sure that the product is available in as many outlets as possiblePreferred for consumer, pharmaceutical products and automobile sparesSDM- Ch 819Tata McGraw Hill PublishingSelective DistributionA few select outlets will be permitted to keep the productsOutlets selected in line with the image the company wants to projectPreferred for high value productsTanishque jewelryKeeps distribution costs lowerSDM- Ch 820Tata McGraw Hill PublishingExclusive DistributionHighly selective choice of outlets – may be even one outlet in an entire marketCould include outlets set up by companies – Titan, BataProducer wants a close watch and control on the distribution of his products. Channel strategySDM- Ch 821Tata McGraw Hill PublishingDistribution Channel StrategyDerived from the corporate strategy and the marketing strategySteps for designing the distribution strategy are:Defining customer service levelsDistribution objectives and steps Structure of the network required Policy and procedure to be followedKey performance indicatorsCritical success factorsSDM- Ch 822Tata McGraw Hill PublishingCustomer Service LevelsDefined by the nature of the industry, the products, competition and market shares.Affordability also decides the service levelIt should at least match competition.Customer expectations have no limit SDM- Ch 823Tata McGraw Hill PublishingDistribution Objectives Influenced by the customer expectationsDefines the extent of time, place and possession utility which the customer can expect out of the channel network Set of activities.SDM- Ch 824Tata McGraw Hill PublishingSet of ActivitiesManner in which the company and its marketing channels go about achieving the customer service levelsSome of these steps could be:Sales forecastsDespatch plansMarket coverage beat plansJourney plans for service engineersCollection of sales proceedsCarrying out promotional activitiesThe company also decides as to who is to perform which task Organization.SDM- Ch 825Tata McGraw Hill PublishingDistribution OrganizationExtent of company support and outsourcing to be decidedBudget for the cost of the distribution effortSelect suitable channel partners – C&FAs, and distributorsSetting clear objectives for the partnersAgree on level of financial commitments by the channel partners.Policy and procedure..SDM- Ch 826Tata McGraw Hill PublishingPolicy & ProcedureDefine policy and implementation guidelines through Operating ManualsPolicy guidelines includeCode of conduct for channel membersSystem for redressal of complaintsAny additional subsidies etcHandling institutional businessService policy for engineering products KPIs.SDM- Ch 827Tata McGraw Hill PublishingKey Performance IndicatorsFor measurement of effectiveness. Some of these could be:Consistent achievement of targets by product groups, periods and territoriesAchievement of market sharesAchievement of profitabilityZero complaints from customersNo stock returnsAbility to handle emergencies and sudden spurts in demandSDM- Ch 828Tata McGraw Hill PublishingKey Performance IndicatorsFor measurement of effectiveness. Some of these could be:Balanced sales achievement during a period – no period end skewsMarket coverage with ready stocksExcellent management of accounts receivablesMinimize losses on account of stock-outsMinimize damages to productsCSFsSDM- Ch 829Tata McGraw Hill PublishingCritical Success FactorsThe distribution strategy also needs the support and encouragement of top management to succeedSome of the CSFs could be:Clear, transparent and unambiguous policy and procedureSerious commitment of the channel partnersFairness in dealingsClearly defined customer service policyHigh level of integrityEquitable distribution at times of shortageTimely compensation of channel partnersSDM- Ch 830Tata McGraw Hill PublishingKey LearningsCompanies use distribution channels to reach their large customer baseThe channel members could be nominated like distributors or freelance like retailersDistribution channels provide the time, place and possession utility for consumers for the company productsDistribution channels could be sales, service or delivery focused SDM- Ch 831Tata McGraw Hill PublishingKey LearningsCompanies could also choose the intensity of distribution based on their products and distribution objectivesDistribution could be intensive, selective or exclusiveThe distribution strategy takes care of service levels, objectives, activities, organisation to deliver the service, measurement of performance and critical success factors SDM- Ch 832Tata McGraw Hill Publishing