Introduction to Sales and

Distribution Management

Your guide: Dr Sumanjit Dass

Topics to be covered
• Evolution
• Sales Management Function (POST DC)
✓ Organising (Organise for delivering value through Business models + Org. Structure)
✓ Leading (Leadership, Decision making, Communication, Groups and Teams, Motivation)
✓ Controlling (System and Processes + Strategic Human Resources)
• Types of Sales Managers
• Emerging trends
• Personal selling
• Buying Decision Process
• Buying Situation
• Sales process
• Transactional versus Relationship selling
Evolution
Evolution of Sales

Father of professional selling: John Henry Patterson

What is Sales Management – Meaning
Sales management is solely concerned with the
direction and control of the sales force.

The American Marketing Association has defined “sales

management” as “the planning, direction and control of
personal selling, including recruiting, selecting, equipping,
assigning, routing, supervising, paying and motivating as these
tasks apply to the personal sales force.”
…….sales force management
Sales Management, Marketing & Marketing Management

Sales management refers to

the direction and control of
salesmen.

“Marketing” refers to the business activities

through which ownership of products is
transferred from the producer to the
consumers.

Marketing management refers to several activities of marketing,

viz., pricing, promotion, physical distribution, product and sales
personnel management.
Sales management, however, is mainly concerned with the sales
personnel management Marketing management is a broader
term which covers sales management and marketing functions.
Major objectives of Sales Management are given below:

1. Achievement of Sales Volumes/Values

2. Contribution to Profits

3. Growth in Sales

4. Growth in Market Share

Sales Management Functions
Sales management functions and flow: POLC framework

Controlling Planning

INPUTS: Directing/ GOALS

Organising
5M’s Leading
ATTAINED

Training Staffing
Planning

Vision Tactics

Mission Strategies

Goals Objectives
Organising

Business Organisational Social Network

Culture
Product Model Design
Types of Business Model
Transactional Fee Model Subscription Model

Shared Saving model Distribution Franchise Model

Licensing model Temporary access model

Cost Plus Model Operating & Maintenance Model

Hourly Rate Model Usage Based Model

Upfront+ Maintenance Model Consumable model

 Assignment:

List of business models to be discussed: List of business models to be discussed:

A mix of chain and franchise business model Platform-agnostic model
Ad-supported (subsidized) business model Platform business model
Affiliate business model
Aggregator business model Privacy as an innovative business model
Agency-based business model Razor and blade revenue model
Asymmetric business models Self-serving model
Attention merchant business model Space-as-a-service model
Barbell business model Subscription-based business model
Bidding multi-brand platform model Surfer model: reverse-engineering the gatekeeper
Blitzscaler-mode business model Three-sided marketplace model
Blockchain-based business models
Bundler model User-generated content business model
Cash conversion cycle or cash machine model User-generated AI-amplified model
Discount business model focusing on high quality Unbundler model
Distribution based business model Vertically integrated business model
Direct-to-consumers business model
Direct sales business model
E-commerce marketplace business model
Educational niche business model
Family-owned integrated business model
Feeding model
Freemium model (freemium as a growth tool)
Free-to-play model
Freeterprise model
Organisational Design: 7 types

Horizontal

Team

Functional
Hierarchical Divisional Matrix
Networked
Organisational Design:
Hierarchical
Organisational Design:
Functional
Organisational Design:
Horizontal
Organisational Design:
Market-based divisional org structure
Divisional
 Organisational Design:
Divisional
Product-based divisional org structure
 Geographic divisional org structure
Organisational Design:
Divisional
Organisational Design:
Matrix
Organisational Design:
Team
Organisational Design:
Networked
Staffing

Training
Leading and Directing

Communications

Decision
Group/Teams
Making

Leadership Motivations
Controlling

Strategic
Human
Resources

System/
Processes
Types of Sales Manager
Levels in Sales Management- Organisational Hierarchy

Strategic
Level

Tactical
Level

Operational
Level
Strategic- Tactical- Operational Level Planning
Consumer Decision Process
Queries Lead to EUREKA moments

What is the difference between

Consumer Buying Process
VERSUS
Decision process
Consumer Buying Process VERSUS Decision process
NO BRAINER BRAINER
External
Influences
PESTLE+ CIN+
DEMO (family,
Reference
groups)
Consumer Behaviour types

Legalistic
Subcontracted

Problem Solving
6
Variety seeking Heuristic
Self-Life
and
concepts Picking Consumer Products Habit

Casual Industrial Products Habit

Internal Reciprocity Heuristic
Influences
MPLAP
Lifestyle
Legalistic Problem Solving

NO BRAINER
Quasi-Resolution
BRAINER
6
Various consumer Behaviour models
Buying Situation
Types of Buying Situations / Decisions

B2C

B2B
Sales process
Optimize Your Sales Process
Tips on Designing the Sales Process
• Do your research on the clients before you meet with them
for the first time
• Create scenarios for talking to different clients
• Optimize your strategy
• Test it.
• Revisit it
Transactional versus Relationship
selling
Transactional vs Relational selling
• A transactional relationship is all about the short-
term. Get the sale, at all costs. The focus is on
winning this one sale without much thought to
the customer’s needs or the longer-term. 1. Professional vs. Friendly
• Relational selling is about building long-term 2. Self-Interest vs. Mutual Interest
3. What You Get vs. What You Give
relationships. The sales rep gets to know their 4. Stay in Touch vs. Keep Informed
customer, their needs, and their wants, within 5. Understand the Process vs. Understand
reason. the Person in the Process
6. Judge the Results vs. Evaluate the
Key Differences Between a Relationship
Transactional Relationship and 7. Win Conflict vs. Resolve Conflict
Relational Selling 8. Agreement vs. Acceptance
9. Evaluate the Results vs. Evaluate How the
Other Feels About the Results
Article/ Case Discussion

Personal Selling and Sales Management

Planning, Forecasting and Budgeting

Your guide: Dr Sumanjit Dass

Topics to be covered

• Strategic Planning
• Developing sales forecast
• Forecasting approaches
• Improving forecasting accuracy
• Management of Sales Territories and quotas
Strategic Planning
Difference between Strategic and Marketing Planning

(Marketing Plan= Fundamental + Tactical Plan)

Corporate plan
(Corporate Strategic plan)

SBU Level Plan

Operational Level plan
( Action/Implementation)

Overall company Strategic plan= Corporate plan ( Corporate Strategic plan) + SBU Level Plan (Marketing Plan= Fundamental + Tactical Plan)+ Operational Level plan ( Action/Implementation)
So Let’s see various definition of Strategic Planning
and discuss each of them vis-à-vis diagram in the last slide
….. More compact view to Strategic Planning
Organisational Levels Organisational Structures Planning types

Corporate Strategic
Corporate Level Corporate office : VMO Planning =
Long-term plan

Strategic Business Unit

Division/SBU Level SBU A SBU B SBU C
Plan =
ST ST ST Long-term plan

Functional Level Product Product Product

1 1 1 Operational Plan=
Product (in making)
Production plan+ Marketing
Product Product Product in action plan + Personal
2 2 2 Plan+ Financial Plan +
Facilities Plan
Product Product Short term plan
3 3

Product
4
Strategic Planning: Corporate Strategic Planning

• Corporate strategic planning is developed at the company’s headquarters to

guide the whole organization
• The planning process includes four sub-planning activities:
i. Develop corporate Vision, Mission , Goals
ii. Define various SBU’s
iii. Allocate 5M’s to SBU’s
iv. Develop corporate strategies to fill any strategic gap in present or future

A strategic business unit (SBU) is a

PROFIT CENTER
which focuses on product offering and market segment.
SBUs typically have a DISCRETE MARKETING PLAN, ANALYSIS OF COMPETITION,
and
MARKETING CAMPAIGN,
even though they may be part of a larger business entity.
Strategic Planning: SBU Planning
The strategic planning level at SBU includes the following 8 steps

1. Define SBU mission

2. Scan external environment: Opportunities

&Threats

3.Analyze internal Environment: Assess Strength and

weakness

4. Develop Long Term objectives /Goals for SBU + STP

5. Formulate Tactical strategies: 4P

6. Action planning

Operational planning
7. Implement

8. Monitor and control

Connect SBU with GE 9 matrix cell
The journey from BCG matrix to GE Mckinsey 9 Matrix cell
• Total market growth rate for
industry attractiveness Other Factors that has to be considered
• Business Strength (internal factors) Controllable
• Relative market share for • Industry attractiveness (external factors) Uncontrollable
business strength
`

Once external and internal factors are identified and

assessed each business is positioned in terms of overall
industry attractiveness and business strength on a nine-
cell grid

Possible strategic actions to be taken

• Invest to grow ?
• Selectivity to grow ?
• Selectivity ?
• Harvest or Divest
Identifying step 2 ( external factors)
Identifying step 3 ( internal factors)
Types of Sales Forecast

Geographical area World Nation Region Territory Customer

Long Medium Short

Time-Period Range Range Range
(Term) (Term) (Term)
SKU

Product Product
All (Total) Industry Company Product Variant
Product-Level Sales Sales Sales Line Sales (form)
(Item)
Sales
Sales
Basic Terms used in Forecasting

• Market Potential = ITEMS OR CURRENCY

• Market Forecast
• Sales potential (or company sales potential)
• Sales forecast (or company sales forecast)
• Sales budget
• Sales quota

Difference between Potential and forecast: the max potential versus average of the post
Difference Market or sales: Market (full industry) sales (your own brand)
Forecasting Approaches
Forecasting Approaches
Step 1: Forecast relevant external environment factors Bottom-up approach
over a specific time frame
Delphi
method

Step 2: Forecast Industry sales (Market potential) in your Step 4: Combined into Company Sales Forecast
relevant industry over a specific time period
Regression
analysis
Step 3: Company sales potential = Industry sales forecast
Step 3: Combined into Regional/ Zonal Sales forecast
(from step 2) X company’s % share of sales in the industry
over the past

Step 4: Company sales forecast of the product/service Market Step 2: Combined into Area/ Branch Sales Forecast
under study build-up
method
(B2B)
Step 1: Salespersons sales forecast of individual
Step 5: Sales/Marketing managers forecast for regions, multiple- customers
branches, Territories and customers factor
index
method
(B2C)
Top-down approach All Forecast but not potential
Delphi method
• The Delphi method is a forecasting process
framework based on the results of multiple rounds
of questionnaires sent to a panel of experts.
• Several rounds of questionnaires are sent out to the
group of experts, and the anonymous responses are
aggregated and shared with the group after each
round.
• The experts are allowed to adjust their answers in
subsequent rounds, based on how they interpret the
"group response" that has been provided to them.
• Since multiple rounds of questions are asked and the
panel is told what the group thinks as a whole, the
Delphi method seeks to reach the correct response
through consensus.
Regression analysis

Regression analysis is a set of

statistical methods used for the
estimation of relationships
between a dependent variable and
one or more independent
variables.
It can be utilized to assess the
strength of the relationship
between variables and for
modeling the future relationship
between them.
Linear Regression

Linear regression is a linear model,

e.g. a model that assumes a linear relationship between
the input variables (x) and the single output variable (y).
More specifically, that y can be calculated from a linear
combination of the input variables (x).

The Linear Regression Equation

The equation has the form Y= a + bX,

• where Y is the dependent variable (that's the variable that
goes on the Y axis), X is the independent variable (i.e. it is
plotted on the X axis),
• b is the slope of the line and a is the y-intercept.
Non-Linear Regression
Non-linear regression is a method to model a non-linear relationship between the dependent variable and a set of
independent variables

These data points correspond to China’s

gross domestic product or GDP from 1960–
2014.
The first column is the years and the second
is China’s corresponding annual gross
domestic income in US dollars for that year.
That is what the data points look like.
Now, a couple of interesting questions.
• First, can GDP be predicted based on
time?
• Second, can we use a simple linear
regression to model it?
Non-Linear Regression Types
Multiple Linear Regression
Multiple linear regression is a model for predicting the value of one
dependent variable based on two or more independent variables.
OR
Multiple linear regression attempts to model the relationship
between two or more explanatory variables and a response
variable by fitting a linear equation to observed data. Every value of
the independent variable x is associated with a value of the
dependent variable y.
Market build-up method
• The first step in this method is to identify existing and potential business buyers in a geographical area.
• The second step is to find out their potential purchases of the product under study.
• The final step is to add-up the business potential of all the buying firms to obtain a fairly accurate estimate of the market potential for
the product or service for a specific geographical territory.

Market Potential= $340

$90

$30 $90 Market build-up method

potential purchases
identify existing and potential business buyers $70 $10

$50
Multiple- factor index method
In this method CERTAIN WEIGHTS ARE ASSIGNED TO FACTORS AFFECTING SALES OF CONSUMER GOODS.
It is mainly dependent upon population of the geographic area, average personal income of people of that
area, number of retail outlets in the area etc.

Let us take an example of a company, manufacturing and marketing detergents all over India.
The company wants to find out the market potential of detergents in all cities.
The major factors that influence sales of detergents are:
• population,
• personal income and
• retail sales, which are given weights of 0.4, 0.3 and 0.3 respectively.
Suppose a city like Bangalore has 0.7 percent of India’s population, 1 percent of India’s disposable personal income
and 0.9 percent of India’s retail sales.

The multi-factor buying index for Bangalore would be: 0.4(0.7)+ 0.3(1) + 0.3(0.9)= 0.85

Based on the Indian detergent industry forecast of Rs55000 million for the year 2005-06, the market potential for
detergents would be: 0.85 percent of Rs 55000 million, i.e. equal to Rs 467 million for the year 2005-06
Sales forecasting
Methods
Sales Forecasting Methods
Qualitative Methods Quantitative Methods

Executive/ Expert Opinion Moving Averages

Delphi Method Exponential Smoothing

Decomposition
Sales force composite

Naïve/ Ratio Method

Survey of Buyers Intention

Regression Analysis
Test Marketing
Econometric Analysis
Sales Forecasting Methods
Qualitative Methods

Executive/ Expert Opinion

Delphi Method

Sales force composite

Survey of Buyers Intention

Test Marketing
Sales Forecasting Methods
Quantitative Methods

Moving Averages

Exponential Smoothing

Decomposition

Naïve/ Ratio Method

Regression Analysis

Econometric Analysis
Management of Sales
Territories and quotas
Hello!
We are Group 3
Group 3:
● Marketing Channels and Formats
● Retailing and its Formats and Strategies
● Wholesaling and its Classifications and
Limitation and Emerging Trends
 Marketing Channels
1 and Formats
Marketing channel refers to the means through which the physical
distribution of goods takes place from the manufacturer to the
customers, either directly or through intermediaries. The manufacturer
can also adopt Multi-Channel marketing if he finds it suitable for his
product and the business.
 Direct Marketing Channel

Direct selling is that medium of distribution in which there is no middle person

involved, and the manufacturer directly sells the goods or services to the customer. It
is also termed as „zero-level channel‟. This type of channel is popular among the
services industry.
Most of the services like travel, catering, salons fall under the direct marketing
channel.
Even when the products are complicated to use like the industrial machinery require
direct selling and support from the manufacturer.
The small manufacturer of general goods finds this channel more profitable and cost-
efficient since they cannot afford giving margin to the intermediaries.
For Example; In restaurants, the food is prepared as well as served to the consumers.
 Indirect Marketing Channels

In this channel of distribution, the goods produced by

manufacturing units passes through different intermediaries
to reach its final consumer.
One-Level Channel: Big Bazaar is a retail mart which buys the
products directly from the manufacturer and makes it
available to the consumers.
Two-Level Channel: Rice yield by farmers is purchased and
stored in bulk quantity by the wholesalers. The retailers then
buy the rice in small portion from the wholesaler and sell it to
the customers.
Three-Level Channel: Tata Tea manufactured by the company
is sold to the agencies in different regions; these agencies sell
it to the wholesalers of their respective areas. The wholesaler
further sells it to the retailers from where it reaches the
customers.
 Marketing Formats

Product Driven Seller Driven Service Driven

◉ Company owned Retail outlets:- Owned ◉ Existing retailers: These ◉ Transporters: They provide
retail outlets are stores belonging to the people are established in the service on contract for
network head company or to one of its markets and are used by end- companies to reach their
subsidiaries. users. ultimate customers.
◉ Consignment selling agents:-The company ◉ Supermarkets: They are much ◉ Warehouse owner: They
passes on the physical stocks to the bigger retailers who not only provide space for storage of
intermediary who pays the company only sell a large number of branded products closer to consumer
after products have been sold. products but also sell other markets and reach them with
◉ Brokers/Agents:- The intermediary
grocery, stationery and minimum waiting time.
contacts the user and sells the product on
clothing items. ◉ C&FA: They are on contract
behalf of the company without taking any
physical possession of goods. He takes a
◉ Specialty stores:-They are and provide both time and
commission when the sale is retailers who sell only one place utility- both storage and
consummated. type of merchandise only. transport.
◉ Franchisees:- Product and merchandising ◉ Discount stores: These stores ◉ Couriers: It is similar to C&FA
are decided by the company and the sell the same products and but handle much smaller
franchisee has to pay from the company brands as the supermarkets packets.
to sell. but at much lower prices
 Retailing and its
Formats and Retail
2 Strategies
The word retail is derived from French words “re” and “tailer” whose meaning is
to “cut again”. Retail store works exactly as their name describes. Goods are
sold in small pieces to make a profit. Retailing involves various activities to sell
to end consumers for their non-business and personal use.

The meaning of retailing is to sell goods from a fixed location such as from kiosk,
departmental store, or by post. Goods are sold to consumers in small portions
so that consumers can consume them.
Different formats of Retailing...

“
Retail Strategies...

“
 Factors to consider while designing
a retail strategy

Know the Customer Get new and retain old

The customer is the one who is going to purchase the It is essential that the retailer retains the customers.
material which is why knowing the customer would With the use of advertising and marketing campaigns
mean knowing the likes and dislikes of the customer the retailer can get new customers, but similarly, the
preferences and tastes of different types of customers focus should be equally on retaining the existing
and the current trends in the market. customers as well.

Know your business Know the competition

Knowing the retail business is also an important factor in Retail store with multiple competitors in the neighborhood,
designing the retail strategy. It is crucial that the retailer and it is important that the retail store knows about its
considered the nature of the business and the nature of the competition and the unique offerings of that competition.
goods that are sold.
The retailer should invest time in understanding the strategy
For example, the retail business of having vegetables and other of the competition and what is it that the competition is
perishable items is very different from the retail business of getting right so that the retailer can incorporate those
having grocery, which is also very different from the retail changes in his own store.
business of furniture.
 Retail Strategies to Boost Sales

Partnerships Social Media

The easiest way to promote yourself would be to partner The easiest way to reach a particular set of the targeted
with similar businesses. This store can achieve this by using audience is social media. With the help of social media,
different techniques like partnering with different retailers of unwanted advertising expenses can be avoided, and only
different businesses in the same location who will provide a specifically filtered customers can be targeted, and the
reference to that particular retailer when the customer walks store can be positioned.
to other retailers of different businesses.

Referral Campaigns Instore Advertising

The existing customers of a retail store can be asked to refer for Many retail stores have fantastic advertising inside the store,
new customer after which both the existing and referred which instantly converts walk-in customers. These stores
customer will get a discount on a few products, or the retailer utilize their windows with large displays of the products
can also offer freebies. Referral campaigns proved to be highlighting offers and the best of their stuff so that it
successful because getting a new customer would be the job of attracts the window shoppers. Window advertising is seen
the existing customer, whereas the retailer can focus only on commonly in tourist places where the tourists are unaware
strategies to retain the existing customer. of the local products, and the store can help themselves
promote with window advertising.
 Wholesaling and its
Classifications and
Limitations and Emerging
3 Trends
The word „Wholesaler‟ has been derived from the word „Wholesale‟ which
means to sell goods in relatively large quantities or in bulk.

A wholesaler, in the words of S.E. Thomas „is a trader who purchases goods in
large quantities from manufacturers and sells to retailers in small quantities.‟

So, a true wholesaler, as S.E. Thomas observes, “is himself neither a

manufacturer nor a retailer, but acts as a link between the two”. He is a vital link
in the channel of distribution.
Types of Wholesalers...

“
 Types of Wholesalers
Full-service Wholesalers – Retail Wholesalers
Merchant Wholesaler
They are most commonly observed in Consumer Durables or
These are the most common type of wholesalers used in the
Engineering products. The full-service type of wholesalers is, as
FMCG industry, agriculture industry or Private label industry.
the name suggests, giving full service to the end retailer. These
Quite simply, Merchant wholesalers are the ones who buy
wholesalers mainly operate in the retail market and sell
directly from the manufacturer, store the product and then sell
products to a reseller (a retailer in this case) Everything except
it to the customer. They might sell in any channel and they are
service of the product is the responsibility of the full-service
not restricted to selling to retail only or to online only.
wholesaler.

Limited Service Wholesalers

A limited service wholesaler is someone who stocks the products of the company and sells it in a limited channel. He
does not have a large turnover or does not cover all channels of the company.
The same way – there are other limited-service wholesalers mentioned below.
1. Cash and Carry wholesalers – Strong FMCG products are sold as cash and carry. Immediate payment is
demanded on a delivery of material.
2. Logistics wholesalers – A milk wholesaler who delivers whole trucks of milk across the market. His only work
is to deliver the milk and not to get orders for the company.
Types of Wholesalers

Brokers and Agents Specialized Wholesalers

Most commonly observed in the real estate These are wholesalers who do wholesale of
industry or in the chemical markets. A broker specialized items only. Example – A used car
assumes no risk. He has the producer or the wholesaler who sells directly to customers or
manufacturer on one side and he has the buyer to other used car dealers. He is specialized in
on the other side. The work of the broker is to used cars and knows the ins and outs of
get the deal done and he gets a commission on
selling a used car to consumers or
the deal.
refurbishing the used cars.
Similarly, there are other specialized
wholesalers who are known for the specific
product that they sell.
Limitations of Wholesalers...

“
 Limitations of Wholesalers
Quantity
Capital
In the buyer‟s point of view, wholesaling is not good when it
In the wholesaler‟s point of view, he should have a big capital to buy
the product from the manufacturer and then have enough logistics to
comes to quantity. If there is one or two items that he would
distribute the product to buyers. In this case, big trucks are needed to like to buy from the wholesaler, he will not be able to do it.
contain the large amount of goods to be sold throughout the day. Wholesaling is dependent on quantity, which means that he
If the goods were not all sold, most of the time, the wholesalers can‟t purchase the items that he wanted alone. The buyer has
cannot return the goods to the manufacturers. One of the examples is to buy a minimum number or amount of products dictated by
wholesale fish, which the wholesaler bought from the fishmongers. the wholesaler.
The wholesaler doesn‟t have a choice but to find means to sell the
catch even at a very low price.

Discounts
Asking for discounts is a disadvantage most of the time in the retailer‟s part. People would think that the retailer has
purchased the goods at a very low price since they were from wholesale.
This is true at times, but buyers fail to consider the retailer‟s expenses on transportation, VAT, and human labour.
Knowing that the goods were bought from wholesale would also decrease their market value in the perspective of
buyers.
Limitations of Wholesalers

Competitive Pricing Big Storage

It is hard to set a good price when the good The need for a big storage is a disadvantage
was bought from wholesale. The retailer will to the wholesaler. The wholesaler should
have to compare his goods with other retailer have enough storage space most especially
before he can set his own price. This is to in cases when the goods weren‟t sold as
avoid over and under-pricing which would targeted. This is much needed particularly for
confuse the buyers. a fish supplier who should make sure that his
goods will not perish.

18
Emerging Trends...

“
Emerging Trends

◉ Omnichannel Selling
◉ Growing Commerce Ecosystems
◉ Expanding into Global Markets
◉ Inventory and Order Management
Transparency
◉ Automation
Thanks!

Any questions
?
 Group 2

Vishist Jain DM003

Rajdeep Seth DM006
Aditya Sahu DM010

Distribution Channel
 Topics covered !
 Introduction to Distribution Channel
 Functions of Distribution Channel
 Various Levels of Channel
 Factors Determining Choice of Channels
 Components of Physical Distribution
 Steps for Channel Designing
 Factors Affecting Selection of Channel Partners
 Channel Design Comparison Factors
 Channel Design Implementation
 INTRODUCTION PLACE MIX
=
Channel of Distribution refers to the people Distribution Channel
or middlemen who help in distributing
goods. +
Product Presentation
BASIC CONCEPT: Goods are produced at one place and customers are scattered all over the
country so it is very difficult for producer to distribute goods to the place of consumption.

For example; Tea is produced in Darjeeling, Assam but it is consumed all over the country. It is very
difficult for producer to distribute tea all over the country so he takes the help of some middlemen so
that it can be supplied to all the consumers.

PRODUCER WHOLESALER RETAILER CONSUMER

 Functions of Distribution Channel
Sorting/Grading: Risk Taking:
Wholesalers maintain large stock of goods, they
Middlemen produce goods from various transport goods from one place to other so they
manufacturers and then they do sorting i.e., bear the risk of spoilage or damage of goods. If
repack them according to quality, size or price. goods are not maintained well enough then the
damage may occur in warehouse

Negotiation: Variety Assortment:

Negotiation with the manufacturers as well as
with customers on price, quality and guarantee. Maintaining variety of goods. Procuring goods
They help in transfer of ownership. from various manufacturers and assemble them
at one place so that consumer can fulfill his
requirement by visiting only one place.
Packing:
Middlemen buy goods in bulk then repack them
at small lots. For e.g. Wholesaler buys a bag of Accumulation:
100kg wheat and then repacks it convenient Maintaining a large stock of goods so that
packs of 2kg, 5kg or 10kg. there is smooth supply of goods without any
delay
 Various Levels of Channel
Zero Level Channel/Direct Channel:
It is a case when firm sell their products directly to customers without adopting any intermediary.
For e.g. Naaptol, Ikea, etc.
Common types of Direct Channel are: Manufacturer Consumer
 Direct sale by appointing salesman
 Through mail order house
 Through Internet
 Through Teleshopping

Indirect Channel:
1. One Level Channel: In this only one intermediary is adopted i.e., the retailer. Firms
directly supply the product to retailer who sells the product direct to customers. For e.g. Cars
are sold through dealers, expensive watches through watch showrooms, etc.

Manufacturer Retailer Customer

 Two Level Channel: Most commonly used distribution path where two intermediaries are
adopted by firms to sell the products i.e., the wholesaler and retailer. The manufacturer sells the
goods in bulk to wholesaler who sells in small lot to retailers who supply it to ultimate consumers.
Generally FMCG products, necessity and convenient goods are sold through this path.

Manufacturer Wholesaler Retailer Customer

Three Level Channel: In this one more middlemen is added so there are three intermediaries
involved, these are distributors, wholesalers and retailers. When products are distributed in the
deep corners of the country the distributors are appointed area wise. For e.g. North India
distributors, South India, etc. The wholesalers buy from distributors then pass it to retailers.
Generally pharmaceuticals use this channel.
Agent
Manufacturer Wholesaler Retailer Customer
Distributor
 Factors Determining Choice of a Channel
Market Related Factors:
Product Related Factor: • Nature of Market
• Value of Product Line • Size of the Market
• Product Complexity • Geographical Concentration
• Nature of Product • Quantity Purchased
• Perishable or non-perishable product
Competitive Factors
Company Related Factors: Environmental Factors
• Finance
• Degree of Control
Components of Physical Distribution:
Order Processing: Refers to time and steps involved between taking order from
the customer and delivery of goods as per customer. There is an indirect
relationship between time taken in order processing and satisfaction of the
customer.

Transportation: Refers to physical movement of goods from place of

production to the place where they require. For e.g. Tea plantation is done in
Darjeeling, Gangtok, Assam etc. but these are transported all over the
country.

Warehousing: Whatever is produced not sold off

immediately. Therefore every company needs to store the
finished goods until they are sold in the market. Some
goods are produced at a particular season but consumed
throughout the year and vice versa.

Inventory: Refers to maintenance of stock of goods. The inventory needs to

be maintained so that goods can be supplied whenever demanded.
 Steps for Channel Designing
1. Defining the product/service of
the company:
• Consumer Goods
• Industrial Goods 3. Channel Alternative Study
• Durable Goods • Intermediaries Currently
Available
2. Defining channel objectives on the • No. and type of
basis of product/service of the intermediaries required
company. For e.g. • Any new member to be
• Industrial products needs specially developed
direct marketing.
• Consumer products should be 4. Cost of Developing new channel
available in large number of structure/Cost of modifying
outlets. existing channels.
• Frozen Desert and Ice creams
need cold storage facilities. 5. Evaluation of Major Alternatives
• Seeds selling will need rural • Finance
distribution • Ability to control
• Range and Volume to be handled
 Factors Affecting Selection of Channel Partners
Selecting Intermediaries: Financial Strength
• Should be in or close to the main • Ability to handle all operating expenses
market of the company • Insurance

Selecting Warehouse:
• Close to a major market
• Should have proper road/transport access
• Labor Availability
• Utilities Support
• Should have proper network coverage

History of Past Business:

I.T. Capability • Should have experience in this service
• Adequate own hardware • Should have access to good warehouse
• Qualified IT employees • Ability to manage the inventory
• Ability to maintain confidentiality of transactions
Flexibility:
• In operating hours daily
• To handle peak loads

Transportation Facilities:
• Reliability, Consistency in sources of vehicles
• Additional volume to be handled at short notice

Attitude, Commitment:
• Willing to expand the business
• Highly Motivated
• Disciplined

Selecting Distributors:
• Qualified, Experienced Salesmen
• Reputation, Leadership in the market
• Integrity, Fairness in dealings
• Market Coverage, Relationship, Productivity
 Channel Design Comparison Factors
While Comparing different Channels:

 Efficiency: Input vs. Output

 Effectiveness: How well channel meet its objectives ?

 Capacity: How effectively channel can handle change in volume ?

 Agility: How well can channel handle changing demand pattern ?

 Consistency: of performance

 Reliability: Commitment on performance

 Integrity: Is the channel fair ?

 Channel Design Implementation
 Define Criteria for appointment of channel partners
 Document channel objectives for sales people and channel partners
 Define the profile of the customer to be served
 List down all the customer service level in detail
 List the task in sequence which will drive this service levels
 Get benchmark for good practices from knowledge of competition
 Define channel partners and channel structure who constitute it
 Allocate the task among the channel partners
 Workout cost of delivering CS levels and prepare a budget
 Advice the channel partners on tasks and their benefits
 Define channel partner performance appraisal system and share it
 List down reports, records and frequency from each channel partner
 CONCLUSION !

Distribution Channel is an integral part of Place MIX. Its very important to

select a proper channel after considering all the alternatives thoroughly.
After all it’s the physical channel with the purpose of delivering company’s
product/service to its end consumers on time. A company distribution channels
decision directly affects every other marketing decision.
 THANK YOU
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