LECTURE 3

DISTRIBUTION CHANNELS

Distribution Management
M Wahidul Islam
Elements of
Distribution
Management
WHAT IS A DISTRIBUTION CHANNEL?

 A group of people and firms involves in the

transfer of title or ownership as the product
moves from the producer to the ultimate
consumer

 “the structure of intra company organization

units and extra company agents, dealers,
wholesalers and retailers through which a
commodity, product or service is marketed” –
American Marketing Association
KEY QUESTIONS FOR
DISTRIBUTION
CHANNEL
Whowill be the Channel
Members?

Who is driving the Channel?

What is the Channel Format?

What would be the Patter of

Distribution?
 DISTRIBUTION CHANNEL MEMBERS

Owned or Contracted
Exclusive
/ Shared
Carry Consig
Comp Distri Valu
nment Dire
Fra Wh
any
Owne
ing
and
Selling ct butor e Re
d
Forw
Agent Mark nc s/
Adde ole
tail
s or
Distri
Gener eting Deale
ardin
butio
g al Sale his rs / d sal
ers
n Selling s Resel
Cente Agen Agent
force es Stocki
ers
r ts s est lers
DISTRIBUTION CHANNEL MEMBERS
 C&FA
 Facilitators
 Do not pay for the product or hold physical possession
of the goods. Merely stores in a central location and
then pass it on to the distributor
 Example: Edible Oil Industries

 Consignment Selling Agents (CSAs) or

General Selling Agents (GSAs)
 Sales the goods on behalf of the company and transfer
amount to the producer
 Example: Shipping Companies, Airlines
Companies
 Value Added Resellers
 Purchases incomplete product or kit and add value to
assembling it and then selling to customers
 Example: Personal Computers, Bicycles,
 Producer

Central
Distributor

Regional /
Market
Specific
Distributor

Wholesalers

Direct Own
CSAs / GSAs Authorized Branded
Marketing Retailers Reseller Store
Team

Customers
PATTERS OF DISTRIBUTION
 It represents the service level that the
organization provides to its customers

Intensive ●
The strategy is to make the product available to
as many customer as possible
Distribution ●
Example: Unilever, GP, BATB, FMCG Products

Selective ●
Few carefully selected outlets are
permitted to keep company’s products
Distribution ●
Example: QUBEE, HP, Nikon

Exclusive ●
Only one or two outlets in a market may keep
the company’s product
Distribution ●
Example: Franchises, BATA, Transcom, KFC
 DISTRIBUTION CHANNEL MEMBERS

Owned or Contracted
Exclusive
/ Shared
Carry Consig
Comp Distri Valu
nment Dire
Fra Wh
any
Owne
ing
and
Selling ct butor e Re
d
Forw
Agent Mark nc s/
Adde ole
tail
s or
Distri
Gener eting Deale
ardin
butio
g al Sale his rs / d sal
ers
n Selling s Resel
Cente Agen Agent
force es Stocki
ers
r ts s est lers
 CHANNEL FORMATS
 Who plays the major / dominant role in the
distribution channel is also a big deciding
factor

Producer Driven Seller Driven Service Driven Others

Company Owned Existing Retailers Multilevel

Retail Outlets Couriers marketing
Wholesalers
Licensed Outlets
Credit Card Kiosks
Modern Store Formats

Consignment
Companies TV home shopping
Specialty Stores networks
Selling Agents
Financial
Factory / Discount Stores
Franchisers Institutions Catalogue
shopping
Agents / Dealers
3P Logistic Internet based
Distributors D2D Sales People service providers sellers
HOW TO DECIDE WHICH
DISTRIBUTION CHANNELS TO USE?
 Product type
 Industrial
/ Textile / Chemicals and Fertilizers
Automotive
 FMCG
 Pharmaceutical
 Telecommunication
 IT hardware
 Services
 Consultancy

 Requirement of after-sales service??

 Who is driving the channel?

 Ability to influence consumer’s buying

decision
 Producer

Direct Own
Central Authorized
CSAs / GSAs Marketing Branded
Distributor Reseller
Team Store

Regional /
Market
Specific
Distributor

Wholesalers

Retailers

Customers
INDUSTRIAL PRODUCTS
 General natures
Producer
 Technical
 Mostly B2B
 Need of more personal Agent

interaction with the

customer
Industrial
 Relationship management Distributor

very important
Customers
 Examples: Production Raw
Materials, Steel Mills

Critical Question:
How do you manage the relationship with the Customer?
PHARMACEUTICAL PRODUCTS
 Highly technical
Producer
 Doctors one of the key
stakeholders
 End Users / Customers Distributor

virtually have no
Wholesaler
communication with the Doctors

manufacturer Retailer /
Chemist

 Examples: Medicine
Customers
Companies

Critical Question:
Can the producer influence Customers buying decision?
CONSUMER PRODUCTS
 Target is to reach as many
Producer
customers as possible
 Every possible route is
selected Distributor

 Most evolved distribution

Wholesaler
flow / channels format
Different forms of
Retail
 Examples: Lux, Clear, Low Cost
Ball Pen, Mineral Water etc. Customers /
 FMCG Products Consumers

Critical Question:
Which distribution flow is right for my product?
Is my Consumer buying my product?
CONSUMER DURABLES
 Similar to Consumer
Producer
Products
 But needs to be
maintained / serviced Market
Specific
Distributor
 Targeted Customer / End
Users based Different
Product
Service Team
forms of
 Usually high-end Retail

 Examples: Samsung, NOKIA, Customers /

Sony, Mercedes Benz, QUBEE End Users

Critical Question:
Which is more important?
Distribution Flow or Service? After Sales Service??
SERVICES
 Customer Experience is the most
important factor, leading to high Service
coordination of Sales and After Provider
Sales Customer Service
 The customer interaction is directly
with Company Representative,
Different
usually Forms of
Service
 Usually customer goes through a Outlets
process of service experience
 Purchase > Experience > Post
Evaluation
 Franchises / Agents are carefully Customers
chosen, and are closely controlled

 Examples: DHL, Hospitals, Airlines’

 Telecommunication?? Critical
GP?? Question:
Does a distribution flow exist as there is no physical
movement of services?
NEW FORM OF DISTRIBUTION FLOWS

 Mixtureof Service and Physical

Distribution
 Online Marketing
 Tele-shopping
 Catalogue Marketing (New or Old)
 Kiosks
 Others????
ONLINE MARKETING
TELE-SHOPPING
CATALOGUE MARKETING
CATALOGUE MARKETING
KIOSK / VENDING MACHINE
 KIOSK / VENDING MACHINE

The Google Vending Machine The Facebook Vending Machine

REFERENCES
 Chapter 8 – Distribution Management and the
Marketing Mix
 Havaldar K. and Cavale V. M. (2011) Sales and
Distribution Management – Text and Cases (2nd
Edition) Delhi: Tata McGraw-Hill Education Private
Limited
 Chapter 9 – Marketing Channels
 Havaldar K. and Cavale V. M. (2011) Sales and
Distribution Management – Text and Cases (2nd
Edition) Delhi: Tata McGraw-Hill Education Private
Limited
END