Module-II

Introduction & Concept of Sales

Management
Faculty: Dr.Ritesh Sharma
 Things to be covered…………
Sales Manager and Sales Force: Qualities, types and their
functions/duties. Recruitment, Selection, Training and
Remuneration of Sales Force. Motivation of Sales force.
Supervision and control of Sales force. Sales force
Performance and its Evaluation. Sales Territories, Quota and
Reports.
Sales Promotion, Demonstrations and Conference. After
Sales Service. Prospecting, Objection Handling. Distribution
Management: Physical Distribution System Meaning and
Organization. Types of Channels of Distribution: functions,
Selection & motivation of intermediaries. Transport system
elements and management: Features, Types & role of
different modes of transport.
 Sales Manager
Sales managers organize, motivate and lead
sales teams in a wide range of sectors,
including :-
•pharmaceuticals,
•fast moving consumer goods (FMCGs)
•Automobiles and
•finance. etc.
He is responsible for the combined performance
of the team and for ensuring that everyone
within their team reaches their targets.
 Definition of Sales Manager
A sales manager is the heart of sales organization. He
is the person who steers the wheels of the
organization towards a definite destination. Sales
manager manages the sales- which is the life blood
of the business. The formal definition of sales
manager is given below -
‘The sales manager is a person who is directly
responsible for planning, organizing and
performance of the sales force.’
•
 Role of Sales Manager
Roles of a sales manager can be divided into the following
heads:-
• Roles regarding management functions
• Planning
• Organizing
• Staffing
• Directing
• Controlling
• Motivating
• Roles related to Market
• Market Research
• Product planning and development
• Providing services to customers and dealers
• Distribution channel selection
• Advertising and sales promotion.
 Qualities of Sales manager
Sales manager plays an important role in
attaining the goals of the business. He is
responsible for directing all the sales activities
and the result of his functioning has a direct
influence on the prosperity and the direction of
the business. The qualities of the sales manager
can be studied under the following heads:-
• Personal Qualities-It is said that a sound mind exists in a
sound body. Hence the sales manager should posses sound
health, courage and attractive personality, self confidence,
firm decision making, courage, foresightedness, courtesy,
patience, honesty, ambition, consciousness, leadership ability,
good academic qualification, neatness and attractive get-up,
punctuality, smiling face, open mindedness, ability to use
time effectively, pleasing behavior, better understanding,
smart and tactful, peace loving, initiative, a strong character,
optimistic, flexible etc.
• Professional Qualities: The sales management should have
professional qualities, such as managerial skills, required
experience, knowledge of the product, knowledge of
statistics, knowledge of the sales area, technical abilities,
organizational ability, salesmanship degrees, diploma, and
aptitude etc.
• Personal Abilities: The sales manager should have
the following personal abilities :-
• Recruitment and selection of right type of salesman
• Ability to train salesman for future growth of the enterprise
• Ability to define positions, rights, duties and abilities of
the salesman
• Ability to inspire and motivate salesmen
• Ability to evaluate the performance of the salesmen
• Ability to guide, supervise, and control of the staff under
his control including salesmen
• Ability to work successfully and take work and
cooperation from the staff
• Ability to choose alternatives
•Product Knowledge: The sale manager should
possess the knowledge of following:-
• Knowledge of the policies and objectives of the enterprise
• Knowledge of the products, both of the enterprise as well
as of the competitors
• Knowledge of the rules, regulations and practices etc.
which are governing the trade.
• Knowledge of the research and development in sales
management, data processing and inventory control.
• Knowledge of human psychology etc.
 Duties/Functions of a Sales Manager
Following are the duties of the sales manager:-
• He has to appoint suitable persons to work in different
departments and to see that no losses are suffered to the
enterprise.
• He must study the market conditions, problem of competition
and the substitutes coming into the market. He must inform
the MD regarding these facts and also he has to provide his
suggestions to fight with these threats.
• He should collect the sample of goods of the competitor’s
product to understand its features so that the product of his
own enterprise can be improved or modified.
• He should keep the market knowledge up to date by talking
with wholesalers, retailers, agents and distributors.
• He should know the sale tax rules and other policies
which are governing the trade.
• He must arrange the training programmes for new
salesmen and as well as for those who need it.
• He should call conferences and meetings to discuss
the problems and review the sales of the product.
• He should hold the sales environment healthy which
can improve the output of the firm.
• He must look after important correspondence and
clarify the queries made by the agents and traveling
salesman’s.
• He has to arrange and plan salesman’s tours, allocate sales
territories and also he must have to see that no clashes and
conflicts are taking place among the salesman’s.
• He must organize the internal audit and inspection system.
He must act promptly on reports and find out the defects
which are present there.
• He has to see that the sales department is running effectively
with minimum or optimum expenditure.
• Finally, it is his duty to increase the sales volume for which
he has to plan and make sales promotion activities and
strategies.
 Types of Sales manager
• The Administrative Sales Manager: In case of a large sales
department along with multifarious responsibilities and
duties administrative sales manager is needed. Such type of
sales departments are divided into sub-departments and each
department is put under an executive officer, known as
assistant sales manager/ deputy sales manager. In this case
the sales manager is the deputy head of the sales department.
• The Operating sales Manager: The operational sales
manager is mainly concerned with the execution of a
marketing plan as approved by the head. He works under the
direct control of administrative sales manager. He gives
effect to the sales plans laid down by the administrative sales
manager.
• The Administrative-cum-Operating Sales Manager: This
type of sales manager is a combination of first and second
type of sales manager discussed above. In a small concern
the work related to sales is entrusted to a single person
known as Administrative-cum-Operating Sales Manager. He
performs both administrative as well as operational functions
himself with the help of few salesmen’s under his direct
control.
 Duties of Sales manager
• He has to appoint suitable persons to work in different
departments and to see that no losses are suffered to the
enterprise.
• He must study the market conditions, problem of
competition and the substitutes coming into the market.
He must inform the MD regarding these facts and also he
has to provide his suggestions to fight with these threats.
• He should collect the sample of goods of the
competitor’s product to understand its features so that the
product of his own enterprise can be improved or
modified.
• He should keep the market knowledge up to date by
talking with wholesalers, retailers, agents and
distributors.
• He should know the sale tax rules and other policies
which are governing the trade.
• He must arrange the training programmes for new
salesmen and as well as for those who need it.
• He should call conferences and meetings to discuss the
problems and review the sales of the product.
• He should hold the sales environment healthy which can
improve the output of the firm.
• He must look after important correspondence and clarify
the queries made by the agents and traveling salesman’s.
• He has to arrange and plan salesman’s tours, allocate
sales territories and also he must have to see that no
clashes and conflicts are taking place among the
salesman’s.
• He must organize the internal audit and inspection
system. He must act promptly on reports and find out the
defects which are present there.
• He has to see that the sales department is running
effectively with minimum or optimum expenditure.
• Finally, it is his duty to increase the sales volume for
which he has to plan and make sales promotion activities
and strategies.
 Sales Force

Sales force can be defined as – the division of a business that is

responsible for selling product or services.
Sales force includes those persons who are responsible for selling
product or services via direct contact with the customers. They may be
paid a fixed salary regardless of sales volume or may receive a small
base salary plus commission calculated as a percentage of revenues
sold.
 Types of Salesman
 Manufacturer’s Salesman
• The pioneer and missionary salesman
• Re-sale or service salesman
• Merchandizing salesman
 Wholesaler’s Salesman
 Retailer’s Salesman
 Speciality Salesman
 Industrial Salesman
 Exporter’s Salesman
 Duties of a Salesman
• To Make sales Call:
• To determine Territory and its Development
• To provide Product Knowledge
• To promote Goodwill of the Organization
• To welcome the prospective customer:
• To increase the sales:
• Contributes to Employee’s Morale:
• To assist the customer in Selecting the Product:
• To act as a Counsellor:
 Responsibilities of a Salesman
• Securing adequate sales volume in relation to territory
potential.
• Development of the company’s Goodwill and image.
• Assisting in selecting, appointing and training new
salesman.
• Self-development and growth of the organization.
• Carrying out the sales policies faithfully and sincerely.
• Maintaining his morale and faithfulness towards the owner
and the firm.
• Collecting requisite market information and presenting
the same before the owner along with the comments. In
addition to this he has to provide the counselling and
advice.
• Safe guarding the trade secrets of the firm carefully from
the competitors.
• Presenting the relevant reports on time.
• Dealing strictly in the name and behalf of the firm with
the customers.
• Preparing, maintaining and presenting his books of
account regularly before the
 Motivation of Sales Force
• Motivation is a psychological set of force which influences the
behavior of an individual. It involves the complex combination of
individual needs, desires, comforts, aspirations, emotions and
expectations.
• To motivate a sales force, a Sales Manager must know the mind set
and expectations of his Salesman. He must know their Physical,
Emotional and Mental needs. In addition to this he must also know
their attitude towards the company.
• Salesman job involves a lot of hard work. He has to face many
disappointments and still have to continue his job. Hence, it becomes
very much important to motivate him so that he can do his job
normally. Let’s see the psychology of a Salesman, why they accept
the job of Salesman.
 Let’s see the psychology of a Salesman, why they accept the job of
Salesman. There could be many reasons but some of the important
one’s are given below:-
1. Liking to meet new people all the time.
2. Liking for travel to different places and destinations.
3. Liking to understand and know different cultures.
4. Liking for eating food (out of the ordinary and different).
5. For staying in good hotels at company’s cost and expenses.
6. For earning good money.
7. For getting freedom from constant bosses.
8. For avoiding routine working hours of job (9 to 5 schedule).
9. For wearing smart dress to work.
10.For traveling in first class and executive class.
 Objective of Motivation of a Sales Force
1. To encourage salesman for maximizing and increasing the sales and
efficiency respectively.
2. To raise the morale of the sales force.
3. To get full support of the sales force.
4. To develop good mutual coordination and support amongst the salesman
5. To develop good relations between the salesman’s and sales
management.
6. To satisfy economic, social and mental needs of the salesman.
7. To provide job satisfaction to the salesman.
8. To encourage salesman for improving their quality of work and services.
9. To provide job security, fair pay packets and good working conditions for
the sales force.
 Forces of Motivation of a Sales Force

• Proper working Environment and Culture

• Fair pay packets (Good Salary and Remuneration
• Recognition and Praise
• Job Security and Stability
• Opportunity for Progress and Advancement
• Target and Goal Oriented
• Honest and Competent Leadership
• Job Satisfaction
• Tempo and pace of Working
• Opportunity for Self Expression
• Pride in Selling
Supervision & Control of Sales Force
 Supervision and Control

Supervision and control of salesperson is very essential for

the sales org. to achieve max possible success. It is the duty
of sales manager to supervise and control the efforts and
activities of the salesman so as to achieve the
predetermined and set goals.
The need of supervision and control arises basically out of
the following two factors
1. Salesman works independently at the long distance from
the sales manager, therefore the co-ordination and co-
relation of salesman efforts with other sales efforts such
as advertising sales promotion efforts became necessary.
2. Supervision of the superior officer is making the
salesman work more regularly channelizing his efforts to
the most desired and from firm’s view point.
 Prerequisites for effective supervision and control

Effective supervision and control of sales force pree suppose the

following
1. The sales manager know what exactly does he expect a sales man
to do.
2. Salesman should be given clear idea of what he is expected.
3. Sales manager should know that salesman is doing what is
expected to do.
4. Salesman should be made to know that the sales manager knows
what he does.
5. Salesman should know that the sales manager appreciate what he
does.
• The first condition is met by establishing the sales quota for
individual salesman.
• The second condition is achieving during training period by
giving exact knowledge of salesmanship.
• The third condition is met through periodic reports from the
salesman on about his performance.
• The fourth and fifth requisites are fulfilled through reports and
records and personal talks across the table with the individual
salesman.
CONTROL PROCESS
 Settlements of standards

Communication of standards

Measuring the actual performance

Compare the actual with the standards

Find out gaps

Controlling the variance or reducing the gaps by using

methodology or practices
 METHODS OF REDUCING THE GAPS/
VARIATIONS
(METHODS OF SUPERVISION AND CONTROL)
 Personal supervision

The personal supervision of sales manager always inspire the

confidence of sales employees to work effectively. This is the
method by which a sales manager can co- ordinate the efforts of
sales employees and help to control the undesirable activities of
the sales force for getting the desired outcome. In large
organization various special supervisors or exports can be
appointed for this task.
 Salesman report

This method is similar to the correspondence but instead of letter printed

reports or forms are used to facilitate the speedy transmission of information.
The salesman is in a position to give his org. the valuable information on
various points that can help the marketing department . All the information
about the market is provided by the salesman to the company to make
effective decision and it is also valuable for salesman because it is a way of
increasing the sale and to sell the product in market.
 Field supervision

Some firms give free hand to their salesman in the field for
providing the close supervision and the main obj. of field
supervision is to see that the salesman are doing their work in
the best way and for guiding him to make the proper growth in
% of total sales after a period of time.
 Sales force Performance and its
Evaluation
• With the changing global environment, varying customer
needs and increasing competition, the organizations are
seeking new ways to improve their performance.
• Since, sales force performance has a direct bearing on the
overall performance of the organizations, they are given
more weightage on improving their working and
performance standards.
• There are various methods to improve the sales force
performance. Some of them are sales force training, good
human resource policies and the introduction of grater
awareness of the elements which influences and motivates
their working.
 Determinants of Sales force
Performance
The determinants of the Sales force performance can broadly be divided into
two heads. That is- Internal and External.
Internal Determinants-
• Motivation
• Skill Level- required to have a good skill set, which includes public speaking,
ability to establish relationships with customers, an effective communication
skills etc
• Job Satisfaction
• Role perception- awareness about the activities and responsibilities of the
job, the needs of the customer, the type of the product company offers, and
how it meets customers needs and requirements helps the sales force with
clear perception of their roles.
• Personal Factors- personal factors include the factors like age, gender,
weight, height, appearance, marital status, education etc.
• Ego Drives
• Empathy
External Determinants
• Environmental Factors: The external environmental factors like land of
the territory, economic and demographic factors can have a deep influence
in the sales force performance.
• Organizational Factors- Organizations which have streamline and
smooth communication facilities; good interaction among the sales
personnel enjoys good sales performance. Even the compensation system
of the organization can also influence the sales force performance.
• Sales Management Functions: It includes sales force planning,
forecasting, territory management, compensation and control of the sales
forces. The organizational structure, job descriptions and sales force
structure also plays a critical role in influencing the sales force
performance.
 Criteria for Evaluation of Sales Force
performance
Qualitative Component
• Sales Skills
• Territory Management
• Personality Traits
Quantitative Component
• Sales Volume
• Average Calls made per day
• Sales orders
• Ratio of selling cost to sales
• Gross profit obtained from the new customers
 Sales Territories
• According to Still, Candiff and Govoni, “Operationally a
sales territory is a particular grouping of customers and
prospects assigned to an individual sales person.”

• According to B. R Confield, “A sales territory is a

geographical area containing present and potential
customers who can be effectively and economically served
by a single salesman, branch, dealer or distributor.”
 Objectives and reasons for Establishing Sales territories

• To Improve market coverage

• To reduce selling and expense ratio
• To improve customer service
• To improve sales force interest and morale
• To co-ordinate personal selling and advertising efforts
• To improve sales force performance evaluation
• To meet competition
• To increase the profitability of sales
• To improve sales planning
• To have better control on sales force
 Advantages of Allocating Sales territories

1. Market potential of each sales territory can be tapped fully and

efficiently.
2. Activities of each salesman can be effectively planned,
compared, controlled and evaluated.
3. Better market coverage.
4. Effective utilization of sales force and efficient distribution of
work load among sales persons.
5. It offers a convenient way to evaluate the performance sales
people and also helps in enhancing the employee’s morale.
6. It helps in market research.
7. It helps and facilitates the comparison of two different
salesmen’s at different territories.
8. Inefficient or non-performing salesmen are either forced to improve of to
quit the firm.
9. Complaints of the customer’s can be promptly attended by the salesman
of the concerned sales territory.
10. Production of goods can be adjusted according to taste, fashion and
suggestions of the customers.
11. The salesman remains in close contact with their customers, which gives
them an opportunity to develop relations with them. Ultimately, these
relationship building helps them to increase the sales of their territory.
12. It encourages hard work and creative efforts on the part of salesmen.
 Sales Quota
• According to Phillip Kotler, “A Sales Quota is the sales goal set for
the product, company, division, and sales representative. It is
primarily a managerial device for defining and stimulating sales
efforts.”
•
• Sales quota can also be understood as- the part of company’s total
estimated sales assigned to a salesman, a territory, a branch, a
distributor or dealer, selling unit, as a goal to be achieved in certain
defined period of time.
•
• In other words we can say that sales are the quantitative objectives or
assignments of a sales force which are to be achieved by them during
a given specific time period.
 Objectives of Sales Quota

• To provide quantitative performance standards for the sales

force
• To motivate the sales force for desired performance
• To obtain tighter control on sales and expenses
• Quotas are used in connection with sales contests
• To identify market areas where extra promotional efforts are
needed:
• Other objectives:
a. To estimate the future requirements of the enterprise.
b. To establish territorial objectives.
c. To obtain more effective control of budget.
d. To maximize sales in terms of volume as well as in terms of value.
e. To identify salesman who needs salesman training.
 Factors Determining the Sales Quota

• Past Sales
• Potentialities of the Market
• Production Capacity of the Firm
• Advertisement and Sales Promotion Policy
• Product Development
• Level of Competition
• Living Standard of the Customers
• Sales Forecasting
• Sales Policy of the firm
 Sales Report
Sales report is a report of a salesman; it is the mirror of the sales position
in the whole area. Salesman report is a source of communication
between the salesman and the sales manager. Salesman report-
 Provides the required information to the sales manager about the
activities of the salesman.
 It also assists the sales manager in determining –what more can be
done to secure more, to secure larger orders and to win the confidence
of the salesman and the customers?
 Salesman’s report provides the raw information to the salesman for
gaining insights, which provides background material for evaluation
of the salesman.
 Objectives of Salesman Report

1. To evaluate the performance of individual salesman.

2. To control the activities of the salesman.
3. To gather and collect the information related to competitors.
4. To record customers reaction. The report contains the information about customer’s
complaints, suggestions, reaction about new products, reaction of customers related
to any change in price and service policies etc.
5. To find out the problems of the salesman, so that necessary assistance can be
provided to him.
6. To report changes in territory and business conditions.
7. To compare two different salesman’s.
8. To have necessary information related to any change occurred in customers
preferences such as taste and fashion etc.
9. For collecting data and information for marketing research.
10. To assist communication between the salesman and sales manager.
 Types of Salesman Reports
• Progress or Call Report
• Sales Work plan Report
• Expense Report
• New Business or New Potential Business Report
• Lost Sales Report
• Report of Complaint or Adjustment
 Sales Promotion
It includes activities other than advertising, personal selling,
publicity and public relations which are used in promoting sales of
the product or in persuading the customer to purchase the product
such as coupons, rebates, free samples, frequent-user incentives,
exchange, etc.
Objective
• To introduce new products

• To attract new customers and retain the existing ones

• To maintain sales of seasonal products

• To meet the challenge of competition

 Methods and Tools for Sales Promotion

• A consumer sales promotion method attracts consumers to particular retail stores and motivates them to
purchase certain new or established products.

• A trade sales promotion method encourages wholesalers and retailers to stock actively promote a
manufacturer’s products. A number of factors enter into marketing decisions about which and how much
sales promotion methods to use. You must be familiar with many of the following sales promotion methods:
• Rebate

• Coupon

• Free Samples

• Premium and Bonus

• Frequent user benefits

• Point-of-Purchase Displays

• Trade Fairs and Exhibition and Shows

• Price-off offer

• Exchange schemes

• Scratch and win offer

• Money Back offer

 Demonstrations and Conference
Sales Conference can be defined as, “A Conference in which the members of a sales team or
organization brought together for a review or a significant announcement, such as product
launch.”
Advantages
1. It provides a platform for mutual exchange of ideas, opinions and suggestions among the
sales executives and sales force.
2. Through these, salesman can have the opportunity to develop close contact with their
seniors and experienced sales executives.
3. Such meetings develop the feeling of love, affection, mutual understanding, cooperation
and team spirit among the sales force. It any mis-understanding exists, than these meeting
give an opportunity to remove it.
4. These increase the efficiency, morale, knowledge and confidence of the participants and the
sales force.
5. Conferences and conventions provide necessary information and knowledge about the sales
policy, strategy, sales targets, sales promotion activities, new products, new techniques,
competition and the progress of the organization.
6. In these meetings prizes and awards are given to recognize the good performances of the
sales force and employees.
7. Organizing such events is a symptom of progressive sales management. It increases the
goodwill of the enterprise.
 Sales Demonstration
Forms
1. Demonstration in use: This is the most popular and effective form of demonstration form.
In this type of demonstration form, it has shown to the customer that how the product will
appear when they actually use it. For example, selling a readymade suit, the salesman should
ask the customer to wear it on and look it in a full size mirror. Thus, the salesman make the
customer actually see how the suit will appear on him. If the customer is pleased with
appearance, he is likely to purchase it.
2. Demonstration of a specific feature: The products which cannot be put into the above
category, the salesman may emphasize a particular feature of that product. For example, if a
salesman is demonstrating a blotting paper, a blob of ink may be sprayed on it from a pen to
demonstrate its absorbing ability or feature.
Techniques
• Exhibit/ Displays or shows:
• Models and Samples:
• Films and slides:
• Testimonials:
1. Examples: Citing examples of persons who are getting benefits of the product may be
helpful in creating a good impression on the customer. Examples provide additional
evidence of benefits and add to the reputation of the product.
 After Sales Service
After sales services can be defined as the services provided by the company to its
customers after making sales to them. These services increase the standard of
products and goodwill of the products of the company. These services are provided at
free of cost or a payment of some normal amount by the customers. After sales
services are quite common now-a-days and are provided by almost all the sellers or
the companies.
Features
1. It should be provided at reasonable cost.
2. It should be adequate and there should be promptness in providing it.
3. The policy of after sale service should be stable and free or some fixed
period of time.
4. It should be provided when the customer face some problems in using a
particular product.
5. It should match the customer’s expectations and they should feel benefited
by taking and using the product.
 Prospecting
‘‘Prospecting is hunt for needier who can be changed into wanter and
buyers.’’ Here we have to understand these three words needier, wanters and
buyers-to understand very clearly who is a prospect.’’
In other words-‘‘The stage in the personal selling process that involves
developing a list of potential buyers is called as prospecting.’’
Methods
• Cold Canvass Method
• Endless method/Family tree/Reference method
• Centre of influence method
• Personal observation Method
• Junior salesmen method
• Trade fairs, exhibitions and demonstration method
 Objection Handling
A salesmen job is not an easy job. To make people ready or to make them buy a
specific product is very difficult job. Objection in a simple language can be defined as the
doubts or the queries of the customers.
Methods
• The direct denial method
• Indirect denial method
• Boomerang method
• Compensation method
• Question method
• Pass-up method: In this method the salesmen doesn’t pay any attention to the customer
objections and express neutral opinion.
• Reverse position method
 Physical Distribution System/ Channels of
Distribution
Distribution of products constitutes an important element of marketing mix of a firm. After
development of the product, the entrepreneur has to decide channels or routes thought
which the product will flow the factory to the potential customer. He has a number of
alternatives available to him. The entrepreneur may choose to distribute the product
directly to customers without using any intermediaries. Alternatively, he may use one or
more middlemen including wholesalers.
Strategies
• Intensive distribution strategy: Firms sometimes use all possible outlets to distribute
the product. This ensures easy availability to the consumer. This strategy is generally
used for items such as tobacco products, soaps, snack food, soft drinks etc.
• Selective distribution strategy: Selective distribution strategy involves the use of a few
outlets for distribution by a firm. It is used by established firms and new firms seeking
distributors. This ensures good working relationships with the limited channel members,
optimum market coverage and more control at a lesser cost for the firm. For e.g. Nike,
Lee, wrangler etc.
• Exclusive distribution strategy: It involves exclusive dealing arrangements, in which
the resellers agree not to carry competing brands. This is a common form of distribution
of products and brands that seek high image.
 DISTRIBUTION CHANNELS
 A channel facilitates the transfer of ownership and the physical
exchange of products and services.

 Business managers need to plan carefully before actually

setting up a suitable channel for their products.

 Once established, these channels should be adjusted often

according to the needs of the customers.
CHARACTERISTICS OF
CHANNELS OF DISTRIBUTION

 Place Utility
help in moving the goods from one place to
another

 Time Utility
bring goods to the consumers when needed

 Convenience Value
bring goods to the consumers in convenient
shape, size, unit, style and package
CHARACTERISTICS OF
CHANNELS OF DISTRIBUTION
 Possession Value
make it possible for the consumers to obtain goods with
ownership title

 Marketing Tools
serve as vehicles for viewing the marketing organization
in its external aspects

 Supply-Demand Linkage
bridge the gap between the producers and consumers by
resolving spatial (geographical distance) and temporal
(relating to time) irregularities
FUNCTIONS OF
CHANNELS OF DISTRIBUTION
 The main function of a distribution channel is to provide a link
between production & consumption.

 Information
 Gathering and distributing market research and intelligence - important for
marketing planning

 Promotion
 Developing and spreading communications about offers

 Matching
 Adjusting the offer to fit a buyer's needs, including grading, assembling and
packaging
FUNCTIONS OF
CHANNELS OF DISTRIBUTION
 Contact
 Finding and communicating with prospective buyers

 Negotiation
 Reaching agreement on price and other terms of the offer

 Physical distribution
 Transporting and storing goods

 Financing
 Acquiring and using funds to cover the costs of the distribution channel

 Risk taking
 Assuming some commercial risks by operating the channel (e.g. holding
stock)
 Distribution Channel Levels
• Each layer of marketing intermediaries that performs some work
in bringing the product to its final buyer is a "channel level".
Distribution Channel Levels
 In the figure, Channel 1 is called a "direct-marketing" channel, since it
has no intermediary levels. In this case the manufacturer sells directly
to customers.

 An example of a direct marketing channel would be a factory outlet

store.

 The remaining channels are "indirect-marketing channels".

Distribution Channel Levels
 Channel 2 contains one intermediary. In consumer markets,
this is typically a retailer.

 The consumer electrical goods market is typical of this

arrangement whereby producers such as Sony, Panasonic,
Canon etc. sell their goods directly to large retailers which then
sell the goods to the final consumers.
Distribution Channel Levels
 Channel 3 contains two intermediary levels - a wholesaler and a
retailer.

 A wholesaler typically buys and stores large quantities of several

producers goods and then breaks into the bulk deliveries to supply
retailers with smaller quantities.

 This arrangement tends to work best where the retail channel is

fragmented. A good example of this channel arrangement is the
distribution of drugs.
 Factors influencing choice of channel of
distribution
• 1) The Nature of the Product:
• Perishability
• Size and weight of product
• Unit value of a product

• 2) The Nature of the market

• Consumer of industrial market
• Size of the order
• Buying habits of customers

• 3) The Nature of Middlemen

• Services provided by middlemen
• Reputation and financial soundness
 Factors influencing choice of channel of
distribution
• 4) The nature and size of the manufacturing unit
• Manufacturer Reputation and Financial Stability
• Desire for Control of Channel

• 5) Government Regulations and Policies

• The Government may impose certain restrictions on the wholesale trade of a
particular product and takeover the distribution of certain products.

• 6) Competition
• Different manufacturers producing similar products may employ the same
channels of distribution.