deepakjain 2010mba008

8/2/2019 deepakjain 2010mba008

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Assignment on

Distribution channel

Sub. Sales and distribution management

Institute of business management

Submitted to Submitted byDr. Shailendra Singh Deepak Jain

2010MBA008

MANGALAYATAN UNIVERSITY


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Concept of distribution channel-

Distribution is all about getting your product/service to the right people at the right time with

special consideration for profit and effectiveness. Successful marketing does not end when a

business has developed a product/service and has found its appropriate target audience with a

view to Marketing & sales pricing strategy. When a product/service is purchased by a

consumer, it may have been bought directly from the business, or it may have been through a

number of intermediaries (wholesaler, retailer, etc.): these are known as distribution channels.1

A distribution channel is the primary delivery path the product or service travels from the

producer to the intended receiver. The delivery path itself is divisible into three fundamental

elements: the production end, the throughput process, and the receiver end. How well these three

get integratedthat is, the degree to which they work in sympathy with one another can make

all the difference in the world for delivering value fulfillment.2

Most producers use intermediaries to bring their products to market. They try to develop adistribution channel (marketing channel) to do this. A distribution channel is a set of

interdependent organizations that help make a product available for use or consumption by the

consumer or business user. Channel intermediaries are firms or individuals such as wholesalers,

agents, brokers, or retailers who help move a product from the producer to the consumer or

business user.3

A companys channel decisions directly affect every othermarketing decision. Place decisions,

for example, affect pricing. Marketers that distribute products through mass merchandisers such

as Wal-Mart will have different pricing objectives and strategies than will those that sell to

specialty stores. Distribution decisions can sometimes give a product a distinct position in the

market. The choice of retailers and other intermediaries is strongly tied to the product itself.Manufacturers select mass merchandisers to sell mid-price-range products while they distribute

top-of-the-line products through high-end department and specialty stores. The firms sales force

and communications decisions depend on how much persuasion, training, motivation, and

support its channel partners need. Whether a company develops or acquires certain new products

may depend on how well those products fit the capabilities of its channel members.3

Definition of distribution channel-

The chain of businesses or intermediaries through which a good or service passes until it reaches

the end consumer. A distribution channel can include wholesalers, retailers, distributors and even

the internet. Channels are broken into direct and indirect forms, with a "direct" channel allowing

the consumer to buy the good from the manufacturer and an "indirect" channel allowing the

consumer to buy the good from a wholesaler. Direct channels are considered "shorter" than

"indirect" ones.4


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Importance of distribution channel-

As noted, distribution channels often require the assistance of others in order for the marketer to

reach its target market. But why exactly does a company need others to help with the distribution

of their product? Wouldnt a company that handles its own distribution functions be in a better

position to exercise control over product sales and potentially earn higher profits? Also, doesnt

the Internet make it much easier to distribute products thus lessening the need for others to be

involved in selling a companys product?

While on the surface it may seem to make sense for a company to operate its own distribution

channel (i.e., handling all aspects of distribution) there are many factors preventing companies

from doing so. While companies can do without the assistance of certain channel members, for

many marketers some level of channel partnership is needed. For example, marketers who are

successful without utilizing resellers to sell their product (e.g., Dell Computers sells mostlythrough the Internet and not in retail stores) may still need assistance with certain parts of the

distributionprocess (e.g., Dell uses parcel post shippers such as FedEx and UPS). In Dells case

creating their own transportation system makes little sense given how large such a system would

need to be in order to service Dells customer base. Thus, by using shipping companies Dell is

taking advantage of the benefits these services offer to Dell and to Dells customers.5

Channels of distribution-

1- Manufacturer-------------------------------------------------------consumer

2- Manufacturer--------------------------------------- retailer------consumer

3- Manufacturer-------wholesaler--------------------retailer------consumer

4- Manufacturer-------wholesaler-----jobber-------retailer------consumer

Distribution channels may not be restricted to physical products alone. They may be just as

important for moving a service from producer to consumer in certain sectors, since both direct

and indirect channels may be used. Hotels, for example, may sell their services (typically rooms)

directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation

systems, etc.

There have also been some innovations in the distribution of services. For example, there has

been an increase in franchising and in rental services the latter offering anything from

televisions through tools. There has also been some evidence of service integration, with services

linking together, particularly in the travel and tourism sectors. For example, links now exist


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between airlines, hotels and car rental services. In addition, there has been a significant increase

in retail outlets for the service sector. Outlets such as estate agencies and building society offices

are crowding out traditional grocers from major shopping areas.3

Channel members-

Distribution channels can have a number of levels. Kotler defined the simplest level, that of

direct contact with no intermediaries involved, as the zero-level channel.

The next level, the one-level channel, features just one intermediary; in consumer goods a

retailer, for industrial goods a distributor. In small markets (such as small countries) it is

practical to reach the whole market using just one- and zero-level channels.

In large markets (such as larger countries) a second level, a wholesaler for example, is now

mainly used to extend distribution to the large number of small, neighborhood retailers.3

Wholesaling

Wholesaling is all activities involved in selling products to those buying for resale or business

use. Wholesaling intermediaries are firms that handle the flow of products from the manufacturer

to the retailer or business user.

Wholesaling intermediaries add value by performing one or more of the following channel

functions:

Selling and Promoting Buying and Assortment Building Bulk-Breaking Warehousing Transportation Financing Risk Bearing Market Information giving information to suppliers and customers about competitors, new

products, and price developments

Management Services and Advice helping retailers train their sales clerks, improving storelayouts and displays, and setting up accounting and inventory control systems.3


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Independent Intermediaries

Independent intermediaries do business with many different manufacturers and many different

customers. Because they are not owned or controlled by any manufacturer, they make it possible

for many manufacturers to serve customers throughout the world while keeping prices low.3

Merchant Wholesalers

Merchant wholesalers are independent intermediaries that buy goods from manufacturers and

sell to retailers and other B2B customers. Because merchant wholesalers take title to the goods,

they assume certain risks and can suffer losses if products get damaged, become out-of-date or

obsolete, are stolen, or just dont sell. At the same time, because they own the products, they are

free to develop their own marketing strategies including setting prices. Merchant wholesalers

include full-service merchant wholesalers and limited-service wholesalers. Limited-service

wholesalers are comprised of cash-and-carry wholesalers, truck jobbers, drop shippers, mail-order wholesalers, and rack jobbers.3

Merchandise Agents or Brokers

Merchandise agents or brokers are a second major type of independent intermediary. Agents and

brokers provide services in exchange for commissions. They may or may not take possession of

the product, but they never take title; that is, they do not accept legal ownership of the product.

Agents normally represent buyers or sellers on an ongoing basis, whereas brokers are employed

by clients for a short period of time. Merchandise agents or brokers include manufacturers

agents (manufacturers reps), selling agents, commission merchants, and merchandise brokers.3

Manufacturer-Owned Intermediaries

Manufacturer-owned intermediaries are set up by manufacturers in order to have separate

business units that perform all of the functions of independent intermediaries, while at the same

time maintaining complete control over the channel. Manufacturer-owned intermediaries include

sales branches, sales offices, and manufacturers showrooms.Sales branches carry inventory and

provide sales and service to customers in a specific geographic area. Sales offices do not carry

inventory but provide selling functions for the manufacturer in a specific geographic area.

Because they allow members of the sales force to be located close to customers, they reduceselling costs and provide better customer service. Manufacturers showroomspermanently

display products for customers to visit. They are often located in or near large merchandise

marts, such as the furniture market in High Point, North Carolina.3


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References-

1-BizHelp24.com

2-marketing strategy management.com

3-MBA Knowledge Base.htm

4-investopedia.com

5-Know This.com

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