Channel of Distribution

Marketing intermediaries like Sole Selling Agents,

C & F agents, Wholesalers, Distributors, Dealers,
Retailers, Franchisees etc who take product to
users, constitute the distribution channel.
It renders services directly related to the
purchase and/or sale of a product as it flows from
producer to consumer either by owning a
product or by actively aiding in transfer of
ownership.

Middlemen are necessary evils

Role of a Middleman
Sales specialist for Producer
Provides market Info
Interprets consumer wants
Promotes product
Creates Assortments
Stores Products
Negotiates with customer
Provides Finance
Owns product
Shares risk

Purchasing agent for buyers

Anticipates wants
Breaks bulk
Stores product
Transports product
Creates Assortments
Provides Finance
Makes product available
Guarantees product

Components of Channel

Sole Selling Agents

C & F Agents/Liasoning Agents/Associates
Wholesaler/Stockist/Distributor
Retailer/Dealer

Importance of Channels
Channels provide distribution efficiency to
manufacturer
Brings together maker and user in an efficient and
economic manner
In mass consumption products, because of the
need of large resources like men, money and
materials, manufacturer takes help of channels
Intermediaries minimize the number of contacts
the firm has to make to sell its product

Imp of channels contd..

Channels offer products in assortments
Manufacturer typically produce large quantities of
limited variety, whereas consumer needs limited
quantity of a wide variety.

Channels provide vital input of salesmanship

Channels provide pre,during and post sales service

Use their goodwill
Promote the product
Provide Market Intelligence
Give feedback

Imp of channels contd.

Help in Merchandising
Reinforce the awareness about the product
among the target customers

Help in implementing Price Mechanism

Look after Physical Distribution function
Look after functions like Transportation,
Warehousing, Repacking etc

Look after Financing function

Negotiates, Gives credit, Installments etc.

Imp of channels contd.

Channel decisions have a vital bearing on
other areas of Marketing
Pricing
Sales Force Type, Size, number etc.
Marketing department
Advertising etc.

Major Channels of Distribution

Consumer Goods
Business Goods
Services

Designing a Distribution Channel

Formulation of Channel Objectives
It originates from firms marketing objective.
Eg Best market coverage (Sam Pitroda, Pepsi,
Kachwa agarbatti), Maximum Coverage in
Minimum time (Eureka Forbes) etc.

Identification of Channel functions

These are in line with channel objectives

Designing contd
Linking product characteristics to the channel
In case of Industrial product, the number of
customers are less, sales/customer is large,
products are complex and technical in nature,
sometimes customised, high unit value, special
team for installation and commissioning etc.
Thats the reason Direct Contact
In consumer products,

Designing contd.
Evaluation of Distribution Environment
Includes vital features of Business and Legal
environment

Evaluating Competitors Channel

Evaluating companys resources
Identifying the alternative channels and
selecting the most suitable

Marketing Without Channels

Direct Marketing Contacting through Radio,
NP, TV, Magazine Mailers etc
Direct Selling Eureka Forbes
Telemarketing
Automatic Vending
Net

Selection and Appointment of Dealers

Qualities required in a Dealer
Reputation
Capacity
Infrastructure shop,warehouse,manpower,
vehicles etc.
Existing line and Experience
Financial capability
Subdealer network
Attitude

Managing Dealer Network

Mutually beneficial, profitable and healthy
relations
Dealer Compensation/Margins
Dealer Induction
Different schemes
Efficient and Quick service
Dealer Training
Dealer Appraisal
Review and corrective action in the dealers and
network

Channel Conflict

Performance appraisal of Channel

Members

Example on deciding Channel

Structure (CD Company)
Collect data from potential customers regarding their
expectations from the DC, like:
The max distance customer would travel to look at
household appliance is 3-5 Kms. To travel more, customer
has to be compensated with superior features, attractive
price etc.
One of the key influencing factor is presentation by the
salesperson at the outlet
Max thrust on post sales service
If the stock is not available, customer will shift.

Eg Continued..
The next step is to find out what competitors were
offering in their channel output
Retailers were not in a position to take the full truck
load, where as, it was economical to dispatch in full
truck load from factory. This is one reason for one
level in between Mfr and retailer.
Cities with more than 100000 population was to be
targeted. So 400 such cities.
For product to be available at a radius of 3-5 Kms,
based on the geographic spread, 5000 retail outlets.

Eg contd
If the waiting time has to be zero, then
Retailer to keep minimum one week stock
That stock to be replenished within one week
One level above retailer would be company depot or
distributor. This to have min 2 weeks stock, keeping in
mind time taken to get from company and distribute to the
farthest.
200 retailers by one distributor/depot, so 25 such
distributors/depot. If we consider 5/6 working days a
week, then one ditributor per day would serve 35-40
retailers.
This would give a guideline about cost and other details.

Eg Parle Agro

Parle caters to approx 13000 outlets in Pune

This includes A, B and C outlets
A type are large outlets, B type are Grocery stores type and C are small Pan stalls
etc
A 1000 approx, B 5000 and C 7000 in Pune
These 13000 retailers are catered by 25 distributors in Pune
Each distributor has A,B and C retailers to cater to. He covers come of the
standalone malls as well Eg Dorabjee. Whereas large chains have their depot
outside octroi, say at Wagholi, company supplies to this depot directly and they
have their own transport arrangements to all their outlets.
Each distributor caters to 40-50 outlets/day/vehicle, so more are the no. of
vehicles, more are the retailers covered.
So each distributor would cover 300 1200 outlets
Thumb rule for such FMCG product, no. of outlets to be covered are approx 1
retailer/300 people (popullation of Pune approx 40 lacs/13000 outlets), the same
may be in CD would be 1 retailer/10000 people.

Retail Outlet Site Evaluation Parameters of a Petrol Pump

Parameter
Retail Outlets (Maximum Marks)
City / Towns
Highway/Others
Sales potential
20
15
Frontage
15
12
No earth filling reqd.
8
7
No earth/rock cutting reqd.
6
4
No Low Tension Over Head Line
3
3
No Over Head Telephone Line
3
3
No Trees
3
2
Proximity to culvert (farther from culvert
Desirable)
2
11
Soil Type (Soft)
7
5
Availability of Power
10
8
Availability of Water
9
8
Visibility from Road
7
9
No Presence of Divider
7
4
Outside Octroi Limits.*
0
9
Total
100
100

Write up on Dealer Selection and

Development in Agri sector

Harley Davidson