Basis of allocating territory to the distributors/retailers at Usha

International

Territory allocation refers to a geographical area assigned to a particular distributor for the
purpose of further selling the product. Generally, a firm divides the markets into specific
geographical zones or areas and assigns, a specific zone to each retailer/distributor in which
they have to carry out his selling operations. The specific geographical zone or area assigned
to them becomes their sales territory.
OBJECTIVES OF ALLOCATION OF DISTRIBUTION TERRITORY

1. To hold the retailer/distributor responsible for sales and services.

2. Supervise and control over the channel network.
3. To meet competition easily.
4. To save time and expenses

FACTORS DETERMINING ALLOCATION OF TERRITORIES

1. Studying the market potential through market research: Market research is undertaken
by the company to not only compete with various other competitors in the industry but also
to get analytical information on the competition, market size, and varied other market
needs. In order to understand the buying pattern, purchasing power of the customers,
identifying potential customers, the geographical distribution of the customers, Usha
International uses market research. It also hires third party research companies to
continuously work on thee parameters and present insights to the company.

2. Ability and experience of retailer/distributor. The profile of the retailer/distributor also

forms the basis of allocating territories.

a) The amount of investment the channel partner can possibly make in the company.
b) The turnover and quantity of sales done by the channel partner.
c) The ability of the partner to push the product towards the customer end.
d) The goodwill, partner carries in a particular geographic area.

3. Historical data estimates : Trend analysis is based on historical data about the
retailer/distributor performance given the overall trends of the market and particular
indicators within the market. This helps in identifying which channel partner to continue
with and make alterations in the existing channel network.

4. Presence of retailer/distributor in a particular area: The marketing research business

consists of a large number of suppliers who make available many products (i.e., research
studies and other documents) targeted at many buyers. To get research into the hands of
 buyers, the creators of the research can attempt to sell the products themselves or they can
enlist the services of companies serving an intermediary role (i.e., bring buyers and sellers
together). For their services these dealers receive a percentage of the sale price.

5. Demand for the product: While allocating territories to retailers/distributors, the demand
for a particular product should also be taken into account. If the demand for a particular
product is constant and frequent, then the company divides the whole area into small sales
territories. However, in case of low demand and infrequent purchase of articles, the size of
the sales territory should be large.

6. Nature of the product: First, the nature of the product is of utmost importance. There are
certain consumer items which have constant demand in the market. They are high turnover
goods and they need little selling efforts. Thus, for such products a large territory can be
assigned. For luxurious, bulky and durable articles, which need concentrated selling efforts
small sales territory can be assigned. Particularly for sewing machines, Usha International
sets the territory on the basis of the type of machine (automatic and manual black machines)
demanded in a particular area (urban and rural).
Channel Conflict Management

The Channel Conflict arises when the channel partners such as manufacturer, wholesaler,
distributor, retailer, etc. compete against each other for the common sale with the same brand.

1. Vertical Channel Conflict: This type of conflict arises between the different levels in the
same channel.
E.g.The conflict between the manufacturer and the wholesaler regarding price, quantity,
marketing activities, etc.

2. Horizontal Channel Conflict: This type of conflict arises between the same level in the
same channel.
E.g. The conflict between two retailers of the same manufacturer faces disparity in terms
of sales target, area coverage, promotional schemes, etc.

3. Multichannel Conflict: This type of conflict arises between the different market
channels participating in the common sale for the same brand.

E.g. If a manufacturer uses two market channels, first is the official website through which
the products and services are sold. The second channel is the traditional channel i.e. through
wholesaler and retailer. If the product is available at a much lower price on a website than
is available with the retailer, the multichannel conflict arises.

Types of conflict at Usha International Limited

1) One distribution channel selling to the other internally – The retailer who is directly
supplied by the company (Usha) when starts selling the product to the e-commerce
channel which is also being supplied by the company, then a conflict arises with the
company.
 2) Horizontal conflict - There are two stores in a region which are given a territory each.
Store 1 is given territory 1. Store 2 is given territory 2. Now the channel conflict occurs,
when store 1 services customers from territory 2 or vice versa. This means that the
channels are not following rules set by the company and hence it is creating conflict.
There is a difference between competition and horizontal channel conflict. If store 1
and store 2 were both performing optimally so that they can show the best figures to
the company and win the prize for the best channel dealer, then they are competitors.
However, if they are breaking the company rules and encroaching each other’s
territories, then this is clearly channel conflict. And it has to be managed by the
company by setting a rule or a policy.

3) Vertical conflict - Retailer 1 might get extra credit, he might get deliveries faster, he
might get further discounts, whereas due to whatever reasons, retailer 2 might not get
such benefits. It might be due to the distributors relations with Retailer 1 or it might be
due to the nature of retailer 2 (haggling, rudeness). But this can be another real live
example of vertical channel conflict.

Considerations in Avoiding Channel Conflicts

No simple recipe exists for avoiding channel conflicts. In fact, conflicts can only be minimized,
not avoided, according to the book “Marketing Management,” by Rajan Saxena. The most
effective approach for business owners is to approach channel management with transparency
and a willingness to find compromises that work for all the members of the various channels
to which it belongs.

1) Pricing Strategy: Usha International Limited adopts the strategy of standard pricing
across all it’s distribution channels.

2) Providing various schemes: Attractive schemes are offered to the distributors to reach
the target and work as per the company guidelines while dealing with the company
products.

3) Defining geography: By defining the geography of the retailers/distributors, conflicts

among them would be minimal and the company will have a better track of the
performances of the retailers/distributors. Usha International Limited also penalises
distributors who violate the rule of territory allocation heading back.