Physical Distribution

Criteria for selecting Channel members.

Nature of the product Extent of market coverage The speed of demand Company policies Existing distribution pattern & competition Availability of suitable persons in the area. Reputation & business standing

criteria for selecting Channel members.

Financial capacity Marketing skill Experience Capability

Channel Dynamics
Vertical Marketing system In a Conventional marketing channel both producer and channel members are independent of each other. In VMS producer and channel members are unified.

Vertical Marketing system

Corporate system. It combines successive stages of production and distribution under single ownership. Eg :- A bakery like Monginis & Merwaan produces & dustributes own bakery items. Companies having stores at factory gates like Raymonds,Century & Pidilite.

Vertical Marketing system

Administered System : It coordinates successive stages of Production & distribution not through common ownership but through size & power of brands. Eg;_ Colgate & Pepsi & Coke get unusual cooperation from channel members wrt shelf space.

Vertical Marketing system

Contractual : The channel members enter into informal contract with retailers to use common name.to provide common or same facilities etc to prevent competition within the same channel.

Horizontal marketing system

Readiness of two or more non related companies to put together resources or programs to exploit an emerging marketing opportunity.

Multichannel Marketing System

When a single company uses two or more marketing channel to reach one or more marketing segments.

Channel Conflicts
Vertical Channel Conflict: Conflict between company and dealer about type of service pattern, pricing and advertising. Eg Coco cola's partner Parle marketing own brand.

Horizontal Channel conflict

Conflict between members at the same channel level within the channel.eg one dealer of Samsung offering discount of 1200/- while another dealer is offering Rs 800/-.

Multichannel conflicts
Manufacturer establishes two or more channels that compete with each other in selling to the same market.

Causes of channel conflicts

Goal incompatibility Unclear role Difference in perception Great dependence

Managing channel conflict

Super ordinate goals Exchange of goals Treatment Third persons

Distribution equity
What are distribution costs ? Cost of reaching markets Cost of servicing them Cost of shelf space Cost of merchandising

Why?
Why did coco cola purchase Parle brands at Rs 120 crores? Why did Heinz purchase Glaxo at Rs 210 crores? Why did BBLIL capture Cadbury's ice creams Dollops & Kwality at Rs 75 crores?

Answer
To create Distribution equity If Brand equity means brands preference , distribution equity means preferring own distribution system.

Why distribution equity is more important than brand equity?

In a product & price parity situation , the brand that sells more is the one that reaches the highest number of customer. Out of 5.13 million outlets ,HLL itself owns 3 million outlets and hence commands high distribution cum brand equity. In India where climate .life style ,languages differ at every 500 km distance ,brand loyalty is not going to help to tackle above aspects.

Why distribution equity is more important than brand equity?

Retail space is growing at slower rate than number of brands .In last 5 years washing powder brands have increased by 200 %,packed goods by 100 %, whereas retail space increased only by 8 %

Why distribution equity is more important than brand equity?

Distributors measure performance of brands on the basis of Turn over per square feet". Hence only fast moving items will be stocked. Hence new product launcher must own his channels initially.

How to create Distribution equity?

Use IT to slash wastage at every point. Divert stocks to where it is required. Cultivate relationship beyond short term business interests with retailers as he is your ultimate salesman as you cannot be present. Provide techno commercial training to retailers. Own road carriers or hire courier services for better control over transport and improve efficiencies.

How to create Distribution equity?

Go to rural markets which is untouched and contribute 40 % to national markets. Use of selling environment as a product differentiator. Use of selective & intensive distribution a s tactic to yield maximum benefits on case to case basis.

New channel members

Vending machines Mail orders

Vending machines
Mainly used for low value consumer non durables like softdrinks,nespapers, cigarette etc. Normally installed in densely populated areas like railway stations,cinemas,offices etc

Unpopular in India
Cheap labor available for distribution Public awareness is not adequate Initial heavy capital expenditure Shortage of coins.

Vending machines
Advantages:Fully automatic 24 hrs shopping is possible Self service Unhandled merchandise.

Vending machines
Disadvantages :Requires frequent stocking Frequent breakdowns High pilferage Merchandise cannot be returned. Expensive.

Mail orders
Advantages :High selectivity of target customers. Personalized communication possible, Flexibility in purchase decisions Measuring effectiveness is much easy.

Mail orders
Disadvantages :High commission to middle men. Poor after sales by middle men Reluctance of middle men due to lack of info of track record of product.