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At the end of this module the learning outcomes are: 1. What are the roles and functions of channel partners? 2. Various types of channel levels. 3. What are considerations in channel design decisions

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SUGGESTED READINGS 1. Marketing management by Kotler, Millineium edition, chapter 16. 2. Marketing management by Ramaswami and Namkumari, chapter 21.

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DISTRIBUTION ISSUES PLACE Why do you use - Dealers - Stockist - Distributors etc How does the product becomes available to customer

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Marketing channels Set of interdependent organizations involved in the process of making a product for use or consumption Example - Dealers - Distributors - Retailers - Agent
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Marketing channel - Hindustan lever Lifebuoy
Goes to villages 5 lakhs villages in India Can Lever set up 5 lakhs offices? Do they have such resources? No Probably no company in this world has Need of partner Help you to reach your target customers Role of channel partner required.

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CHANNEL FUNCTIONS & ROLES 1. Information gathering / feedback Potential / current customers Competitors Used by companies to alter marketing mix Can take actions to counter competition

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2. Supply products in assortments Example Pepsi Pepsi supplies in case of 24 bottles - Crate Suppose consumer requires - 1 Pepsi Shopkeeper - Provides 1 Pepsi Breaks products in assortments
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3. Risk sharing - Channel members - Buy goods from producers - If the goods do not sell? - Who bears the risk - Channel partner Risk sharing is critical

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4. Helps merchandise the product

Merchandising Attractive display Increases - Awareness - Interest Wide display of music Can try Attractive display Dcor Invested in space, display Sales personnel, warehouse, trucks
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Music world

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5. Provides salesmanship 6. Assists in sales promotion

7. Provides pre-sale and after-sale service. - TV servicing in rural areas - Company or channel - Done by channel partner
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7. Extend credit to select customers - Buy now, pay later. 8. Helps in test marketing - Testing products before launch - Use channel premises

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CHANNEL LEVEL No of channel partners between producer & consumer Various levels are 1. Zero level 2. One level 3. Two - level 4. Three level

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1. Zero channel No channel partners Producer directly to customers Examples Eureka Forbes Door to door selling Boeing Directly to Indian airlines
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2. One level channel One intermediary Example Competent motors Channel partners for Maruti 3. Two - level channel Two intermediary Example Onida black & white TV Onida sells to distributor in each district Retailer buy from distributor
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4. Three level channel Three intermediaries Example Hindustan lever Company Stockist . (district level)

Wholesaler (town level)

Retailer (village level)
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DISTRIBUTION / PLACE ISSUES Analysing customers Desired Service output levels - What kind of service levels are expected by target customers - Five Service Output levels
1.
2. 3. 4. 5.

Lot Size Waiting time Spatial convenience Product variety Service backup
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1. Lot size No of units the channel permits a typical customer to purchase on one occasion Example Purchase of Air-conditioners A. Maruti Prefer a channel from where it can buy 100 Air Conditioners B. Household Buying a lot size of 1 Air conditioner. Shop
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2 Waiting time Average time customers of that channel have to wait for receipt of the goods. Customer normally fast delivery channels Bread / Newspaper Customer want newspaper every day morning Will you wait for newspaper till evening ?

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3. Spatial convenience
Degree to which the marketing channel makes it easy for customer to purchase the product. Maruti Baleno vs Honda City Maruti About ten dealers in Dealers in Delhi Honda About 2 dealers Maruti offers greater spatial convenience than Honda Repair and search cost lower in Maruti.
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4. Product variety Variety Normally customers prefer variety More choice Example Shoppers Stop vs. Snowhite Wide variety in Shoppers Stop Snowhite only garments
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5. SERVICE BACKUP Add on services - Credit - Deliver at home - Installation - Repairs Provided by the channel Higher the service backup, greater the work provided by the channel.
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6. MAJOR CHANNEL ALTERNATIVES Has three elements 1. Types of intermediaries 2. Number of intermediaries 3. Terms and responsibilities of intermediaries

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A. Types of Intermediaries
1.

Company salesforce Sales personnel from company directly Products are complicated / not understood

Boeing Aircrafts Complex Can take one yr to finalize the sale Own sales force Trained

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2. Dealers Appoint middleman in different territories Example LG Sells TV through multibrand dealer outlets - Pankaj Electronics 3. Canteen stores department (CSD) Buys on behalf of defence services in India Defence personnel can buy LG BPL supplies in CSD canteens all over India Defence personnel buy from CSD departments.

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DISTRIBUTION CHANNELS
CEAT Tyres 1. Company Salesman Supply to large Automobile Manufacturers - Maruti, Ford, Hyundai 2. Dealers Multibrand Shops all over India 3. Ceat exclusive showrooms Exclusive shops dealing with Ceat tyres only
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DISTRIBUTION CHANNELS
B. Number of Intermediaries Three types of strategies 1. Exclusive distribution 2. Selective distribution 3. Intensive distribution

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DISTRIBUTION CHANNELS
1. Exclusive distribution Limiting the use of intermediaries Not allowing competing brands Maintain control Total commitment of intermediary Maruti Exclusive dealers Huge investments by dealers Maruti provides support
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DISTRIBUTION CHANNELS
2. Selective Distribution Use of more intermediaries Compared to exclusive Need more visibility More control Less cost Shahnaz Hussain Herbal products Not available from every Grocery shop Available at select outlets Maintain Image
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3. Intensive Distribution As many outlets as possible Multiple channels Consumers widespread Reach critical Problems of control Example Lux Soaps, Lifebuoy, Colgate
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C. Terms and responsibilities of channel Members Profitable relationship - Producer - Channel partner Rules of the game Channel partner responsibilities - Prices - Discounts - Terms & conditions of sale Credit policies Defective return policies Merchandise Dos and Donts
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Territorial Limit - Scope of each others activities Both work united Conflicts happen when their roles are not clear
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Channel-Design Decisions
Criteria for Channel Alternative Evaluation
Economic Control

Adaptive
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Channel-Management Decisions The Channel Development Process

Channel Member
Selection Training

Motivation

Evaluation

Channel

Modification
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