MARKETING MANAGEMENT II

T3 MBA
Mount Zion Institute of Management Studies
Kozhuvalloor, Chengannur
Asst. Prof. Jibson Abraham Varghese
TYPES OF DISTRIBUTION CHANNELS
▶ 1. Direct Distribution Channel : the goods and services
directly move from manufacturer to the consumer with no
intermediaries.

i. Selling at Manufactures plant: ideal for goods which are

perishable in nature like milk, bread, fish, other agricultural
and edible items.
ii. Door-to-Door Sales
iii. Sale by mail order technique: Products are delivered
through mail to the customers by taking their orders
beforehand.
iv. Sales by Multiple Shops
v. Single Stores
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 2. Indirect Distribution Channel
▶ Here goods are distributed via intermediaries.
i. One-level Channel:
Retailer/
Producer Distributer Consumer

ii. Two-Level Channel:

Wholesaler/
Producer Retailer Consumer
Distributer

iii. Three-Level Channel:

Producer Distributor Wholesaler Retailer Consumer

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 iv. Four-level Channel:

Producer Agent Distributor Wholesaler Retailer

Consumer

▶ 3. Hybrid or Multi Channel Distribution System :

Using two or more distribution channels to target one
or more customer segment.

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 CHANNEL INTERMEDIARIES
▶ Sole Selling Agent/Marketer: large marketing
intermediary having huge resources and widespread
region to operate.
▶ C & F Agents(CFAs):A person who is involved in
rendering services to any other person directly or
indirectly like C&F activities.
▶ Wholesalers: second largest intermediary, also known
as ‘stockist’ or ‘distributer’.
▶ Semi-Wholesalers: Purchase goods from
manufactures or distributers in bulk and then resell
the goods to retailers…. Sometimes they do retailing
functions also.
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▶ Retailers: who sell goods directly to final consumers.
▶ Value-Added Resellers(VARs): Purchase the basic goods
from manufactures , then add value to it or modify it on
the basis of product attributes, and finaly resells to the
end consumers.
▶ Merchants: buy or take physical possession of goods
and then sell them to customers.

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 PHYSICAL DISTRIBUTION SYSTEM
▶ According to American Management Association,
‘Physical distribution means moving of finished
products from one end of a production line to
customers”.
Components of Physical Distribution System

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▶ Order Processing: The receiving and transmission of
sales order.
Order Entry-Order Handling- Order Delivery
▶ Managing Inventory: Determining the exact time and
quantity of desired items to be ordered. There is a fixed
minimum stock level, where placing new order is
necessary, called as order point.
▶ Material Handling: Physical handling of goods.
▶ Warehousing: These are large and centralised places,
which are used to receive products coming from
production houses or suppliers, realign them according
to order of prefernce and ship them to final user.

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▶ Transportation: Shifting products from factories to
ultimate users.
Railroads- Trucks- Waterways- Air Transportation-
Pipeline.
▶ Customer Service: act as a regulator for designing other
components of distribution system.

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CHANNEL MANAGEMENT

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▶ Channel Management is the process of administering
the existing channels to attain the cooperation of
channel members in order to accomplish the
distribution of the company.

▶ Channel management is not just about distribution

function. Rather, it is defined as to how and where a
product has to be used and how the product and the
customer will interact.

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Channel Management Decisions

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 Recruitment of Channel Members
While recruiting , it is vital to establish clear and fixed
parameters that define standards for the identification,
qualification and recruitment of new members.
▶ What should be the size of the perfect partner
organisation?
▶ What expertise and experience it should posses?
▶ In which market would the partner operate?
▶ What should be its customer base?
▶ How many sales representatives should it own?

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Selection of Channel Members
▶ The factors need to be analyzed are business
experience, profit and growth records, cooperation
level, creditworthiness and reputation.

▶ Selection Process of Channel Members:

i. Identifying the Potential Channel Members
The channel manager has a wide range of sources
available to find the potential channel members.

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▪ Field sales organisation: Knows the potential
intermediaries available for the firm as they know
better about the territory the work.
▪ Trade sources: Associations, trade publications, trade
shows, other firm selling similar products.
▪ Re-seller Inquiries: Direct inquiring by intermediaries
▪ Customers: . Customers of potential intermediaries
also serve as the source of information for firms.
▪ Advertising: in trade journals.
▪ Trade Shows: Annual conventions

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ii. Selection criteria for Channel Members:
> The Intermediaries must have a good knowledge of
market
> Market Coverage

iii. Finalising the Channel Members: It’s a mutual

decision of two parties.

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 Training of Channel Members
▶ Intermediaries are considered as customers by the
company.
▶ Types of Training for Channel Members.
1) Field Training: on the job Training
2) Class room Training: on the company’s product line,
the competition level and how to handle competition
so as to gain large market share
3) Orientation Programme: are special meetings
organised to launch a new product and the way in
which the product has to be launched.
4) Training for Paper Work: to prepare reports and
maintain records.
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5) Training for Care of Company Products
6) Technical Training: regarding technical specifications
and developing skills to handle all types of customer
queries.
7) Installation Training: Installation, maintenance, repairs,
demonstration.
8) Service Training: automobiles

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Motivation of Channel Members
▶ Every company has a definite sales and growth target
which can be achieved by putting in extra effort from
the company’s sales force and their channel members.
1. Relationship Marketing: enhance sales in long run.
2. Benefits and cost offered to intermediaries.
▶ Reduction of amount of capital employed by the
distributor.
▶ Lower operating cost
▶ Improved sales promotion
3. Cooperative programs: advertising allowance, sales
force training, commission on extra sales.

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Evaluation of Channel Members
▶ Retention, training and motivation decisions.
▶ Whether to retain the channel or not.
▶ Identify the shortfalls in the skills and competencies
of the distributor.

Channel Member performance audit

1. Developing a criteria for measuring their performance.
2. Periodically evaluating their performance against the
criteria.
3. Recommending corrective actions.

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 Sales Performance
1. Comparison of channel members current sales to
historic sales.
2. Cross comparison of a members sale with those of
other channel members.
3. Comparison of channel members sales with pre-
determined quota.

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Modifying Channel Arrangements
▶ It is necessary for a company to keep modifying the
marketing channels according to the changing needs of
the market.
1. Changes in stages of PLC: in accordance with the
stages in the product life cycle, the distribution needs
of the product also changes.
2. Customer Needs and Preferences: if not customers
will find a new alternative to fulfill their needs.
3. Multi-Channel Marketing System: to reach marketing
segments.

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Managing Relationships in Channel
▶ Marketers know regarding Channel members, but are
unaware of the total sales and needs of the ultimate
customers.
1. Channel Cooperation and Coordination:
2. Channel Power: ability of a Channel Member to
influence the action of other same marketing channel.
3. Channel Conflict: arises when a channel member
feels obstructed by another channel member in the
achievement of its goal.

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