INDUSTRIAL DISTRIBUTION

Industrial distribution channels

and marketing logistics
Marketing channel
Marketing channel is defined as set of
interdependent organizations that make a
product or service available to customers
for use.

Industrial channel are different

from consumer channel
2

Distinctive nature of industrial channels as

against consumer goods channels
Geographical concentration because of
concentration of industrial buyers
Channel size They are short. Ideally
customers will like to buy directly from the
manufacturer for factors like product availability,
technical expertise, and servicing capabilities

Characteristics of intermediaries
Technically competent, must have close
relations with industrial buyers
Business happens mostly at customers
place, therefore no need to have jazzy
road-facing showroom
Presentable office needed if customer
visits the sellers office for some purpose
like demo, etc.
Mixed system Mixture of direct and
indirect channels to meet requirements of
different market segments

Why industrial customers

buy from distributors?
Dependable delivery Fast and
economical deliveries
Information
Variety
Liberal credit and discounts
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Types of industrial
intermediaries

Manufacturers representatives
agents or sales agents, paid only
commission on orders, suits small and
medium firms
Distributors or dealers Handle a
geographical region
Brokers brings the manufacturer
and consumer together, short term
relationship
Value added resellers (VARs)

Distribution strategies

Intensive distribution The objective is

to make product available from a large

number of retail outlets, Standard
products with less unit value (electric
bulbs, cleaning powder,
Selective distribution Product made
available through relatively small number
of retail outlets. The outlet may have
competing brands also.

Managing channel
members
Selection of intermediaries criteria, (min 3

yrs experience in designing hydraulic circuits,

assembling power packs, marketing.),
financial standing, location, past experience
Motivating middlemen Partnership concept,
vendor managed inventory system (VMI)
through EDI (Electronic data interchange),
reasonable discounts and commissions,
distributor councils,
Controlling channel conflicts
Evaluating channel members

Sources of channel
conflicts
Differences in objectives
Manufacturers want long term
profitability and distributors prefer
short term profitability
Dealings with customers
Distributors and agents feel cheated
when the manufacturer deals with

Differences in interests The

manufacturer feel that the distributor is
not giving adequate attention to
companys products. The distributor is
interested in products that are fast
moving and have higher profits
Differences in perceptions The
manufacturer want the dealer to carry a
higher inventory due to perception of
good market conditions. The distributor
does not want to carry higher stocks as
the dealers perception of the market is
pessimistic

Managing channel
conflicts
Effective communication network
periodic formal and informal meetings,
distributor council, co-optation (have
intermediary member on advisory
committee)
Joint goal meetings Agreement on
super-ordinate (fundamental) goals
(leadership in market share)
Diplomacy discussion between persons
from both parties
Mediation Neutral third party tries to

Logistic management
Logistic management optimizes material flow

within the organization

Supply chain management extends material

flow integration upstream to suppliers and

down stream to customers
Physical distribution (or marketing logistic

management) Movement of finished product

from the factory to customer, includes order
processing, material handling, packaging,
warehousing, transportation, customer service

Financing
Financing
Ordering
Ordering
Negotiation
Negotiation
Communication
Communication

Risk
Risk Taking
Taking
Physical
Physical
Distribution
Distribution
Payments
Payments
Transfer
Transfer

Information
Information

Distribution
Distribution Channel
Channel Functions
Functions

Retailer
Retailer

Consumer
Consumer

Retailer
Retailer

Consumer
Consumer

Retailer
Retailer

Jobber
Jobber

Consumer
Consumer

Wholesaler
Wholesaler

Mfg
Mfg

3-level channel
Wholesaler
Wholesaler

Mfg
Mfg

2-level channel
Manufacturer
Manufacturer
1-level channel
Consumer
Consumer

Manufacturer
Manufacturer
0-level channel

Consumer
Consumer Marketing
Marketing Channels
Channels

Why are marketing intermediaries

used?

channel design decision

Analyzing consumer service needs
Setting channel objectives and constraints
Identifying major alternatives
Evaluating the major alternatives

physical distribution and logistics

management
Physical distribution(marketing logistics)
major logistics function
Integrated logistics management
Third-party logistics

Major logistics function

Order processing
Warehousing
Inventory
transportation

Integrated logistics
management
Cross-functional teamwork inside the
company
Building channel partnerships

Third-party logistics
An independent logistics provider that

performs any or all of the functions required

to get their clients product to market.