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Distribution Channel ManagementAn Introduction

Compiled and Presented by: Ms. Kumkum Bharti

Channel Management- An Introduction

05/13/12

INTRODUCTION

No. of retail outlets in India Provides livelihood to . Million people in India Contribution cant be ignored Undergoing tremendous change w.r.t both span & productivity Role of internet Distribution channels are critical for marketing

Channel Management- An Introduction 05/13/12

Definition

According to STERN & EL ANSARY(1992), Distribution channel is defined as a set of interdependent organizations involved in the process of making product or service available for use or consumption.

Channel Management- An Introduction 05/13/12

Why they are required?


Take services for granted criticize for minor inconvenience According to Pitt et all(1999), intermediaries essentially exist to perform three fundamental functions:

Adjust to discrepancy of assortment through the process of sorting. Accumulating, allocation and assorting Minimize distribution cost through routinizing and standardizing transactions, making exchange more efficient and effective Facilitate the searching process of both the parties Place and opportunity Channel Management- An Introduction 05/13/12 Leads to economic efficiency

Sorting Includes:
1.

2.

3. 4.

5.
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Breaking down a heterogeneous supply into separate stocks that are relatively homogeneous in nature called sorting out Bringing similar stocks from a number of sources together into a larger homogeneous supply called accumulation Breaking a homogeneous supply into smaller and smaller lots called allocation Building up of an assortment of products for resale in association with each other called assorting Each transaction involves, ordering, valuation and payment
Channel Management- An Introduction 05/13/12

Distribution Channel Activities

According to Alderson, Distribution activities fills the gap between production of goods and the consumption Discrepancies
1. 2. 3. 4.

Spatial Discrepancies Temporal Discrepancies Need to Break the Bulk Need to Provide Assortment

Channel Management- An Introduction 05/13/12

SPATIAL DISCREPANICY

It refers to the discrepancy caused in exchange process because of the geographical distance between the buyer and the seller Should be bridged in the most cost effective manner Ex: GlaxoSmithKline

Channel Management- An Introduction 05/13/12

TEMPORAL DISCREPANCY

It refers to the discrepancy caused in the exchange process because of the time gap that exists between the time product is consumed and the time product is produced. To reduce, it should be stocked Waiting time should be reduced What will happen in case of perishable goods?

Channel Management- An Introduction 05/13/12

Need for Breaking the Bulk

This activity is carried out by an intermediary in which he breaks down the bulk production into small parts to facilitate purchase and consumption by a buyer. Ex: ITC Cigarette

Channel Management- An Introduction 05/13/12

Need for Assortment

It is the activity carried out by an intermediary wherein products from different sources are brought together to form a heterogeneous group according to the buying pattern of the customers. Ex: assortment of chocolates Information gap Affects motivation of consumers Impact buying decision

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Channel Management- An Introduction 05/13/12

Intermediation: Is it actually needed?


YES/ NO Challenged because of internet Example: DELL computers Desirable+ level of commitment+ new product(whos PLC is very short) + technical products= distribution channels should be taken as strategic option Concept of specialization Cost associated with direct distribution is prohibited Diagram???
Channel Management- An Introduction 05/13/12

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Value Enhancement Through the Distribution Channel


Form utility Time utility Place utility Possession utility

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Channel Management- An Introduction 05/13/12

Distribution Channel Strategy


1. 2. 3. 4.

Setting distribution objectives Finalizing channel activities Organizing channel activities Developing policy guidelines for the day-today operations

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Channel Management- An Introduction 05/13/12

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Framework for the channel management
Distribution channel strategy 1. Channel objectives 2. Activity finalization 3. Organizing the activities 4. Developing policy guidelines Motivating channel members Designing channel structure Establishing the channel

Resolving conflicts among channel members

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Channel Management- An Introduction 05/13/12

Framework For The Channel Management


Ex-ante: involved in the design and establishment of the distribution channel Ex-poste: involved in the logistical network

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Channel Management- An Introduction 05/13/12