53601dlm Mod 2

Amity Business School

1

Amity Business SchoolMBA Class of 2010, Semester II

Distribution & Logistics Management

Ms.Vandana Gupta


Designing customer-oriented marketing channels


Distribution System for various Product categories

Direct

Mfg.’s website

Direct call By Sales Force/

Phone call/Mail Order etc

Own store

Indirect

Dealer/RetailStore

C&FAgent

Stockist

Retailer

Central and/orDistributionWarehouse

Wholesaler/Distributor

Retailer

Manufacturer/Service Provider

Customers


TYPES OF DISTRIBUTIONSYSTEM

DIRECTDISTRIBUTION

SYSTEM

INDIRECTDISTRIBUTION

SYSTEM

MULTIPLECHANNEL SYSTEM


Types of Direct Distribution System

Personal Selling Direct Mailing Catalogue Marketing Telemarketing


Types of Indirect Distribution System

One Tier Distribution System

Two Tier Distribution System

Multi Tier Distribution System


DESIGNING CHANNEL STRUCTURE

1. Determining Distribution Objective

2. Distribution System Alternatives

3. Determining Intensity of distribution

4. Factors affecting Choice of Distribution


1. Determining Distribution Objective

o Higher Growth and Long Term performance of businesso Greater market coverage, dominance and penetrationo Sustainable competitive Advantageo Distribution cost containmento Development and maintenance of partnering channel

relationships for qualitative outcomes of marketingo Improvement of Social and Economic welfare


2. Distribution System Alternatives

o Direct Distribution Systemo One Tier Distribution Systemo Two Tier Distribution Systemo Multi Tier Distribution Systemo Multiple Channel System


3. Determining Intensity of distribution

Channel Number

Channel Length

Channel Width

o Intensive Distribution

o Exclusive Distribution

o Selective Distribution


4.Factors affecting Choice of Distribution

MarketVariables

ProductVariables

Firm’s Variables

MarketingIntermediary

Variables

Nature of Market

No. of PotentialcustomersGeographic concentration of the market

Order sizeCustomer Value modelsCustomer Buying Habits

Unit sale valueBulk and WeightPerishable Nature

Technical Products

Product LineNature ofThe product

Financial Soundness

Desire forChannel control

Direct Distribution Strengths

ManagerialCapabilities

Cost of eachProposed channel

Contribution of Middleman inValue additionAvailability ofDesired middleman

Firm marketingIntermediaryRelationshipsdynamics


Channel Design• The channel design is normally meant to give a clear

idea about:• The number of channel entities in the channel network, • The way in which they are linked,• The roles and responsibilities of the entities in the

network• The rewards for participating in the activities and also • Clear cut guidelines for the major activities to be

performed during the normal functioning of the channel.


What are the service outputs

• Waiting time

• Breaking the bulk

• Spatial convenience

• Assortment


Distribution channel design

To consume a product

Service outputs have to be delivered

Channels

Participates in channel flows

Activities have to be performed

Thus performs activities


Example of a service output delivered template

Sl.No. Service dimension Service output delivered

1. Bulk-Breaking Units are delivered in ones

2. Spatial convenience There is at least one outlet for almost every 3 km radius excluding of course thinly populated areas

3. Waiting time Not more than 2 days for any model

4. Assortment Other consumer goods items including that of other competitors are available at all theoutlets where the products are otherwiseAvailable

5. Installation support Available

6. After sales support Free for first two years, but available on payment afterwards. Also available at every city from where the product was bought.

7. Consumer financing Available


Flow Direct contribution Indirect contribution Other contribution

Physical Possession

Spatial convenience, bulk breaking, waiting time

Assortment

Ownership Spatial convenience

Promotion Spatial convenience Is a service output in itself

Negotiation Spatial convenience, bulk breaking

Assortment

Risk taking Waiting time, bulk breaking, spatial convenience

Financing Spatial convenience, waiting time, bulk breaking

Assortment

Ordering Bulk breaking, spatial convenience, waiting time

Payment Bulk breaking, spatial convenience, waiting time

Channel flows and contribution to service outputsChannel flows and contribution to service outputs


Channel design effort decisions

• The service output levels• The flows or activities that are associated

with the achievement of the service output levels

• The type of entity who would be entrusted with the performance of each of these flows


Parameters for comparing channel designs

• Efficiency

• Effectiveness

• Equity

• Scalability

• Flexibility


The channel establishment plan (contd.)

• The main purpose of the channel to be set-up

• The profile of the customers who are the target market for the channel

• The needs and requirements of the target market with regard

to the identified service outputs provided by the proposed/

existing channel:

• Analysis of the operations of the existing channels that deal

in similar product/service lines

• Detailed activity chart for achieving the service output

objectives


Plan….. Contd.

• Details about the various channel constituents who will be performing these tasks

• The cost of performing the activities

• The designated roles and responsibilities of the channel constituents

• The proposed remuneration for performing these roles and responsibilities

• Standards for measuring the performance

• Procedures for reporting and information sharing

• Monitoring mechanisms

• Criteria for appointing the channel members

53601dlm Mod 2

Business

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