Introduction to Distribution Decisions, Marketing Management Video Lecture | Marketing Management - B Com

hello students welcome to the lecture on
distribution decisions and after this
lecture we will be able to learn the
following objectives understand concept
of distribution channel explain
distribution channel design define types
of distribution channels in marketing
discuss direct indirect distribution
channels describe concepts clarifying of
hybrid distributional systems and define
multiple channels of distribution let's
start today's lecture with the
definition of distribution decision
distribution decisions focus on
establishing a system that at its basic
level allows customers to gain access
and purchase a marketer's product in
order to facilitate an effective and
efficient distribution system many
decisions must be made including but
certainly not limited to assessing the
best distribution channels for getting
products to customers determining
whether a reseller network is needed to
assist in the distribution process
arranging a reliable ordering system
that allows customers to place orders
creating a delivery system for
transporting the product to the customer
for tangible and digital goods
establishing facilities for product
storage concept of distribution channel
most producers use intermediaries to
bring their products to market they try
to develop a distribution channel
marketing channel to do this a
distribution channel is a set of
interdependent organizations that help
make a product available for use or
consumption by the consumer or business
user channel intermediaries are firms or
individuals such as wholesalers agents
brokers or retailers who help move a
product from the producer to the
consumer or business user distribution
decisions can sometimes give a product a
distinct position in the market the
choice of retailers and other
intermediaries is strongly tied to the
product itself manufacturers select mass
merchandisers to sell mid price range
products while they distribute
top-of-the-line products through
high-end department and speciality
stores
functions of distribution channels
distribution channels perform a number
of functions that make possible the flow
of goods from the producer to the
customer channels provides time place
and ownership utility they make products
available when where and in the sizes
and quantities that customers want
distribution channels provide a number
of logistics or physical distribution
functions that increase the efficiency
of the flow of goods from producer to
customer distribution channels create
efficiencies by reducing the number of
transactions necessary for goods to flow
from many different manufacturers to
large number of customers this occurs in
two ways the first is called breaking
bulk wholesalers and retailers purchase
large quantities of goods from
manufacturers but sell only one or a few
at a time to many different customers
second channel intermediaries reduce the
number of transactions by creating
assortments providing a variety of
products in one location so that
customers can conveniently buy many
different items from one seller at one
time channels are efficient the
transportation and storage of goods is
another type of physical distribution
function retailers and other channel
member
move the goods from the production site
to other locations where they are held
until they are wanted by customers
channel intermediaries also perform a
number of facilitating functions
functions that make the purchase process
easier for customers and manufacturers
intermediaries often provide customer
services such as offering credit to
buyers and accepting customer returns
customer services are oftentimes more
important in b2b markets in which
customers purchase larger quantities of
higher priced products channels a number
of alternate channels of distribution
may be available selling direct such as
via mail-order Internet and telephone
sales agent who typically sells direct
on behalf of the producer distributor
also called wholesaler who sells to
retailers retailer also called dealer or
reseller who sells to end customers
advertisement typically used for
consumption goods channel members
distribution channels can have a number
of levels
Kotler define the simplest way that of
direct contact with no intermediaries
involved as the zero level channel the
next level the one level channel
features just one intermediary in
consumer goods a retailer for industrial
goods a distributor in small markets
such as small countries it is practical
to reach the whole market using just one
and zero level channels in large markets
such as larger countries a second level
a wholesaler for example is now mainly
used to extend distribution to the large
number of small neighborhood retailers
wholesaling wholesaling is all
activities involved in selling products
to those buying for resale or business
use wholesaling in two
our firms that handle the flow of
products from the manufacturer to the
retailer or business user wholesaling
intermediaries add value by performing
one or more of the following channel
functions selling and promoting buying
an assortment building bulk breaking
warehousing transportation financing
risk bearing market information giving
information to suppliers and customers
about competitors new products and price
developments management services and
advice helping retailers train their
sales clerks improving store layouts and
displays and setting up accounting and
inventory control systems independent
intermediaries independent
intermediaries do business with many
different manufacturers and many
different customers because they are not
owned or controlled by any manufacturer
they make it possible for many
manufacturers to serve customers
throughout the world while keeping
prices low merchants wholesalers
merchants all sailors are independent
intermediaries that buy goods from
manufacturers and sell to retailers and
other b2b customers because much until
sailors take title to the goods they
assume certain risks and can suffer
losses if products get damaged because
out-of-date or obsolete are stolen or
just to not sell merchandise agents or
brokers agents and brokers provide
services in exchange for commissions
they may or may not take possession of
the product agents normally represent
buyer's or seller's on an ongoing basis
whereas brokers are employed by clients
for a short period of time
merchandise agents or brokers include
manufacturers agents manufacturers reps
selling
Commission merchants and merchandise
brokers manufacturer owned
intermediaries manufacturer owned
intermediaries are set up by
manufacturers in order to have separate
business units that perform all of the
functions of independent intermediaries
while at the same time maintaining
complete control over the channel
manufacturer owned intermediaries
include sales branches sales offices and
manufacturers showrooms vertical
marketing systems a vertical Marketing
System VMs is a distribution channel
structure in which producers wholesalers
and retailers act as a unified system
one channel member owns the others has
contacts with them or has so much power
that they all cooperate a vertical
marketing system provides a way to
resolve the channel conflict that can
occur in a conventional distribution
channel where channel members are
separate businesses seeking to maximize
their own profits even at the expense
sometimes of the system as a whole there
are three major types of vertical
marketing systems corporate contractual
and administered corporate VMs is a
vertical marketing system that combines
successive stages of production and
distribution and a single ownership
channel leadership is established
through common ownership a contractual
VMs is a vertical marketing system in
which independent firms at different
levels of production and distribution
join together through contracts to
obtain more economies or sales impact
than they could achieve alone an
administered VMs is a vertical marketing
system that coordinates successive
stages of production and distribution
not through common ownership or
contractual ties but through the size
and power of one of the parties
distribution channel design I hope you
understood what we just discussed now we
will move further and discuss about the
distribution channel design channel
design facilitates the flow of goods
from the manufacturer to the end-user
the purpose of the distribution channel
is to distribute the product from
manufacturer to the end-user to the
right time to the right place
the channel of distribution is the
marketing managers bridge to the market
channel design creates a competitive
advantage that separates market winners
from market losers channel distribution
for government sectors customers score a
at all sales in direct channel
distribution is generally found where
the markets are fragmented and widely
dispersed low transaction amount
prevails and buyers typically purchase a
number of items in one transaction the
government sector segment is widely
dispersed and the buyers in the segment
purchase a number of items in one
transaction indirect approach is
recommended for dealing with the segment
quarry it all sales in direct channel
distribution is generally found where
the markets are fragmented and widely
dispersed low transaction amount
prevails and buyers typically purchase a
number of items in one transaction the
government sector segment is widely
dispersed and the buyers in the segment
purchase a number of items in one
transaction indirect approach is
recommended for dealing with this
segment distribution channel for general
public general public customers will
maximum order one to four units per
orders and it's not so easy for the
manufacturer to deal with every
individual customer separately so the
manufacturer should make tie ups with
dealers or wholesalers these dealers or
wholesalers create awareness about the
product and in
the general public to buy the safety
systems these distributors or
wholesalers in turn may die off with the
vehicle repairing sheds and retailers
these vehicle repairing sheds play a
vital role in increasing the sales of
the safety systems types of distribution
channels in marketing I hope you
understood what we just discussed now we
will move further and study about the
types of distribution channels in
marketing in marketing a distribution
channel is a vehicle used by the company
to sell its products and services to its
customer base companies can choose to
use a single channel or multiple channel
strategy traditional media traditional
media is a common distribution channel
that businesses use to generate
awareness about their products and
services traditional media outlets
include TV radio billboard advertising
magazines and newspapers direct response
direct response includes a variety of
communications vehicles such as
postcards sales letters email marketing
and television direct response
infomercials when you use direct
response marketing it's important to
have a call to action
public relations public relations are a
broad distribution channel today PR
involves pitching stories to media
outlets and generating positive buzz
about your company or brand as well as
managing your company's online presence
and how your company interacts with its
customers internet and e-commerce
internet marketing includes search
engine optimization affiliate marketing
and online advertising search engine
optimization or SEO involves tailoring
your website and its content so when
users search online for products and
services similar to what your company
provides your website shows up at the
top of the search result
direct indirect distribution channel in
this section we will study about the
direct indirect distribution channel a
direct channel of distribution describes
a situation in which the producer sells
a product directly to a consumer without
the help of intermediaries a direct
chain of distribution may involve
face-to-face sales computer sales or
mail order but does not involve any form
of distributor other than the original
producer advantages using a direct
channel of distribution to connect
consumers with your product because no
intermediaries share the profits most
direct to distribution channels tend to
have higher rates of profit than
indirect distribution channels lastly
many customers appreciate the
opportunity to give profits directly to
producers and artists disadvantages the
most obvious disadvantages that a direct
distribution channel cannot compete with
the geographical reach and business
volume of a distribution channel that
includes major wholesalers and retailers
channels of distribution may broadly be
classified into two categories direct
channels indirect channels indirect
channels of distribution there are no
middlemen
and a producer directly sells goods to
consumers a manufacturer can sell goods
directly to consumers in several ways
which are as follows doted or selling a
producer may employ travelling salesmen
who go from door-to-door and sell goods
on the spot to the customers the
producer also arranges for delivery of
the product to customers chain stores
big manufacturing firms may open their
own retail stores in different parts of
the country to sell their products
directly to consumers
post office or courier in this method
the manufacturer sells sales literature
by first to a select group of customers
customers place orders over telephone
fax or by mail the manufacturer delivers
the product to customers through value
payable post VPP or courier it is called
mail order business telemarketing in
this system a manufacturer advertises
the product its features uses prices and
availability through the medium of
television the interested customers
place orders by telephone fax or mail
concepts clarifying of hybrid
distributional systems I hope you
understood what we just discussed now we
will move further and study about hybrid
distributional systems hybrid
distribution systems are characterized
by the existence of multiple
distribution system belonging to the
same entity and created to deliver
merchandise to one or several market
segments methods of bringing forth
hybrid distributional channels some
methods of applying some hybrid
distributional channels of a sole
producer addressing to certain distinct
markets are reunited in the diagram
forming altogether a hybrid distribution
system which completes the assurance of
optimal usage of the resources for the
benefit of the company and of the
altogether deserved markets the analysis
of the constituents associated in the
diagram proves the existence of four
distinct channels the first two are
created in order to satisfy the needs of
two segments of final consumers the
first one is short and implies specific
methods of the direct marketing and the
second one is a long channel including
retailers the two latter channels are
created so as to serve two segments of
organizational custom
but we must also match this time with a
short channel which uses selling power
with a long one including two mediating
reasons for implementing certain hybrid
distributional systems the reasons for
implementing certain hybrid
distributional systems may be classified
in the following categories the
existence of some markets that are
inaccessible to common distributional
channels the discount of sell products
and service costs of a certain already
existent but hardly accessible consumers
category the possibility of ensuring the
service quality criteria required by all
final beneficiary categories alongside
these reasons we meet the accommodation
needs of the distributional channels to
the lifecycle of the product the growing
number of companies deciding to embrace
a hybrid distributional system proves
once more not only the strategic
importance of this kind of distribution
system but also its potential future
especially due to the mixture of
traditional distribution channels along
with the new channels based on modern
technology providing great advantages
for market consumers multiple channels
of distribution in this section we will
study about the multiple channels of
distribution for many products and
services their manufacturers or
providers use multiple channels of
distribution channel structures range
from two to five levels the simplest is
a two-level structure in which goods and
services move directly from the
manufacturer or provider to the consumer
two level structures occur in some
industries where consumers are able to
order products directly from the
manufacturer and the manufacturer
fulfills those orders through its own
physical distribution system in a three
level channel structure retailers serve
as intermediaries between consumers and
manufacturer
retailers order products directly from
the manufacturer and then sell those
products directly to the consumer in a
four level structure retailers order
goods from wholesalers rather than
manufacturers finally a manufacturer's
agent can serve as an intermediary
between the manufacturer and its
wholesalers creating a five-level
channel structure consisting of the
manufacturer agent wholesale retail and
consumer levels a five level channel
structure might also consist of the
manufacturer wholesale jabba retail and
consumer levels where my job or service
smaller retailers not covered by the
large wholesalers in the industry
benefits of intermediaries
intermediaries provides several benefits
to both manufacturers and consumers
improved efficiency a better assortment
of products reutilization of
transactions and easier searching for
goods as well as customers
intermediaries provide a second benefit
by bridging the gap between the
assortment of goods and services
generated by producers and those in
demand from consumers manufacturers
typically produce large quantities of a
few similar products while consumers
want small quantities of many different
products in order to smooth the flow of
goods and services intermediaries
perform such functions as sorting
accumulation allocation and creating
assortments a third benefit provided by
intermediaries is that they help reduce
the cost of distribution by making
transactions routine as transactions
become more routine the costs associated
with those transactions are reduced
summary now in the end let us summarize
what we have learnt in this lecture
distribution distill
focus on establishing a system that at
its basic level allows customers to gain
access and purchase a marketer's product
distribution channels perform a number
of functions that make possible the flow
of goods from the producer to the
customer channel intermediaries also
perform a number of facilitating
functions functions that make the
purchase process easier for customers
and manufacturers the safety systems
manufacturer is entering into the US
market for the first time so the
organization cannot contact the
government organizations for selling
their products a channel of distribution
is the path that a product takes from
producer to consumer distribution
channels of varying lengths exist in
modern business members of channels of
distribution typically buy sell and
transfer title to goods there are
however many other flows between channel
members in addition to physical
possession and ownership of goods