alam report on distribution chanel22.02

8/3/2019 Alam Report on Distribution Chanel22.02

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ROLE

OFDISTRIB

UTION

CHANN



EL IN

FMCG•

Distribution

channel

(also known



asmarketing

channel)Distribution (or

placement) is

one of the four

aspects of



marketing. A

distributor is

the

middleman bet

ween the

manufacturer and retailer.

After a product



is

manufactured, it

may be

warehoused

or shipped to the

next echelon inthe supply

chain, typically



either a

distributor,

retailer or

consumer.

The other three

parts of the

marketing mix

are product



management,

pricing, and

promotion.Frequently there

may be a chainof

intermediaries,each passing



the product

down the

chainto thenext

organization, before it finally

reaches theconsumer or



end-user. This

process

isknown as the'distribution

chain' or the'channel.' Each

of the elementsin these chains



willhave their

own specific

needs, whichthe producer

must take intoaccount, along

with thoseof the all-



important end-

user.

ChannelsA number of

alternate'channels' of

distribution may be available:



Selling direct,

such as via

mail order,Internet and

telephone salesAgent, who

typicallysellsdirect on



behalf of the

producer

Distributor (also called

wholesaler),who sells to

retailersRetailer (also called



dealer or

reseller), who

sells to endcustomers

Advertisementtypicallyused

for consumption



goods

Distribution

channels maynot be

restricted to physical produ

cts alone. Theymay be just as



important for

moving a

service from producer

toconsumer incertain sectors,

since bothdirect and



indirect

channels may

be used.Hotels,

for example,may sell their

services(typically



rooms) directly

or through

travel agents,tour operators,

airlines, tourist boards,

centralizedreservation



systems, etc.

There have

also beensomeinnovations in

the distributionof services. For

example, therehas been an



increase

infranchising

and in rentalservices - the

latter offeringanything from

televisionsthroughtools.



There has also

been some

evidence of service

integration,with services

linkingtogether , particularly in



the travel and

tourism

sectors. For example, links

now exist betweenairline

s, hotels andcar rental



services. In

addition, there

has been asignificant

increaseinretail outlets

for the servicesector. Outlets



such as estate

agencies and

buildingsocietyoffices

are crowdingout traditional

grocers from



major shopping

areas.

Channelmembers

Distributionchannels can

thus have a



number of

levels. Kotler

defined thesimplest

level,that of direct contact

with nointermediaries



involved, as

the 'zero-level'

channel.Thenext level, the

'one-level'channel,

features justone



intermediary;

in consumer

goodsaretailer, for

industrialgoods a

distributor. Insmall markets



(such as small

countries) it

is practical toreach the

whole marketusing just one-

and zero-levelchannels.In



large markets

(such as larger

countries) asecond level, a

wholesaler for example, is

now



mainly used to

extend

distribution tothe large

number of small,

neighborhoodretailers.In



Japan the

chain of

distribution isoften complex

and further levels are

used, even for thesimplest of



consumer

goods.In

BangladeshTelecom

Operators areusing different

Chains of Distribution,



especially'seco

nd level'.In IT

and Telecomindustry levels

are named"tiers". A one

tier channelmeans that



vendorsIT

product

manufacturers(or software

publishers)work directly

with thedealers. A



onetier / two

tier channel

means thatvendors work

directly withdealers and

withdistributorswh



o sell to

dealers.But the

most importantis the

distributor or wholesaler.



The internalmarket

Many of themarketing

principles andtechniques

which are



applied to the

externalcusto

mers of anorganization

can be just aseffectively

applied to eachsubsidiary's, or



eachdepartmen

t's, 'internal'

customers.Insome parts of

certainorganizations

this may infact be



formalized, as

goods

aretransferred between

separate partsof the

organization ata `transfer



price'. To all

intents

and purposes,with the

possibleexception of

the pricingmechanism



itself, this

process can

andshould beviewed as a

normal buyer-seller

relationship.The fact that



this is a

captivemarket

, resulting in a`monopoly

price', shouldnot

discourage the participants



fromemployin

g marketing

techniques.Less obvious, but

just as practical, is the

use of `marketing' by



service and

administrative

departments; tooptimize their

contribution totheir

`customers'(the rest of the



organizationin

general, and

those parts of itwhich deal

directly withthem in

particular). Inall of this,



thelessons of

the non-profit

organizations,in dealing

with their clients, offer a

veryuseful parallel.



ChannelDecisions

ChannelstrategyProduc

t (or service)-Cost-



Consumer

location

Channelmanagement

The channeldecision is

very



important. In

theory at least,

there is a formof trade-off:

thecost of using

intermediariesto achieve



wider

distribution is

supposedlylower. Indeed,

mostconsumer goods

manufacturerscould never



justify the

cost of selling

direct totheir consumer

s, except bymail order. In

practice, if the producer is



large enough,

the use

of intermediaries (particularly

at the agentand wholesaler

level) cansometimes cost



more

thangoing

direct.

Many of the

theoreticalarguments

about channels



therefore

revolve around

cost. Ontheother hand,

most of the practical

decisions areconcerned with



control of the

consumer.

Thesmallcompany has

no alternative but to use

intermediaries,often several



layers of them,

butlarge

companies 'do'have the

choice.However, many

suppliers seemto assume that



once their

product has

been sold intothechannel,

into the beginning of

thedistribution



chain, their

job is

finished. Yetthatdistributio

n chain ismerely

assuming a part of the



supplier's

responsibility;

and, if hehasany

aspirations to be market-

oriented, his job should



really be

extended to

managing,albeitvery

indirectly, allthe processes

involved inthat chain,



until the

product or

servicearriveswith the

end-user. Thismay involve a

number of decisions on



the part of the

supplier:Chann

elmembershipCh

annelmotivationMon

itoring and



managing

channels

Channelmembership

Intensivedistribution -

Where the



majority of

resellers stock

the 'product'(with

convenience pr oducts, for

example, and particularly the



brand leaders

in consumer

goods markets) pricecompetiti

on may beevident.Selecti

ve distribution- This is the



normal pattern

(in both

consumer andindustrial

markets)where'suitable'

resellers stock the



product.Exclus

ive distribution

- Onlyspecially

selectedresellers or

authorizeddealers



(typicallyonly

one per

geographicalarea) are

allowed to sellthe 'product'.

Often this formof distribution



stipulates the

contracted

resellers cannotoffer

competing products.



Channelmotivation

It is difficultenough to

motivate directemployees to

provide the



necessary sales

and

servicesupport.Motivating the

owners andemployees of

theindependent



organizations

in

adistributionchain requires

even greater effort. There

are manydevices for



achieving

suchmotivatio

n. Perhaps themost usual is

`incentive': thesupplier offers

a better margin,



totempt the

owners in the

channel to push the

product rather than its

competitors;or



acompetition

is offered to

thedistributors'

sales personnel, so

that they aretempted to



pushthe

product. At the

other end of the spectrum is

the almostsymbiotic

relationshipthat the alltoo



rare supplier in

the computer

field developswith its agents;

where theagent's

personnel,support as well as



sales, are

trained to

almost thesame standard

as thesupplier's own

staff.



Monitoringand managing

channelsIn much the

same way thatthe

organization's



own sales and

distribution

activities needto bemonitored

and managed,so will those of

the distributionchain.In



practice, many

organizations

use a mix of different

channels; in particular, they

maycomplement a direct



salesforce,

calling on the

larger accounts, with

agents,covering

thesmaller



customers and

prospects.

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