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What is Place / Distribution? All activities that focus on making sure the

product is available to the customer at the right place, at the right time in the right way.

An order fulfillment function of the marketing mix comprising the distribution channels and physical distribution (Logistics)

Distribution activities should support the org`s marketing strategy and ensure that customers derive time, place,, form and assortment utilities

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The Role of Distribution Driving growth Order fulfilment Market coverage Customer service Relationship and reputation building Ensure consistent availability Convenience Customer satisfaction Logistics efficiency – Transport, inventory

management, order processing.

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Distribution ChannelsThe route that a product follows from the

manufacturer to the final intended consumer.

Thus distribution channel levels can be direct (zero channel level) or indirect distribution (multi-level channel)

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ProducerMiddlemen /Distributors /

Dealers

Consumer

Producer Consumer

Producer uses strategies to reach end users/consumers without going through any intermediary.

*Examples of Direct Distribution Channels Producer Consumer

Producer Business User

Service Provider Consumer/Business User

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• The firm prefers direct interface with customers

• If special technical advice is needed e.g. industrial equipment manufacturers

• If the product is highly perishable e.g. flowers/services

• Where there is need to maintain personal relationships with customers.

• Where specialist skills are involved e.g. auditing/legal services

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• Where after sales service is important and is best provided by the manufacturer.

• To complement direct channels of distribution

• Where there is need to dispose sub-standard goods

• To maximise profits by eliminating intermediaries

• Where the relationship marketing concept is employed

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Producer relies on intermediaries in distributing products and services to final consumers/users.

• Examples of Indirect ChannelsProducer Wholesaler Retailer Consumer

Producer Retailer Consumer

Producer Agent /Broker Wholesaler Retailer Consumer

Service Provider Agent /Broker Consumer/Business User

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*A considerable number of factors impact on the selection of a distribution channel such that the final distribution channel as follows;

(i) Product attributes• Perishable products are typically sold through

shorter channels.• Complex products are often sold directly to

customers• Services, because of their inseparability nature,

are mostly sold directly to customers

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*(ii) Market Characteristics Consumer / Business markets Concentrated / dispersed market

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(iii) Organisational ObjectivesThe objectives being pursued by an

organisation can influence its choice of a distribution channel

• e.g. where the company wants to achieve higher market share it can try & maximize on distribution

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(iv) Competition• Org may use same channels used by competitors

as they are relevant as well as to ensure visibility of products alongside those of competitors.

• Org may also opt for a shorter channel relative to competition in order to achieve the highest possible level of customer satisfaction in relation to customer utilities.

• Some organisations may develop new distribution channels to remedy inadequate promotion of its products by intermediaries who have strong links with competitors

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*(v) Organizational Factors • Factors specific to the org also influence the

choice of a distribution channel, e.g a production oriented firm may need the marketing expertise of its intermediaries to offset its own lack of such skills OR

• A company with adequate financial, management and marketing resources may feel little need for help from intermediaries and therefore distribute its products through a network of company owned outlets

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What are Middlemen/Channels of Distribution?

A group of individuals and organisations that direct the flow of products from producers to customers (Pride and Ferrell et al 2005)

Middlemen can be retailers,wholesalers,brokers or agents

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The Functions of Middlemen (Distributors) Buying Selling Risk taking

Transportation Sorting Storing Assorting

Financing Grading Marketing Information & research

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Key Distribution Channel Decisions:

1.Understanding the different types of intermediaries

2.Selecting the right type of intermediary to use3.Deciding on the level of market coverage

required4.Managing intermediary relationships

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Levels of Market Coverage*Intensive distribution An approach to market coverage that

involves making the product available in as many outlets as possible.

Typically used for convenient goods where producers aim at enabling purchasers to buy their products with minimum efforts.

Suits products with a wide appeal across broad groups of consumers e.g. soft drinks

Usually employed in the growth & maturity stages of PLC

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*Selective Distribution An approach to market coverage whereby a

limited number of outlets in a specific geographical area stocks a firm`s products.

By limiting the number of intermediaries reduce marketing costs are reduced while establishing strong working relationships in the channel.

 Typical for shopping goods Usually employed in the introduction & decline

stage of the PLC for new products

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*Exclusive Distribution A producer practices exclusive distribution

where it grants exclusive rights to an intermediary to sell its products in a given geographical area.

Marketers sacrifice total market coverage for the product in order to develop and maintain an image of quality and prestige for the product.

Limits marketing costs since the firm deals with a small number of intermediaries

Typical for highly priced speciality goods

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Which specific organisations to use?

Capability Number of outlets & location Reputation & Image Accessibility Resources Compatibility – technology, culture, policies,

stock mgmt, Business terms Market share & performance Co-operation

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Management issues include:- Training and motivating channel members Gaining cooperation and minimising conflict Evaluating channel member perfomance

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Marketing Logistics ;- a system of efficiently and effectively making and getting products and services to customers.

Involves the process of planning, implementing and controlling the cost effective flow and storage of materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

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Physical Distribution;- A set of activities consisting of order processing, materials handling, inventory management and transportation used in the movement of products from producers to consumers and users.

Objectives of Physical Distribution To manage the costs of physical distribution

to acceptable levels so as to ensure profitability.

To ensure effective customer service by ensuring product availability, promptness and quality.

The process calls for cost/service trade-off, that is; the trade off in costs involved when deciding on the service level to be offered to customers.

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Order processing Materials handling Warehousing Inventory management Transportation

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1. Order Processing ;- the receipt and transmission of sales order information.

Involves three main tasks;- Order entry – the placement of purchase orders

from customers or sales people by mail, telephone or on-line

Order handling – checking customer credit, verifying product availability and preparing products for transportation

Order delivery – selecting the transport mode most suitable for a desired level of customer service

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2. Materials Handling ;- physical handling of the product and involves the coordination of packaging, loading and movement systems taking into account the need for both cost reduction and customer requirements.

3. Warehousing ;- the design and operation of facilities for storing and moving goods.

4. Inventory Management ;- the development and maintenance of sufficient assortments of products to meet customer needs.

Decision involves balancing between stock-outs and inventory holding costs.

5. Transportation ;- adds time and place utility to a product by moving it from where it is made to where it is needed.

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Conclusion Distribution management involves coordinating the

activities of the whole supply chain to deliver maximum value to customers

It involves managing distribution channels (middlemen) as well as the physical distribution interface.

Physical distribution functions account for about one-third of all marketing costs and have a significant impact on customer satisfaction.

Therefore, effective marketers are actively involved in the design and control of the distribution strategy so as to meet customer changing needs and preferences.

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