SMElink Project – Marketing Training
July 2009 - Kathmandu – Nepal
Session 3 – Distribution and Promotion Strategy
by
Mr. Sohan Babu Khatri,
Session 3– Distribution Strategies
* Basic Channels of Distribution Manufacturers/products Agents/brokers Wholesalers/distributors Retailers Retailers Consumers and organizational end users
* Distribution Objectives Minimize total distribution costs for a given service output
Determine the target segments and the best channels for each segment
Objectives may vary with product characteristics
e.g. perishables, bulky products, non-standard items, products requiring installation & maintenance
Functions of Distribution Channels
The main function of a distribution channel is to provide a link between production and consumption.
Information
Promotion
Contact Finding and communicating with prospective buyers
Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution channel
Risk taking Assuming some commercial risks by operating the channel (e.g. holding stock)
* Transaction Cost by Channels As the value-added increases, the cost of transaction also increases
Direct marketing channels—low value-added; low cost of transactions e.g. e-commerce, telemarketing
Indirect marketing channels—medium value-added; medium cost of transactions e.g. retail stores, distributors
Direct sales channels—high value-added; high cost of transactions e.g. own sales force
* Aligning Channels With How Customers Buy Identify customers’ channel preferences and buying behavior
Tabulate channel selection to key buying criteria
Provide flexible channel options
Monitor (and respond to) changes in buying behavior
* Example of buying criteria Buying criteria for flowers:
Price
Ordering speed
Delivery flexibility
Personal selection & customization
Expert advice
Channel appeal & attractiveness
Purchasing events
* Distribution-Scope Strategies Exclusive Distribution
Limiting the distribution to only one intermediary in the territory
Intensive distribution
Distribute from as many outlets as possible to provide location convenience
Selective distribution
Appoint several but not all retailers
* Multiple-Channel Strategy Using two or more different channels to distribute goods and services
Why?
Permits optimal access to each market segment
Increase market coverage, lower channel cost and provide more customized selling
What to look out for?
More channels usually means more conflict and control problems
* Complementary Channels Each channel handles a product or segment that is different or non-competing e.g.
Toyota Lexus
Magazine distributions
* Competitive Channels The same product is sold through two different and competing channels e.g.
Non-prescriptive drugs
Electronic goods
Why? To increase sales
What to look out for?
Over extending yourself
Dealers’ resentment
Control problems
* Modifying Distribution Strategies Modify when the following changes occur:
Consumer markets and buying habits
Customer needs
Competitor’s perspectives
Relative importance of outlet types
Manufacturer’s financial strength
Sales volume level of existing products, and
The marketing mix
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