DISTRIBUTION DECISIONS

Distribution is the physical flow of products through distribution channels. A channel of

distribution is defined as a chain of market intermediaries or middlemen used by a producer or
marketer to make products and services available when and where consumers or users want
them. Intermediaries are individuals or businesses that assists the producers in the performance
of distribution tasks such as physical distribution among others Example of intermediaries
includes wholesalers, retailers, and agents.

Distribution objectives

The first step in designing a distribution channel for a given product is to determine what
objectives the channel must accomplish and their relative importance. Objectives of distribution
channels include the following:

i. Increase the availability of the good or service to potential customers

ii. Satisfy customer requirements by providing high levels of service
iii. Ensure promotional effort: obtain promotional support from channel members
iv. Obtain timely and detailed market information: middlemen are relied upon for fast and
accurate feedback
v. Increase cost- effectiveness
vi. Maintain flexibility
Channels of distribution
There are number of channels which are widely used in the marketing of consumer
products Channels vary in length from short to long, depending on the numbers of
middlemen involved Some of the channels of distribution are as follows:
Factors Affecting Choice of Distribution Channels Since a channel of distribution
should be determined by customer buying patterns, the nature of the market is the key
factor influencing management’s choices of channels. Other major considerations are the
product, middlemen, and the company itself
a) Market considerations
• Number of potential customers: with relatively few customers, a manufacturer may use
its own sales force to sell directly to consumers • Geographical concentration of the
market: sellers may establish sales branches in densely populated markets • Order size: a
manufacturer may sell directly to buyers with large order size
b) Product considerations
• Unit value: the lower the unit value, the longer are the distribution channels e.g. sweets
• Perishability: products subject to perishability must be distributed fast through shorter
channels • Technical nature of the product: an industrial product that is highly technical
is distributed directly to industrial users
c) Middlemen considerations
 • Services provided by middlemen: middlemen who provide services that the
manufacturer is unable to provide influence choice of distribution channel • Availability
of desired middlemen • Attitude of middlemen toward manufacturers’ policies:
congruency of manufacturer’s policies to those of middlemen influence choice of
distribution channel d) Company considerations • Financial resources: a business with
sufficient finances can establish its own sales force • Management’s ability: many firms
with little marketing knowledge and abilities prefer to distribute through middlemen •
Channel control: manufacturers who desire to control the distribution opt for shorter
channels • Services provided by seller: distribution channel decisions are influenced by
the marketing services the manufacturer is able to provide to middlemen

Importance of Place Mix

An effective place mix strategy ensures that goods are delivered to customers seamlessly,
reducing operational inefficiencies and improving customer satisfaction. Here are some key
reasons why place mix is critical:

Streamlined Operations: Proper distribution planning minimizes delays and bottlenecks.

Customer Convenience: Ensures products are available where and when customers need them.

Cost Efficiency: Reduces unnecessary transportation and warehousing costs.

Market Reach: Expands the availability of products to wider geographic areas or target
audiences.

An inefficient place mix can lead to increased costs, reduced adaptability, and operational
complexity, which can negatively impact a business’s performance

Key Elements of Place Mix

The place mix comprises two key elements that could help an organization in meeting its
distribution and business goals. They are as follows:

 Physical Distribution
 Channel of Distribution
Physical Distribution

Physical distribution involves the tangible process of storing and transporting products from the
manufacturer to the end consumer. It encompasses several key elements:
Inventory Management:

Inventory management is a multifaceted process involving meticulous forecasting of demand

patterns, monitoring stock levels, and ensuring a delicate balance between supply and demand.
By accurately predicting customer needs, businesses can optimize their inventory, avoiding both
excess and shortage.

Warehousing:

Warehouses serve as pivotal nodes in the distribution network. They play a critical role in the
storage, organization, and safeguarding of products. Proper warehouse management includes
efficient space utilization, inventory rotation, and security measures to prevent theft or damage.

Transportation:

Choosing the right transportation methods is paramount to the physical distribution process.
Companies must weigh factors such as distance, volume, speed, and cost-effectiveness when
selecting modes of transportation. Whether it’s trucks for regional deliveries, ships for
international shipments, or airplanes for expedited services, the choice of transportation
profoundly influences delivery times, costs, and the condition of products upon arrival.

Order Processing:

Order processing involves a series of steps, from order receipt to product shipment. Streamlining
this process is essential for timely and accurate deliveries. Efficient order processing includes
real-time inventory tracking, automated order fulfillment, and quality packaging.

Channel of Distribution

Channel of distribution, also known as the distribution channel, refers to the pathway through
which products or services move from the manufacturer to the end consumer. It involves various
entities:

Manufacturer:

Manufacturers are the originators of products, crafting them from raw materials or components.
They are responsible for ensuring product quality, innovation, and adaptation to market
demands. Manufacturers strategize their distribution channels based on product characteristics,
target audience, and market reach, laying the foundation for the entire distribution process.
Wholesalers:

Wholesalers bridge the gap between manufacturers and retailers. By purchasing goods in bulk,
they achieve economies of scale, making products more affordable for retailers. Wholesalers also
offer services such as bulk breaking, inventory management, and transportation consolidation.

Retailers:

Retailers are the final link in the distribution chain, directly interacting with consumers. They
curate products, create appealing displays, and offer personalized services. Retailers can be
physical stores, online platforms, or a combination of both.

Agents and Brokers:

Agents and brokers act as intermediaries who facilitate transactions between buyers and sellers.
They bring market knowledge, negotiation skills, and industry expertise to the table.

Types of Channels of Distribution

Businesses use various types of distribution channels based on their products, target audience,
and market dynamics. These include:

One-Level Channel (Direct Distribution):

In a one-level distribution channel, also known as direct distribution, products move directly
from the manufacturer to the end consumer without any intermediaries. This streamlined
approach allows businesses to maintain full control over the entire distribution process.

Two-Level Channel (Indirect Distribution):

A two-level distribution channel introduces intermediaries between the manufacturer and the end
consumer. Wholesalers or retailers typically serve as these intermediaries. Manufacturers sell
their products to wholesalers, who, in turn, distribute them to retailers. Retailers, in the final
stage, sell the products to the end consumers.

Three-Level Channel (Extended Indirect Distribution):

In a three-level distribution channel, an additional layer of intermediaries is introduced between

the manufacturer and the end consumer. Typically, this includes agents or brokers who act on
behalf of the manufacturer to negotiate sales with wholesalers or retailers.
Dual Distribution:

Dual distribution combines both direct and indirect channels to expand market reach. Companies
employing dual distribution leverage their online platforms or company-owned stores for direct
sales while also partnering with retailers, wholesalers, or agents.

Reverse Distribution:

Reverse distribution comes into play after the sale, focusing on the return, recycling, or disposal
of products. This channel is vital for industries dealing with recyclable or hazardous materials,
electronics, or pharmaceuticals.

Distribution Channels in the Digital Era

Digital technology has transformed the way businesses, especially small businesses, use direct
channels of distribution. With increasing consumer demand for online shopping and easy-to-use
e-commerce tools, direct selling usually equals more success for businesses.

Rather than having to rely on relationships with retailers to sell their products, software and
artificial intelligence (AI) sales technology allows companies to manage sales and automatically
achieve high customer relationship management (CRM) .

Online advertising, through social networks and search engines, targets specific areas or
demographics; social media networks are increasingly considered the industry standard and are
changing traditional marketing strategies.

If a company continues to use indirect channels of distribution, digital technology also allows it
to manage relationships with wholesale and retail partners more efficiently.

Strategies for Optimizing Place Mix

To ensure the place mix aligns with business goals and customer needs, companies should
consider the following strategies:

Market Research: Understand customer preferences and buying behaviors to design effective
distribution networks.

Technology Integration: Use advanced logistics software for inventory tracking, order
processing, and route optimization.

Partnerships: Collaborate with reliable intermediaries to enhance efficiency and reach.

Flexibility: Develop adaptable strategies to respond to market changes and customer demands.

The place mix in marketing is a cornerstone of any business’s success. By carefully planning
physical distribution and choosing the right channels, companies can enhance customer
satisfaction, reduce costs, and expand their market reach.

An optimized place mix ensures that products are available where and when customers need
them, bridging the gap between production and consumption seamlessly. For businesses aiming
to thrive in competitive markets, prioritizing the place mix is essential.

What is channel conflict?

Channel conflict refers to any dispute, disagreement or other similar issues that may occur
between two or more channel partners. A channel partnership is a collaboration between a
company that produces or manufactures various products, services or technologies and another
one that markets and sells them. In a channel partnership, the decisions and actions of one
partner affect the other's business metrics, such as profit, sales or market share, which may lead
to channel conflict.Any company that creates its own products may need a distribution
and marketing channel that exposes the respective products to a wide audience, ensuring sales
and profitability. These channels are often complex and involve additional partners and
intermediaries. Any issue between these partners is a channel conflict.

Types of channel conflict

The different types of channel conflict are:

Vertical level conflict: A vertical level conflict represents a conflict between two parties at
different levels in the distribution chain. For example, if a manufacturer stops using a distributor
and sell directly to consumers, it's a vertical-level conflict.

Horizontal conflict: Horizontal conflict is a conflict between two partners who operate at the
same level in the distribution chain. A common example is when multiple retailers or
wholesalers operate in the same geographical area, creating an imbalance between supply and
demand and unproductive competition.

Multi-channel conflict: A multi-channel conflict occurs when two or more channels of the same
manufacturer compete in the same market and sell the same product at different prices.

Causes of channel conflict

Some of the most widely encountered causes of channel conflict are:

Different goals: When the manufacturer and its partners don't have aligned goals, each of them
operates with different objectives in mind, creating a channel conflict.
Role ambiguity: If a certain partner's role isn't properly determined and understood by other
partners, channel conflict may occur.

Different marketing or strategic approaches: If two partners who sell the same product promote it
in different ways, it can cause channel conflict by creating different customer perceptions of the
same product.

Resistance to change: Another potential cause of channel conflict is one party's resistance to a
change another partner wants to make with the sale or distribution of the product.

Different views of the market: When the manufacturer has a certain view regarding the potential
market for its goods or services and how to capture that market, it may differ from that of its
distributors, creating a channel conflict by reducing the distributor's incentive to enter that
market.

Geographic or demographic distribution misalignments: When the potential customer base is

relatively low, but the manufacturer allows multiple distributors for its goods or services, the
lack of a large potential profit may affect the distributors' motivation to succeed in that market.

How to manage channel conflict

Consider following these steps to manage a channel conflict:

1. Establish a minimum advertised price

Since a significant number of channel conflicts arise because of ambiguous pricing, creating a
minimum advertised price is typically the first step you can take to manage potential channel
conflicts. This can motivate distributors by ensuring them you're not planning to compete with
them by selling the products online. You can use your brand to enforce minimum advertising
prices across the markets in which your company operates, creating a sense of consistency and
trust among channel partners.

2. Reduce your distribution channels

After ensuring price consistency, take control of your products' distribution. Although it may be
tempting to work with as many distributors as possible, this might dilute the market, making
partnerships harder to manage and ultimately affecting your supply chain. A reduced distribution
that aims to cover the market's potential through as few partners as possible gives you more
control and limits the odds of a channel conflict occurring.

3. Control your supply chain

Working to limit your supply chain to authorized distributors is an effective way of managing
channel conflicts. An uncontrolled supply chain may cause unauthorized distributors to sell your
products.Ensuring that only authorized distributors are selling your employer's products can help
create less competition between other parties the company partners with. It also limits the
number of distributors that can legally sell the company's product, which also decreases your
chances of encountering channel conflict.

4. Strengthen your brand by offering exclusive products

If you help build a powerful brand for your employer's company, you may reduce the chance of
channel conflicts occurring. A way to do this without undermining your distributing partners is
by launching certain exclusive products on your e-commerce site. This way, you strengthen your
own brand and avoid creating a channel conflict because you're not selling the same products as
your partners.

Tips for preventing channel conflict

Here are tips to help you prevent channel conflict:

Negotiate effective contracts. Before you begin working with a new channel partner, it's helpful
to create an effective contract that protects each party from channel conflict. In this contract,
consider highlighting policies for pricing, communication, marketing and other facts that may
affect sales.

Establish a trial period. When working with a new channel partner, create a contract that's
effective for a shorter period of time at first. This can help you establish a trial period in which
you can determine if the company for which you work and the other party mutually benefit from
the partnership.

Create clear communication practices. Establishing an effective communication method between

the company for which you work and its channel partners may help reduce misunderstandings,
which consequentially can prevent channel conflict.

Definition of a Retailer

A retailer is a business entity or individual that purchases products or services from

manufacturers, wholesalers, or distributors and sells them directly to consumers for personal use.
Retailers operate physical stores, online marketplaces, or a combination of both to reach their
target audience. They serve as the final link in the supply chain, connecting producers with end-
users.

Types of Retailers

Retailers can be classified into various types based on size, product range, target market, and
distribution methods. Here are some common types of retailers:
 1. Department Stores: Department stores are large-scale retail outlets that offer various
products across multiple categories, such as clothing, electronics, home goods, and
cosmetics. They often have different sections or departments, each specializing in
specific product lines. Examples of department stores include Macy’s, Nordstrom, and
Harrods.
2. Supermarkets and Hypermarkets: Supermarkets and hypermarkets are retail stores that
sell food and household products. Supermarkets are smaller than hypermarkets, vast one-
stop shops offering a broader range of products. Well-known examples include Walmart
(hypermarket) and Kroger (supermarket).
3. Convenience Stores: Convenience stores are small retail outlets that operate extended
hours, often 24/7. They offer a limited selection of everyday essentials and impulse
purchase items for customers seeking quick and convenient shopping. 7-Eleven and
Circle K are prominent convenience store chains.
4. Speciality Stores: Specialty stores concentrate on a specific product category or niche,
providing a curated selection for customers with unique preferences. Examples include
Apple Stores (electronics), Sephora (beauty products), and GameStop (video games).
5. Online Retailers (E-tailers): Online retailers, also known as e-tailers, conduct their
business exclusively through online platforms. They offer a wide range of products and
services and leverage digital marketing strategies to reach and engage customers.
Amazon, Alibaba, and eBay are prominent global e-tailers.
6. Discount Retailers: Discount retailers focus on offering products at lower prices than
traditional retailers. They often sell private-label or off-brand merchandise to maintain
competitive pricing. Walmart’s subsidiary, Walmart Inc., is an example of a discount
retailer.
7. Luxury Retailers: Luxury retailers cater to high-end consumers and offer premium and
exclusive products, often associated with luxury brands and high prices. Examples
include Chanel, Louis Vuitton, and Tiffany & Co.
8. Franchise Retailers: Franchise retailers operate under a franchise agreement, using an
established parent company’s branding, products, and systems. McDonald’s, Subway,
and Starbucks are well-known franchise retailers.
Functions of Retailers

Retailers perform various essential functions that add value to their products and services. These
functions are critical to meeting customer needs and preferences effectively. The main functions
of retailers include:

1. Merchandising: Retailers select and procure a diverse range of products from suppliers
to create an attractive and appealing product assortment for customers. They consider
factors like product quality, price, packaging, and branding to offer a well-rounded
shopping experience.
2. Inventory Management: Retailers manage their inventory to ensure products are
available when customers demand them. They use inventory management systems to
track stock levels, restock efficiently, and avoid stockouts or overstocking.
3. Customer Service: Excellent customer service is a hallmark of successful retailers. They
assist customers with inquiries, provide product information, handle returns, and resolve
issues to enhance customer satisfaction and loyalty.
 4. Pricing Strategy: Retailers develop strategies that balance profitability and customer
appeal. They consider competition, cost of goods, demand, and consumer behaviour to
set optimal prices.
5. Promotions and Marketing: Retailers invest in promotional activities and marketing
campaigns to attract customers, boost sales, and build brand awareness. These efforts
may include advertising, social media engagement, loyalty programs, and seasonal sales
events.
6. Store Design and Visual Merchandising: Effective store design and visual
merchandising create a pleasant and immersive shopping environment. Retailers
strategically arrange products, displays, and signage to guide customer flow and highlight
key offerings.
7. Omnichannel Integration: Many modern retailers adopt an omnichannel approach,
seamlessly integrating their physical and online presence. This allows customers to have
a consistent shopping experience across different channels.
8. Payment Processing: Retailers facilitate various payment methods, including cash,
credit/debit cards, mobile payments, and digital wallets, to ensure a smooth and
convenient checkout process.

What is Promotion?

Promotion is a type of communication between the buyer and the seller. The seller tries to
persuade the buyer to purchase their goods or services through promotions. It helps in making the
people aware of a product, service or a company. It also helps to improve the public image of a
company. This method of marketing may also create interest in the minds of buyers and can also
generate loyal customers.

It is one of the basic elements of the market mix, which includes the four P’s: price, product,
promotion, and place. It is also one of the elements in the promotional mix or promotional mix or
promotional plan. These are personal selling, advertising, sales promotion, direct marketing
publicity and may also include event marketing, exhibitions, and trade shows.

Types of Promotion

Advertising

Advertising means to advertise a product, service or a company with the help of television, radio or
social media. It helps in spreading awareness about the company, product or service. Advertising is
communicated through various mass media, including traditional media such as newspapers,
magazines, television, radio, outdoor advertising or direct mail; and new media such as search
results, blogs, social media, websites or text messages.

What is the AIDA Model in Marketing?

The AIDA Model, which stands for Attention, Interest, Desire, and Action model, is an
advertising effect model that identifies the stages that an individual goes through during the
process of purchasing a product or service. The AIDA model is commonly used in digital
marketing, sales strategies, and public relations campaigns.

The AIDA Model Hierarchy

The steps involved in an AIDA model are:

 Attention: The first step in marketing or advertising is to consider how to attract the
attention of consumers.
 Interest: Once the consumer is aware that the product or service exists, the business must
work on increasing the potential customer’s interest level.

For example, Disney boosts interest in upcoming tours by announcing stars who will be
performing on the tours.

 Desire: After the consumer is interested in the product or service, then the goal is to
make consumers desire it, moving their mindset from “I like it” to “I want it.”

For example, if the Disney stars for the upcoming tour communicate to the target audience about
how great the show is going to be, the audience is more likely to want to go.

 Action: The ultimate goal is to drive the receiver of the marketing campaign to initiate
action and purchase the product or service.

Direct Marketing

Direct marketing is a form of advertising where organizations communicate directly

to customers through a variety of media including cell phone text messaging, email, websites,
online adverts, database marketing, fliers, catalog distribution, promotional letters and targeted
television, newspaper and magazine advertisements as well as outdoor advertising. Among
practitioners, it is also known as a direct response.

Sales Promotion

Sales promotion uses both media and non-media marketing communications for a pre-determined,
limited time to increase consumer demand, stimulate market demand or improve product
availability.

Personal Selling

The sale of a product depends on the selling of a product. Personal Selling is a method where
companies send their agents to the consumer to sell the products personally. Here, the feedback is
immediate and they also build a trust with the customer which is very important.

Public Relation

Public relation or PR is the practice of managing the spread of information between an individual or
an organization (such as a business, government agency, or a nonprofit organization) and the public.
A successful PR campaign can be really beneficial to the brand of the organization.

Sponsorship: Sponsorships are essential to promote a company’s brand or products.

Sponsoring events exposes the company to a large audience and enhances the image and
awareness of the brand or product.
Trade Fair and Exhibition: Businesses may promote and demonstrate their goods and
services to a specific audience through trade shows and exhibits. These events bring together
customers and businessmen from different industries which helps and promotes relationship-
building, making sales, and gaining market knowledge. The trade fair and exhibitions include
the display of samples, demos, etc., to attract customers and keep them interested.
Online Promotion: Online promotion has become one of the most important means of
promotion today. With the help of the recent popularity and growth of digital platforms,
marketing can be done in a lot of ways through social media in the form of content
marketing and influencer marketing. Small businesses greatly benefit from the technique of
online promotion. This method takes the help of internet platforms to connect with a large
audience and boost sales.
Purpose and Importance of Promotion
Marketing provides many different purposes and is important to the success of any
organisation. The main purposes of marketing include the following:
1. Increase Brand Awareness: Promotion makes potential consumers aware of what is
available on the market, but it can also help to build brand equity. Brand equity is the overall
value of a brand, based on consumer perception. Businesses may convey their brand message,
values, etc., to a vast number of people through several promotional activities increasing their
brand awareness, loyalty, and trust among the customers.
2. Recall Brand Value: Businesses may improve the image of their brands and survive
competition in the market by promoting their products regularly. Promotions can draw
attention to a brand’s distinct qualities, such as superior quality, reliability, or outstanding
customer service.
3. Increase Customer Traffic: Promotions can attract more customers and increase customer
traffic. Time-limited promotional activities like contests, giveaways, or samples can generate
interest among customers and create opportunities for sale. This also acts as a platform for
building long-term relations with the customers.
4. Increase Sales and Profits: One of the main purposes of marketing is to increase the sales
of the business. Once the customers are properly made aware of the product or service, they
buy those products that they find worthy of purchase. This helps the seller to sell more
products and draw more customers. In marketing, the sellers are always looking for ways that
can increase the worth or value of their products. This will make sure that the customers prefer
their products instead of their competitors.
Promotion Strategies
Promotion strategy is a plan for promoting your product or service. It outlines the specific
tactics you’ll use to create awareness, generate interest, and ultimately, persuade customers to
purchase. Promotion strategies are usually classified into five main categories, and they can be
best tailored to fit your product or service by combining different ones together:
1. Pull Strategy: This approach is about attracting customers to come to you. It involves using
methods such as social media marketing and content marketing so that people can find out
about your product on their own.
2. Push Strategy: This method requires you to actively push the products or services towards
the potential consumers. You reach out directly through things like cold emails and
advertisements to your specified audience.
3. Sales Strategy: This kind of promotional approach encourages the buyers to make a
purchase by giving them discounts, coupons or any other special deals. It can be categorized
under two divisions; inbound methods which entails such things as free shipping offers
among others while outbound methods includes email promotions.
4. Retail Strategy: In comparison with other enterprises, traditional retail shops face unique
opportunities and challenges. They can promote their offers through in-store loyalty
programs and strategic placement of products.
5. Ecommerce Strategy: Digital promotions are the strong suit of ecommerce businesses
when it comes to marketing their goods. For instance, they may carry out search engine
optimization (SEO) specifically meant for online stores.