Distribution – Marketing Management
In order for a company’s products and services to be able to reach its target consumers effectively, it must be made available to them. This aspect of locating the products in close proximity to the firm’s target market groups is taken care of by distribution, which forms the Place ‘P’ of the marketing mix .
According to the Economic Times, distribution means to spread the product throughout the marketplace such that a large number of people can buy it. It involves making the product available to the consumers for either conversion into products, or for final consumption. Distribution typically involves the following activities:
- The location of the business
- The location of the firm’s target market
- Ways to reach the target market
- Warehousing and storage of stock
- A good transport system to transport goods to various geographical locations
- A tracking system to ensure that the right goods reach the right place at right time and in the right quantity
- Efficient packaging which takes accommodates for the wear and tear during transport
- Tracking locations for best placement of the product so that it is available to a majority of the consumers
- Stock return capabilities
Based on the nature of the goods, a firm can select one among the following common distribution strategies.
- Intensive distribution – commonly employed to distribute low-priced or impulse purchase products such as chocolates and soft drinks. Woolworth’s stocks its products through intensive distribution
- Exclusive distribution – distribution of goods is limited to a single outlet; the product is typically highly priced, and requires the intermediary possess extensive knowledge about the product. Rolls Royce showrooms and dealerships in New South Wales and Queensland are excellent examples of this distribution strategy
- Selective Distribution – a handful of retail outlets are selected to stock and distribute the product. This strategy is common with products such as computers, televisions, household equipment and appliances. Apple in Sydney uses selective distribution to distribute iPhones and iPads to certain speciality stores
Channels and Intermediaries
Distribution of products typically takes place through distribution channels. These are interdependent organisations that work to make the product available to the end users, also known as intermediaries. These channels include wholesalers, retailers, e-commerce websites, consultants, catalogue sales teams, direct sales force dealers and home shopping networks. A firm can opt for none, one or a mix of distribution channels. This also depends on the type of products that are offered for sale. For example, Target Australia goes through a minimal number of intermediaries and channels to stock perishable items such as fresh produce, meat, eggs and milk. On the other hand, it may use distributors and stockists for household items such as detergents. Further, it opts for buying houses for is apparel and accessories.
Types of Channels
- Distributors: They engage directly with the manufacturers, and typically maintain exclusive purchasing contracts and agreements with the manufacturers. They are the direct point of contact with consumers, for the manufacturers. Distributors, generally, do no supply directly to the end consumers; they sell the products to wholesalers and retailers who will then resell the products
- Wholesalers: These intermediaries are purchasers of goods in bulk, directly from the distributors. Their large buying volumes are substantiated in lowered costs of goods. These goods are then resold to retailers, with an added margin for the wholesalers
- Retailers: These are typically small as well as large businesses that sell products directly to end consumers . They purchase smaller volumes of goods from different wholesalers or distributors
Channel Design and Channel Mix
A firm can opt for any channel design it wishes to have, after considering the nature of the goods it wants to sell and/or stock, the reach of the channels, the cost implications of each channel design and the feasibility. The firm can also opt for more than one distribution channel, again dependent on factors such as the product perishability and so on.
According to Transfreight, logistics is the planning, execution, and control of the movement / placement of goods and / or people, and the related supporting activities, all within a system designed to achieve specific objectives. It is a part of supply chain management, and controls the physical flow of goods to reach the final users. Logistics is an important aspect of various firms across industries such as DHL, Target Australia, Nike, Innocent beverages and so on as suggested by experts of ExpertAssignmentHelp.
While devising a logistics plan, firms must carefully consider the following:
- Planning and scheduling production
- Order quantity (minimum and economic), raw material supply
- Supply of finished goods per type and style of product
- Storage and warehousing of products so that they reach the consumers in a good condition
- Channels of distribution
- Stock control, in voicing and transportation tracking systems to be employed
The main function of distribution is to reduce the geographical gap between the producer and the purchaser, through the seller. It is important for firms to consider the type of product, costs of each channel and their reach before finalising on a particular distribution strategy and distribution mix. Firms also need to effectively manage these channels by offering channel motivation schemes such as higher margins to certain intermediaries, special deals, premiums and advertisement allowances. They must also possess the ability to resolve vertical as well as horizontal channel conflicts which could arise as a result of encroachment by other intermediaries and lower margins among other reasons.
Other articles under blog series of “Marketing Management”
- Marketing environment
- Consumer behavior
- Organisational buyer behavior
- Market segmentation, targeting and positioning
- Branding and product development
- Marketing plan
- Customer relationship management (CRM)
- Consumer buying process
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