Managing the distribution function


We’ll call this company Alpha. Alpha made a product which is bought by every household. The decades of fifties and sixties saw demand for Alpha’s product exceeding its supplies. Incidentally until that time Alpha was the only supplier of this product. But 1970s and 1980s saw a change in the industry structure. About half-a-dozen medium-sized firms and over a thousand small and cottage sector units now emerged making a product comparable to Alpha. These firms filled retail outlets in the rural and semi-urban areas and small towns. These firms offered more financial incentives to the wholesalers than Alpha. For example, they offered their products at nearly half the cost of Alpha’s and allowed the retailers to retail it at Alpha’s price level or a little lower. Since wholesalers and retailers made almost about 70-80% profit in these small firms’ products as opposed to just about 10-12% in Alpha’s, they started investing more in these than in Alpha. The situation for Alpha was further aggravated by the consumers’ indifference to the brands in this product category. The customer invariably asked for the generic product. Alpha also suffered reverses because its channel of distribution had become obsolete. It was long and many channel members did not perform any meaningful role and yet got compensated by the firm. So, while Alpha lost, its competitors gained by ensuring a better distribution.

Likewise, when faced with resistance from established big dealers, ONIDA in 1984, decided to develop a new breed of dealers and create pull by intensively advertising its television model on the television itself. Brand identity was created; brand image was built and this in turn built customer traffic at these new dealer outlets. These dealers have grown today in size and are loyal to ONIDA.

Distribution decisions are critical .These decisions have to be responsive to market conditions and hence are never static. The decisions reflect the firm’s long term commitment. If the firm does not like the advertising agency it can change. Altering a distribution structure by terminating a contract with the existing wholesaler or dealer is not such a simple decision. The ripples in the distribution system can adversely affect the viability of the enterprise. An agreement between the firm and its intermediaries is a bond of trust and faith as they form business partnerships. It is for this reason that most firms do not take decisions that can precipitate a crisis in the market place.

Again, from the corporate perspective, distribution decisions will also reflect the firm’s profitability. If the cost of servicing a market is high because of low channels loyalty and customers indifference to the firm’s brand then the firm is likely to be unprofitable.

The important facets of distribution decisions are convenience, cost, and communication (including the transportation) that influencing customers decisions to buy a specific brand only. To this has been added outlets images in order to understand why some intermediaries do better than there counterparts.

Intermediaries play an important role in the marketing of the product. The Intermediaries make the product convenient to the customer in a pack size. They buy the product in large quantities and have to compete with the other Intermediaries in the market If there are no Intermediaries than the price of the product will be very high. There is also the inconvenience which we will have to go through to just obtain our requirements directly from the manufacturer. At times, middlemen attempt at profiteering in products whose demand exceeds supply and this leads to a hue and cry for abolishing middlemen and insisting on the government to distribute the product.
When the distribution system is managed by the Government it is inefficient and corrupt. The solution to curb middlemen’s tendency to profiteer lies in increasing the supplies such that there are no gaps in the market. Due to competition in the market and the product availability in the rural and remote areas the rates have been reduced. Intermediaries have made it possible.

Another criticism, in our country is Intermediaries who are dishonest should be blacklisted The customer should refuse to buy a product suspected of adulteration. Today, an average customer refuses to buy a product whose seal may have been tampered with or that which has been in the retail outlet for a longer time and is close to the expiry date. At petrol pumps, oil companies educate customers on how to check adulteration in petrol and diesel.

Managing Distribution channels by the firm is a part of their marketing but the concerned manager must be vigilant and pay adequate attention to ensure that the customers are getting the goods of the company at the right price and quality. It must also be seen that the distributors must render the required services to the consumers.