PLACE: is nothing but a market where buyers and sellers meet for the exchange of goods on the monitory basis

Product distribution (or place) is one of the four elements of the marketing mix. An organization or set of organizations (go-betweens) involved in the process of making a product or service available for use or consumption by a consumer or business user.

The place is (/Customers are) segmented on the following basis

Geographical

Region pacific mountain, new England, India.

City or metro size under 5000, 5000-20000, 20000-50000.

Density urban, sub-urban

Climate northern southern

Demographic

Age age under 6, 6 to 10 and so on

Family size 1-2, 3-4, 5+

Family life cycle young, single, married, no children, minor, major.

Gender male, female

Income under 10000, 10000-50000.

Occupation professional and technical, manager, student, unemployed

Education SSC, HSC, Graduation, PG

Religion Hindu, Muslim, Sikh, Christian etc.

Race White, Black, Asian, Hispanic

Generation baby boomer etc.

Nationality Indian, American, Chinese

Social class lower class, middle class, higher class

Psychographic

Lifestyle lifestyle, culture oriented, sports oriented etc

Personality compulsive, ambitious etc.

Behavioral occasions regular occasion, special occasion

Attitude towards product enthusiastic, negative, positive

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DISTRIBUTION CHANNEL

Distribution is also a very important component of Logistics & Supply chain management. Distribution in supply chain management refers to the distribution of a good from one business to another. It can be factory to supplier, supplier to retailer, or retailer to end customer. It is defined as a chain of intermediaries; each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.

LEVELS/ LAYERS/ TIERS/ TYPES OF DISTRIBUTION CHANNELS

Following are the different layers/ tiers / types of Distribution Channel

ZERO LEVEL / 1^ST TIER

FIRST LEVEL / 2^ND TIER

SECOND LEVEL/ 3^RD TIER

THIRD LEVEL/ 4^TH TIER

ZERO LEVEL / 1^ST TIER

In this type, the manufacturer himself takes the responsibility of the distribution. Manufacturer use the following methods to distribute the goods

- door to door distribution

- through factory outlets

- through own showrooms

- online

- through any direct electronic media

eg. Eureka Forbes and Dell computers are the best examples of 1^st tier Distribution Channel

ADVANTAGES

- No profit sharing as there is no intermediaries

- Direct contact with the customers will help in direct feedback

DISADVANTAGES

- Customer reach is limited; Can manage to target only specific targeted customers

- Cannot cover the entire market

FIRST LEVEL / 2^ND TIER

In this type, there is only one kind of intermediaries. It may be agents/ retailers/ franchises or a combination of retailers and franchises. Agents are the people who work on commission basis; they don’t take the possession of the products.

Eg. Reliance Communication uses the franchises to sell their products. But there are retailers also who sell the reliance product

ADVANTAGES

- A bigger range of retailers or Franchises helps to reach more customers

- Though there is profit sharing, the profit margin for both manufacturers and retailers/ franchises are more

- There is risk sharing

- Retailers can help in demand estimation and better communication with the customers

DISADVANTAGES

- A manufacturer alone cannot handle a huge range of retailers, agents and franchises

- It covers the better market than zero level, but doesn’t cover the entire market

SECOND LEVEL/ 3^RD TIER

In this level there is combination of wholesalers/ agents and retailers/ franchises. Manufacturer distributes the product to wholesaler and wholesalers distribute it further. Or manufacturer appoints agents on commission basis to target maximum retailers or franchises.

Eg. FMCG manufacturers follow this channel for better distribution

ADVANTAGES

- This kind of channel covers the bigger, probably the entire market, as every wholesaler has the group of many retailers

- Manufacturer just has to concentrate on the wholesalers.

- Retailers and wholesalers help manufacturer to estimate the actual demand of the product in the market

- There is risk sharing

- It creates a better communication between consumers and manufacturers.

DISADVANTAGE

- Profit sharing is higher; profit margin is low, as there are many parties involve

THIRD LEVEL/ 4^TH TIER

In this level, manufacturer appoints wholesalers and wholesalers appoint agents to target the retailers and franchises.

Eg. FMCG manufacturers follow this channel for better distribution

ADVANTAGES

- This kind of channel covers the bigger, probably the entire market, as every wholesaler has the group of many retailers

- Manufacturer just has to concentrate on the wholesalers.

- Retailers and wholesalers help manufacturer to estimate the actual demand of the product in the market

- There is risk sharing

- It creates a better communication between consumers and manufacturers.

DISADVANTAGE

- Profit sharing is higher; profit margin is low, as there are many parties involve

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DESIGNING THE DISTRIBUTION CHANNELS

- Formulating the Channel Objectives

o Whether to go for Specific Target Market or Entire Market.

- Identifying Channel Functions

o What kind of targeted Customers the Channels are going to handle

o How to solve customers’ queries

o Estimating customers demand

o Customer retention strategies, etc.

- Linking Channel Design to Product Characteristics

o Comparing the manufacturer’s product with every distribution channels

o Finding out suitable Distribution Channels as compare to product

o Eg. We can’t go for third level or second level distribution channel for highly perishable products

- Evaluation of Distribution Environment

- Evaluation of Competitors’ Channel Design

- Matching Channel Design to Company’s Resources

- Drawing & Evaluation of alternative channels

- Selection of suitable alternatives.

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RETAILERS

Retailing is a business which sells goods to the consumer, as opposed to a wholesaler or supplier which normally sell their goods to another business. Or we can say, The sale of goods or commodities in small quantities directly to consumers.

Retailers are the people who purchase the goods from the wholesaler or manufacturer and sale it to the end consumers.

Following are the types of retailers

- PRODUCT LINE RETAILERS / MERCHANDISE RETAILER

o Departmental Store

o Super Markets

o Specialty store

o Hyper Market

- BARGAIN RETAILERS / PRICE FOCUS RETAILERS

o Discount House

o Factory Outlets

o Off-Price Store

o Warehouse Club / Wholesale Club (Membership)

- NON STORE & e-RETAILERS / CONVINIENCE RETAILERS

o Direct Response Retailers

o Catalog Retailers

o Door to Door / Direct Selling

o Telemarketers

o Online / Internet Retailers

- ONE STOP SHOPPING RETAILERS

o Big Shopping Malls

WHOLESALERS

Wholesaler is a distributor or middleman who sells mainly to retailers and institutions, rather than consumers.

Wholesaler is a Person or firm that buys large quantity of goods from various producers or vendors, warehouses them, and resells to retailers. Wholesalers who carry only non-competing goods or lines are called distributors.

- MERCHANT WHOLESALING

o Limited Function Merchants

§ Drop Shippers

These wholesalers own (take title to) the products they sell - but they do not actually handle, stock, or deliver them

§ Rack Jobbers

These wholesalers specialize in nonfood products sold through grocery stores and supermarkets - and they often display them on their own wire racks

§ Truck jobbers

These wholesalers specialize in delivering products that they stock in their own trucks.

§ Carry & Cash

These wholesalers operate like service wholesalers - except that the customer must pay cash

§ Mail Order Wholesalers

These wholesalers sell out of catalogs that may be distributed widely to smaller industrial customers or retailers who might not be called on by other middlemen.

o Full Service Merchants

§ General Merchandise

These are service wholesalers who carry a wide variety of nonperishable items such as hardware, electrical supplies, plumbing supplies, furniture, drugs, cosmetics, and automobile equipment

§ Single Line wholesaler

These are service wholesalers who carry a narrower line of merchandise than general merchandise wholesalers.

§ Specialty wholesaler

These are service wholesalers who carry a very narrow range of products - and offer more information and service than other service wholesalers

§ Industrial Distributors

These are wholesalers who sale to manufacturers rather than to the retailers. In Simple words, these are the wholesalers of raw materials and parts.

- MANUFACTURER SALES FACILITY

o Producer’s Cooperatives

These wholesalers operate almost as full-service wholesalers - with the "profits" going to the cooperative's customer-members

- AGENTS & BROKER

FRANCHISEE

Franchisee is a form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee.

- PRODUCT DISTRIBUTION FRANCHISEES

These type of Franchisees primarily involve cooperation for the distribution of goods, suppliers or retailers cooperation

Eg. Daas electronics use their own name to sale different electronic products of LG, electolux, Samsung, whirlpool etc.

- TRADE NAME FRANCHISEES

This type of franchisee uses the trademark/ brand name of the franchisor to sale the product of

Eg. Reliance communication franchisees use reliance communication brand name

- BUSINESS FORMAT FRANCHISEES

It’s a combination of franchisor’s name with franchisee’s name

Eg. DAS AUTO VOLKSWAGON, KOTHARI HYUNDAI etc.

- RETAIL FRANCHISEES

Retail franchises tend to be popular high street chains that provide either products or services to usually 'walk-in' customers

- MANAGEMENT FRANCHISEES

A Management franchise tends to include office based work, and will include working closely with businesses and organisations to provide either a service or product.

- SINGLE OPERATOR FRANCHISEES

A Single Operator franchise can take two forms. Both involve the selling of a product or service within a particular trade and require some degree of marketing to ensure that the public are aware of the services or products offered

- INVESTMENT FRANCHISEES

An Investment franchise often involves investing large amounts of money into Business & Finance franchises without working directly within the business

Prof. A. R. Sayyed