Distribution Management and the
Marketing Mix
ANGIE, SANDARA, JULIUS
Sales & Distribution Management
This document covers Chapter 8 of the Sales & Distribution Management subject, focusing
on Distribution Management and its role in the Marketing Mix.
Learning Objectives
The chapter aims to explain the role of distribution management in the marketing mix, why
distribution channels are essential, and how to create effective distribution channel
strategies. It also provides an overview of the members involved in a distribution channel
and discusses different levels of distribution intensity.
The Marketing Mix
The marketing mix includes the elements Product, Place, Price, and Promotion. Distribution
channels are part of the 'Place' component. They help deliver the product to consumers at
the right place, right time, and in a way that allows them to take ownership, thereby
creating time, place, and possession utility.
Example
To illustrate, consider a consumer who wants to buy a tube of toothpaste. The product is
available at a nearby retail store—this is place utility. It is available at 8 pm on a Tuesday
when the consumer needs it—this is time utility. The consumer can pay for it and take it
home immediately—this is possession utility. This scenario could be the same whether the
consumer wants toothpaste, a refrigerator, medicines, or even an electric motor. All of this
is made possible through the company’s distribution function.
Players Involved
The players involved in distribution include the company and its distribution network.
Distribution can occur directly from the company to the consumer, or it may involve
intermediaries such as C&FAs, distributors, wholesalers, and retailers. Each of these
intermediaries contributes to the exchange process of products and services.
Distribution Management
Distribution management refers to all activities that facilitate the coordination of supply
and demand and the creation of time and place utility in goods. It is the art and science of
determining what is required, acquiring it, distributing it, and maintaining it in a ready-to-
use condition throughout its lifecycle.
Distribution Channels Defined
According to Stern & Ansary, distribution channels are sets of interdependent organizations
involved in making a product or service available for use or consumption. These channels
are crucial in marketing as they influence the company’s overall success and market
presence. Kotler notes that all retailers, wholesalers, and logistical organizations are
considered intermediaries.
More Definitions
Cundiff & Still define distribution channels as networks through which producers’ products
reach the market. Bert Rosenbloom describes them as external contractual organizations
used by management to achieve distribution goals. Kotler & Armstrong refer to them as a
set of independent organizations that help make a product or service available for
consumer or industrial use.
Distribution Channels
Distribution channels exist because producers cannot reach all consumers directly. They
extend market reach, improve marketing efficiency, and ensure a smooth flow of goods.
They create time, place, and possession utilities and provide essential benefits such as
contact, specialization, experience, and scale of operation.
Types of Channels
There are various types of distribution channels. Sales channels involve motivating buyers,
sharing information, negotiating deals, and financing transactions—examples include
company salespeople and online platforms. Delivery channels are responsible for the
physical movement of goods, such as through railways. Service channels handle post-sales
service, such as through authorized service centers.
Listing of Channel Members
Channel members can include a company's own sales team, C&FAs, CSAs, distributors,
dealers, stockists, value-added resellers, commission agents, jobbers, brokers, franchisees,
electronic channels, wholesalers, and retailers.
C&FAs / C&SAs
C&FA stands for Carrying and Forwarding Agent, and C&SA stands for Carrying and Selling
Agent. Both operate under a contract with the company. They act as transporters between
the company and distributors, collect products from the company, store them centrally, and
distribute them based on demand. The goods remain the property of the company. While
C&FAs handle logistics, C&SAs also sell the goods and remit the proceeds post-sale.
Distributors, Dealers, Stockists
Distributors buy products from the company and invest in them. They may earn through
commission, margins, or mark-up, and may or may not get credit from the company. They
extend credit to others and cover their market areas using a beat plan. Distributors could be
exclusive for a company. Dealers and stockists support the financing of business but are not
as involved in market coverage. Agents help connect buyers and sellers.
Wholesalers
Wholesalers operate in main markets and deal in multiple product lines from various
companies. They do not have formal contracts with companies. Wholesalers sell to other
wholesalers, retailers, and institutions, often on 15-day credit terms. They provide credit to
their customers and operate on a high-volume, low-margin basis.
Retailers
Retailers are the final point of contact with consumers. They operate through retail shops
and offer a wide variety of goods and services for personal or non-business use. They are
located closest to consumers and may buy from companies, distributors, or wholesalers.
Retailers typically enjoy the highest margins in the distribution network and often provide
personalized customer service.
Patterns of Distribution
Distribution patterns determine the intensity of distribution and influence the level of
service provided to customers. The three types of distribution strategies are intensive,
selective, and exclusive distribution.
Distribution Intensity
Intensive distribution makes products available in as many outlets as possible and is typical
for FMCG products. Selective distribution allows only selected outlets to carry the product
and is used for items like pharmaceuticals and frozen foods. Exclusive distribution restricts
sales to one or very few outlets in a market, such as with automobile dealerships.
Distribution Channel Strategy
A company’s distribution channel strategy is based on its overall corporate and marketing
strategy. Key steps include defining customer service levels, setting distribution objectives,
determining the network structure, establishing policies and procedures, and setting key
performance indicators and critical success factors.
Key Learnings
Distribution channels are essential for transferring products from producers to consumers.
Companies use these channels to reach large and diverse customer bases. Channels may
consist of formally appointed members like distributors or more informal members like
retailers. These channels provide critical time, place, and possession utilities to the end
consumer.
