Answer:
DISTRIBUTION
Part of the challenge of marketing is figuring out which distribution method to use for your business. As soon as you decide which business or product category to compete in, distribution decisions must be made based upon what your competition is doing.
Service businesses may or may not be subject to the same physical distribution limitations as product-based businesses. For example, financial planning services may be offered from printed material, sold at retail, sold by consultants face-to-face, or delivered electronically by computer, by phone and by correspondence - a multitude of different distribution systems.
Distribution decisions have significant implications for:
• product margins and profits
• marketing budgets
• final retail pricing
• sales management practices
Distribution channels can include one or more of these options:
• retail - stores selling to final consumer buyers (one store, or a chain of stores)
• wholesale - an intermediary distribution channel that usually sells to retail stores
• direct mail - generally catalog merchants that sell directly to consumer buyers at retail prices plus shipping (e.g., Land's End, L.L. Bean) via mail
• telemarketing - merchants selling directly to consumer buyers at retail via phones
• cybermarketing - merchants selling directly to consumer buyers at retail prices, or business-to-business products and services at wholesale prices via computer networks
• sales force - salaried employees of a company, or independent commissioned representatives who usually sell products for more than one company
• TV and cable direct marketing and home shopping channels
Distribution choices for a service business follow the same lines as those for a physical product. For example, financial planning services may be offered from printed material, sold at retail by consultants, delivered electronically by computer, or relayed by phone, fax or mail.
Steps for selecting distribution and sales force representation include:
Identify how competitors' products are sold.
Analyze strengths, weaknesses, opportunities, and threats for your business.
Examine costs of channels and sales force options.
Determine which distribution options match your overall marketing strategy.
Prioritize your distribution choices.
This exercise is applicable for both large and small businesses.
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DISTRIBUTION STRATEGY
A successful Distribution Strategy is one that for a particular company, the benefits it gains are reduction of its channel inventory, increases the company' s advocacy
and streamlines the company's operations.
Distribution strategy is far more than logistics and transportation. It comprises the
interplay between four major strategic considerations: Company Portfolio, Company
Operations, Channel, and Customer Considerations. Only after all of these have been considered can a company truly develop a comprehensive strategy.
1.Customer Considerations . The appropriate channel strategy is heavily affected
-by customers' knowledge of the products,
-their price sensitivity in the product category,
-how they make purchase decisions,
-their logistics and
-customer service needs, and
-comfort using technology to meet their needs.
Channel Considerations. Key factors include such items as
-ability to create differential product demand,
-coverage of targeted markets,
customer service capacity,
-physical distribution systems,
-overall cost control orientation, and
-ability to use technology in both demand creation and cost control.
Company Portfolio Considerations.
-Maturity of product portfolio often dictates
-support needed from the channel and therefore is a core driver of channel
strategy.
For example, launching newer products that require significant end user
education without the active support of trusted channels with long-term customer
relationships can be very difficult.
Company Operational Considerations. Core operational considerations involve
-company philosophy towards demand creation through personal selling,
-internal customer service and
-logistics capabilities, and
-company approach to the use of information technology and
-e-commerce.
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A.DISTRIBUTION --SCOPE STRATEGIES.
These could be --
1.EXCLUSIVE DISTRIBUTION.
-limiting the distribution to only one intermediary in the territory.
2. INTENSIVE DISTRIBUTION
-distribution from as many outlets as possible to provide local
convenience.
3.SELECTIVE DISTRIBUTION
-appoint several but at selected few locations.
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B.DISTRIBUTION --STRATEGY OUTCOME
These could be ---
1.competitive positioning
2.wide range of services
3.lower transactions costs
4.lower prices
5.shorter lead time
6.integrated with systems
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Identify your product's features and benefits
What makes it unique and how can it enhance the life or work of your customer? Differentiate between a feature and a benefit and look at the product from your customer's perspective.
Look at your competition
What are others in your market doing? Evaluate your competitors' strengths and weaknesses. Analyse what methods they use to sell.
LOOK ALL THE COMPETITORS INCLUDING
-other brands
-substitutes
REVIEW THEIR SALES AND DISTRIBUTION ]
Define your target market
Who are you selling to? The more research you put into profiling your potential customers the more effective your sales strategy will be. Put yourself in their position by asking: "What benefit is there for me?"
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Distribution channel is formed to solve 3 critical
distribution problems
-functional performance
-reduced complexity
-specialization.
The problem of increasing the efficiency of time,place
and delivery utilities is the central focus of channel
performance.
The major reasons why distribution channel is formed
is to solve the problem of specialization.
As distribution grows more complex, cost and inefficiency tend to grow in the channels.
To overcome this deficiency, many distribution channels will specialize in one or more elements of distribution.
The net effect of specialization is to increase the velocity goods and value added services through the distribution pipeline by reducing cost associated with
-selling
-transportation
-order processing
-credit.
THE AREAS FOR SPECIALIZATION AND
MAKING IT MORE EFFECTIVE ARE
-logistic services.
-selling
-promotions
-value added
-reduce risk
-order flow
-payment flow
-financing
-information servicing.
etc
OTHER FACTORS TO CONSIDER
FOR BOTH.
1.what is the corporate objective.
2.what is the corporate strategy.
3.what is the marketing objective.
4.what is the marketing strategy.
5.what is the sales objective.
6.what is the sales strategy.
7.what is the distribution objective.
8.what is the distribution strategy.
1.DISTRIBUTION BASICS----???
-who are the buyers
-where do they buy
-why do they buy
-where the market areas--geographically
-what conveniences do they require
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2.DISTRIBUTION RANGE ----???
1.Range: WHICH ONE IS SUITABLE.
horizontal, vertical, corporate, administered, contractual.
2.Range: WHICH COMBINATION IS IDEAL.
middleman, agent, broker, wholesaler, retailer, distributor, dealer,
reseller, franchise holder.
3.Range:WHAT FACTORS WOULD AFFECT THE DISTRIBUTION CHANNEL.
legal, regulatory, language, customs, government policies,
logistics, currency, costs.
4.Range: WHAT KIND OF COVERAGE IS REQUIRED
intensive, selective, exclusive.
5.Range: WHAT TYPE OF SYSTEM
centralised, decentralised.
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Distribution Strategy
What distribution strategy is optimal for your business model?
Who are the key channel partners with whom you must build or maintain key
relationships?
How do you manage conflict with channel partners?
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Distribution & Logistics Strategy
Customer Considerations .
-is it the customers' knowledge of the products,
-is the customer's price sensitivity in the product category,
-is it how the customer make purchase decisions, their logistics and customer service
needs,
-is it the comfort using technology to meet their needs.
***is it the following
-product knowledge
-price sensibility
-purchase process decision
-service needs
-logistics needs
-technology comforts
etc etc
Channel Considerations.
-is it the reseller ability to create differential product demand,
-is it the reseller coverage of targeted markets,
-is it the reseller customer service capacity,
-is it the reseller physical distribution systems,
-is it the overall cost control orientation, and
-is it the ability to use technology in both demand creation and cost control.
***is it the following
-selling skills
-market coverage
-customer service capacity
-physical distribution system
-cost effectiveness
-technology orientation
-e-business strategy
etc etc
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Company Portfolio Considerations.
-is it the Maturity of product portfolio often dictates
support needed from the channel and therefore is a core driver of channel
strategy. For example, launching newer products that require significant end user
education without the active support of trusted channels with long-term customer
relationships can be very difficult.
*** is it the following
-product maturity
-sales volume
-unit product margins
-capacity utiliztion
-benefit selling needs
-pull promotional strategy
etc etc
------------------------------------------------------------
Company Operational Considerations.
-is it the company philosophy towards demand creation through personal selling,
-is it the internal customer service and logistics capabilities, and
-is it the company approach to the use of information technology and e-commerce.
***is it the following
-product maturity
-sales volume
-unit product margins
-capacity utiliztion
-benefit selling needs
-pull promotional strategy
etc etc
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OTHER FACTORS
-cycle time for filling orders.
-effectiveness of the order fulfillment
-the risk factor in operation
-facility sizing
-space requirements
-storage systems
-material handling requirement.
-stock levels
-stock out frequency.
-stock handling cost.
PHYSICAL DISTRIBUTION COST
Physical distribution is the set of activities concerned with efficient movement of finished goods from the end of the production operation to the consumer. Physical distribution takes place within numerous wholesaling and retailing distribution channels, and includes such important decision areas as customer service, inventory control, materials handling, protective packaging, order procession, transportation, warehouse site selection, and warehousing. Physical distribution is part of a larger process called "distribution," which includes wholesale and retail marketing, as well the physical movement of products.
Physical distribution can be viewed as a system of components linked together for the efficient movement of products. Small business owners can ask the following questions in addressing these components:
• Customer service-What level of customer service should be provided?
• Transportation-How will the products be shipped?
• Warehousing-Where will the goods be located? How many warehouses should be utilized?
• Order processing-How should the orders be handled?
• Inventory control-How much inventory should be maintained at each location?
• Protective packaging and materials handling-How can efficient methods be developed for handling goods in the factory, warehouse, and transport terminals?
These components are interrelated: decisions made in one area affect the relative efficiency of others. For example, a small business that provides customized personal computers may transport finished products by air rather than by truck, as faster delivery times may allow lower inventory costs, which would more than offset the higher cost of air transport. Viewing physical distribution from a systems perspective can be the key to providing a defined level of customer service at the lowest possible cost.
1.CUSTOMER SERVICE
Customer service is a precisely-defined standard of customer satisfaction which a small business owner intends to provide for its customers. For example, a customer service standard for the above-mentioned provider of customized computers might be that 60 percent of all PCS reach the customer within 48 hours of ordering. It might further set a standard of delivering 90 percent of all of its units within 72 hours, and all 100 percent of its units within 96 hours. A physical distribution system is then set up to reach this goal at the lowest possible cost. In today's fast-paced, technologically advanced business environment, such systems often involve the use of specialized software that allows the owner to track inventory while simultaneously analyzing all the routes and transportation modes available to determine the fastest, most cost-effective way to delivery goods on time.
2.TRANSPORTATION
Transportation costs are largely based on the rates charged by carriers. There are two basic types of transportation rates: class and commodity. The class rate, which is the higher of the two rates, is the standard rate for every commodity moving between any two destinations. The commodity rate is sometimes called a special rate, since it is given by carriers to shippers as a reward for either regular use or large-quantity shipments. Unfortunately, many small business owners do not have the volume of shipping needed to take advantage of commodity rates. However, small businesses are increasingly utilizing a third type of rate that has emerged in recent years. This rate is known as a negotiated or contract rate. Popularized in the 1980s following transportation deregulation, contract rates allow a shipper and carrier to negotiate a rate for a particular service, with the terms of the rate, service, and other variables finalized in a contract between the two parties. Transportation costs vary by mode of shipping, as discussed below.
3.TRUCKING-FLEXIBLE AND GROWING The shipping method most favored by small business (and many large enterprises as well) is trucking. Carrying primarily manufactured products (as opposed to bulk materials), trucks offer fast, frequent, and economic delivery to more destinations in the country than any other mode. Trucks are particularly useful for short-distance shipments, and they offer relatively fast, consistent service for both large and small shipments.
4.AIR FREIGHT-FAST BUT EXPENSIVE Because of the relatively high cost of air transport, small businesses typically use air only for the movement of valuable or highly-perishable products. However, goods that qualify for this treatment do represent a significant share of the small business market. Owners can sometimes offset the high cost of air transportation with reduced inventory-holding costs and the increased business that may accompany faster customer service.
5.WATER CARRIERS-SLOW BUT INEXPENSIVE
There are two basic types of water carriers: inland or barge lines, and oceangoing deep-water ships. Barge lines are efficient transporters of bulky, low-unit-value commodities such as grain, gravel, lumber, sand, and steel. Barge lines typically do not serve small businesses. Oceangoing ships, on the other hand, operate in the Great Lakes, transporting goods among port cities, and in international commerce. Sea shipments are an important part of foreign trade, and thus are of vital importance to small businesses seeking an international market share.
6.RAILROADS-LONG DISTANCE SHIPPING Railroads continue to present an efficient mode for the movement of bulky commodities over long distances. These commodities include coal, chemicals, grain, non-metallic minerals, and lumber and wood products.
7.PIPELINES-SPECIALIZED TRANSPORTERS
Pipelines are utilized to efficiently transport natural gas and oil products from mining sites to refineries and other destinations. In addition, so-called slurry pipelines transport products such as coal, which is ground to a powder, mixed with water, and moved as a suspension through the pipes.
8.INTERMODAL SERVICES Small business owners often take advantage of multi-mode deals offered by shipping companies. Under these arrangements, business owners can utilize a given transportation mode in the section of the trip in which it is most cost efficient, and use other modes for other segments of the transport. Overall costs are often significantly lower under this arrangement than with single-mode transport.
Of vital importance to small businesses are transporters specializing in small shipments. These include bus freight services, United Parcel Service, Federal Express, DHL International, the United States Postal Service, and others. Since small businesses can be virtually paralyzed by transportation strikes or other disruptions in small shipment service, many owners choose to diversify to include numerous shippers, thus maintaining an established relationship with an alternate shipper should disruptions occur. Additionally, small businesses often rely on freight forwarders who act as transportation intermediaries: these firms consolidate shipments from numerous customers to provide lower rates than are available without consolidation. Freight forwarding not only provides cost savings to small businesses, it provides entrepreneurial opportunities for start-up businesses as well.
9.WAREHOUSING
Small business owners who require warehousing facilities must decide whether to maintain their own strategically located depot(s), or resort to holding their goods in public warehouses. And those entrepreneurs who go with non-public warehousing must further decide between storage or distribution facilities. A storage warehouse holds products for moderate to long-term periods in an attempt to balance supply and demand for producers and purchasers. They are most often used by small businesses whose products' supply and demand are seasonal. On the other hand, a distribution warehouse assembles and redistributes products quickly, keeping them on the move as much as possible. Many distribution warehouses physically store goods for fewer than 24 hours before shipping them on to customers.
In contrast to the older, multi-story structures that dot cities around the country, modern warehouses are long, one-story buildings located in suburban and semi-rural settings where land costs are substantially less. These facilities are often located so that their users have easy access to major highways or other transportation options. Single-story construction eliminates the need for installing and maintaining freight elevators, and for accommodating floor load limits. Furthermore, the internal flow of stock runs a straight course rather than up and down multiple levels. The efficient movement of goods involves entry on one side of the building, central storage, and departure out the other end.
Computer technology for automating warehouses is dropping in price, and thus is increasingly available for small business applications. Sophisticated software translates orders into bar codes and determines the most efficient inventory picking sequence. Order information is keyboarded only once, while labels, bills, and shipping documents are generated automatically. Information reaches hand-held scanners, which warehouse staff members use to fill orders. The advantages of automation include low inventory error rates and high processing speeds.
10.INVENTORY CONTROL
Inventory control can be a major component of a small business physical distribution system. Costs include funds invested in inventory, depreciation, and possible obsolescence of the goods. Experts agree that small business inventory costs have dropped dramatically due to deregulation of the transportation industry.
Inventory control analysts have developed a number of techniques which can help small businesses control inventory effectively. The most basic is the Economic Order Quantity (EOQ) model. This involves a trade-off between the two fundamental components of an inventory control cost: inventory-carrying cost (which increases with the addition of more inventory), and order-processing cost (which decreases as the quantity ordered increases). These two cost items are traded off in determining the optimal warehouse inventory quantity to maintain for each product. The EOQ point is the one at which total cost is minimized. By maintaining product inventories as close to the EOQ point as possible, small business owners can minimize their inventory costs.
11.ORDER PROCESSING
The small business owner is concerned with order processing-another physical distribution function-because it directly affects the ability to meet the customer service standards defined by the owner. If the order processing system is efficient, the owner can avoid the costs of premium transportation or high inventory levels. Order processing varies by industry, but often consists of four major activities: a credit check; recording of the sale, such as crediting a sales representative's commission account; making the appropriate accounting entries; and locating the item, shipping, and adjusting inventory records.
Technological innovations, such as increased use of the Universal Product Code, are contributing to greater efficiency in order processing. Bar code systems give small businesses the ability to route customer orders efficiently and reduce the need for manual handling. The coded information includes all the data necessary to generate customer invoices, thus eliminating the need for repeated keypunching.
Another technological innovation affecting order processing is Electronic Data Interchange. EDI allows computers at two different locations to exchange business documents in machine-readable format, employing strictly-defined industry standards. Purchase orders, invoices, remittance slips, and the like are exchanged electronically, thereby eliminating duplication of data entry, dramatic reductions in data entry errors, and increased speed in procurement cycles.
12.PROTECTIVE PACKAGING AND MATERIALS HANDLING
Another important component of a small business physical distribution system is material handling. This comprises all of the activities associated with moving products within a production facility, warehouse, and transportation terminals. One important innovation is known as unitizing-combining as many packages as possible into one load, preferably on a pallet. Unitizing is accomplished with steel bands or shrink wrapping to hold the unit in place. Advantages of this material handling methodology include reduced labor, rapid movement, and minimized damage and pilferage.
A second innovation is containerization-the combining of several unitized loads into one box. Containers that are presented in this manner are often unloaded in fewer than 24 hours, whereas the task could otherwise take days or weeks. This speed allows small export businesses adequate delivery schedules in competitive international markets. In-transit damage is also reduced because individual packages are not handled en route to the purchaser.