Integration of Sales and Distribution Strategies Final 2003(1)

INTRODUCTION Management of sales and distribution is generally acknowledged to be the backbone of marketing. Selecting a sales and distribution approach is a key element of a successful business model. Structuring an analysis of sales and distribution channel options is based on the fundamental logic underlying channel selection: 

How do sales and distribution channel choices fit into an overall business model?

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What were traditional channel options and why did they meet supplier and customer needs?

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How are the underlying characteristics of sales and distribution channels changing?

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What are new options open to suppliers and how should suppliers evaluate those options?

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How can suppliers mange transitions between channel choices?

 Distribution

An organization or set of organizations that are involved in the process of making a product or service available for use or consumption by a consumer or business user.  Distribution channel 

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.'

THE SALES AND DISTRIBUTION RELATIONSHIP • The relationship between sales and distribution functions is unique because it focuses on 1) Product management issues 2) Marketing channel management issues.

• The sales function assumes the responsibility for trade customer sales and marketing, and serves the company by “dealing with customers on a direct or face-to-face  basis” and acting as “a communication bridge between the company and the target audience/customer”. • The distribution function assumes the responsibility for outbound logistics, which encompasses, “the set of decisions and processes

Why there is a need for Effective salesdistribution relationship? An Effective sales-distribution relationship or “ interfunctional relationship” is needed for a firm to attain its broader marketing objectives, which include: 

Identifying and servicing new customers

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Retaining and increasing sales to current customers

 Reducing

current customer defections

Integration of sales and distribution Sales and distribution management constitutes one of the most important areas of  customer satisfaction. Sales management has been defined as the management of a firm’s personal selling functions while distribution is an indirect function. Therefore, integration is required between sales and distribution functions.

SHARING RESPONSIBILITIES Sales Management Task

Distribution Management Task

Achievement of volume and market shares

• Physical movement and storage of products closest to the markets. • Ensuring high shelf visibility. • Keeping high stock pressure at all selling points.

Coverage of markets and outlets.

• Follow plan designed by the sales management using ‘milkrun’ principles. •Making each customer call productive. • Extending required level of 

Sales Management Task

Distribution Management Task

Width and depth of distribution.

• Push all products, brands, packs in each outlet. • Sell more than competitors. • Focus on slow movers.

Managing institutional business and key accounts.

• Getting orders and execution. • Extending credits as necessary. • Keeping high stock pressure to avoid entry of competition.

Competition tracking and action to protect market shares.

• Regular oral and confirmed reports. • Follow up on competition. • Promotion and sales

Sales Management Task

Distribution Management Task

Market feedback and reporting.

• Both of own products and competitors. • Report on good practices on other non-competing companies.

Finished goods inventory management at C&FAs and distributors.

• Retain stocks upto norms. • Order at the replenishment level. • Disposal of damaged stocks.

Managing distribution channels – recruitment, development, evaluation and exit if  necessary.

• Each channel member has to manage his downstream channel. • Conducting training programs.

Sales Management Task

Distribution Management Task

Handling customer and customer complaints.

• First level of interface with customers and hence prompt action is expected. • Bringing to notice of sales management if any problem encountered. • Quickly remove complaint/damaged stocks from the market.

Implementing marketing plans – product launching, consumer and trade promotion, merchandising

• Ensure wide and equitable distribution • Ensure high visibility • Make every promotion a success in terms of set objectives

Sales Management Task

Distribution Management Task

Participation in promotional events

• Organize and participate in fares, exhibitions and melas • Take initiative to sales management • Spend on the event and then claim reimbursement

Local advertising – websites, hoardings, shop boards

• Fix responsibilities of  distribution channels • Spend on task then claim reimbursement.

Selecting an appropriate structure for distribution channel is a major strategic concern for any firm with a product to sell. As competition in the market place intensifies and new technologies evolve, the firms are taking fresh looks at their distribution channels to squeeze out inefficiencies. As a result, many types of distribution channels have come into being ranging from the traditional retail channel to the direct sales model and each of these distribution channels has sales involved at each and every step showing the integration between sales and distribution strategies. Some of the major distribution channels direct distribution channel and

The Well-Designed   Distribution Strategy Specify  the role of  distribution  within the  marketing  mix 

Select  type of  distribu-  tion  channel 

Determine  appropriate  intensity  of distri-  bution 

Choose  specific  channel  members 

Distribution channels are usually of two types. They are1. Direct Marketing Channel  –  This type of channel has no intermediaries. In this distribution system, the goods go from the producer directly to the consumer. e.g., Eureka Forbes. 2. Indirect Marketing Channel - This may further be classified in to the following categories: a) One level channel- In this of channel there is only one intermediary between producer and consumer. Producer

Retailer

Consumer

Example-Producers such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers such as Comet, Dixons and Currys which then sell the goods to the final consumers

b)Two level channel- This channel has intermediaries, namely wholesaler and retailer.

Producer

Wholesaler

Retailer

two

Consumer

Example- Distribution of food grains like rice or wheat c)Three level channel - This type of channel has three intermediaries, namely distributor, wholesaler and retailer. Producer Distributor Wholesaler Retailer

Consumer

Channel Level - Each Layer of Marketing Intermediaries that Perform  Some Work in Bringing the Product and its Ownership Closer to the Final  Buyer. 0-level channel  Producer 

Consumer 

1-level channel  Producer 

Retailer 

Consumer 

Retailer 

Consumer 

Retailer 

Consumer 

2-level channel  Producer 

Wholesaler

3-level channel  Producer 

Wholesaler

Jobber

 Intensity of Distribution

INTENSIVE

SELECTIVE

EXCLUSIVE 

Distribution  through every  reasonable  outlet in a  market 

Distribution  through multiple, but not all, reasonable  outlets in a  market 

Distribution  through a single  wholesaling  middleman  and/or retailer  in a market 

Example- Distribution network of medicine companies Therefore, we can say that distribution is a complete process involved in making a product available for being used or consumed by the consumer where as sales is a small process which is involved at each and every step when the product is passed from one intermediary to another in the process of distribution. Hence sales and distribution strategies are very highly integrated and cannot work without each other.

CASE STUDY Central Marketing Organization Central Marketing Organisation ( CMO ) is India’s largest industrial marketing set -up. It markets carbon steel produced by the five integrated steel plants of SAIL. Headquartered in Kolkata, it transacts business through its network  of 37 Branch Sales Offices spread across the four regions, 25 departmental Warehouses equipped with mechanised handling systems, 42 Consignment Agents and 26 Customer Contact Offices.

CMO’s domestic marketing effort is supplemented by its ever widening network of  rural dealers who meet the demands of the smallest customers in the remotest corners of  the country. With the total number of dealers crossing 2,000, SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country.

CMO (Headquartered at Kolkata)

Eastern Northern

Western

Southern

(Kolkata) (Delhi)

(Mumbai)

(Chennai)

Branch Sales Branch Sales Branch Sales

Branch Sales

Office(BSO) Office(BSO) Office(BSO)

Office(BSO)

Distribution channels of SAIL can be summarized as : 

Direct dispatch from steel plant to big consumers There are large number of big customers receiving supply directly from steel plants.

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Sale of steel to the consumers through the stockyards at different branch offices - Branch offices receive material from steel plants to the stockyards and sell from there to the large number of customers of all type.

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Retail network - There is large number of dealers network established by SAIL in the country to cater the needs small and retail buyers. These dealers network receive materials from stockyards with whom they are attached to.