Distribution in organisation

Distribution Channel:

A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business users.

Distribution Channel Functions:

Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.

Promotion: Developing and spreading persuasive communications about an offer.

Contact: Finding and communicating with prospective buyers.

Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling and packaging.

Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.

Others help to fulfill the completed transactions:

Physical distribution: Transporting and storing goods.

Financing: Acquiring and using funds to cover the costs of the channel work.

Risk taking: Assuming the risks of carrying out the channel work.

[ Channel level: A layer of intermediaries that performs some work in bringing the product  and its ownership closer to the final buyer.]

Direct marketing channel: A marketing channel that has no intermediary levels.

Indirect marketing channel: Channel containing one or more intermediary levels.

Intensive distribution: Stocking the product in as many outlets as possible.

Exclusive distribution: Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.

Selective distribution: The use of more than one, but fewer than all, of the intermediaries who are willing to carry the company’s products.

Physical Distribution (or marketing logistics): The tasks involved in planning, implementing and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.

Distribution Center: A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently and deliver goods to customers as quickly as possible.

Pricing strategy

a.    Cost-based pricing:

Cost-plus pricing: Adding a standard markup to the cost of the product.

Break-even pricing: Setting price to break even on the costs of making and marketing a product; or setting price to make target profit.

Value-based pricing: Setting price based on buyers perceptions of value rather than on the sellers cost.

Value pricing: Offering just the right combination of quality and good service at a fair price.

Competition-based pricing: Setting prices based on the prices that competitors charge for similar products.

b.    New-product pricing:

Market-skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Market-penetration pricing: Setting a low price for a new product in order to attract a large number of buyers and a large market share.

c.     Product Mix pricing:

Product line pricing: Setting the price steps between various products in a product line based on cost differences between the products, customers evaluations of different features and competitors prices.

Optional-product pricing: The pricing of optional or accessory products along with a main product.

Captive-product pricing: Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera.

By-product pricing: Setting a price for by-products in order to make the main products price more competitive.

Product bundle pricing: Combining several products and offering the bundle at a reduced price.

d.    Price-adjustment Strategies:

Discount and allowance pricing:

Cash discount: A price reduction to buyers who pay their bills promptly.

Quantity discount: A price reduction to buyers who buy large volumes.

Functional discount: A price reduction offered by the seller to trade channel members who perform certain functions such as selling, storing and record keeping.

Seasonal discount: A price reduction to buyers who purchase merchandise or services out of season.

Allowance: Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

Segmented pricing: Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Psychological Pricing: A pricing approach that considers the psychology of prices and not simply the economics, the pricing is used to say something about the product.

Reference prices: Prices that buyer carry in their minds and refer to when they look at a given product.

Promotional pricing: Temporarily pricing products below the list price and sometimes even below cost, to increase short-run sales.

e.    Geographical pricing:

FOB- origin pricing: A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Uniform-delivered pricing: A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

Zone pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Basing-point pricing: A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped.

Freight-absorption pricing: A geographical pricing strategy in which the seller absorbs all or part of the actual freight charges in order to get the desired business.

Segmentation, Targeting and Positioning

Marketing Process:

The process of 

- analysing marketing opportunities

- selecting target markets

- developing the marketing mix, and

- managing the marketing efforts are collectively called marketing process.

To succeed in today's competitive marketplace, companies must be customer centered, winning customers from competitors, then keeping and growing them by delivering greater value. Each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments better than its competitors do. This process involves three steps - market segmentation, market targeting, and market positioning.

Figure: Factors influencing company marketing strategy.

Market segmentation: Dividing a market into distinct groups of buyers on the basis of needs, characteristics or behavior who might require separate products or marketing mixes.

Market segment: A group of consumers who respond in a similar way to a given set of marketing efforts.

Market targeting: The process of evaluating each market segment's attractiveness and selecting one or more segments to enter.

Market positioning: Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers.