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10.5. Distribution Planning

There are three basic elements: (i) product recognition, (ii) price structure and (iii) the distribution planning which are required to develop an effective marketing mix. The relative importance of these three elements varies from product to product and from time to time. Distribution is often the key to a successful sales and marketing policy. The synchronization process for the distribution planning is discussed as below:

  • Product - Attributes and consumer recognition.
  • Size and value of sales - Extent of sales realisation.
  • Market area – Consumer segments, coverage, channel length.
  • Existing methods of distribution - Impact, problems and prospects.
  • Needed efforts - Customer value, Value added distribution, cost effectiveness
  • Overhead costs - Operational expenses, personnel management, and,
  • Monitoring- Information flow, schedule of distribution, cash flow and payments.

Objective of distribution planning is to make the product available to the consumers at a more convenient outlet. The distribution planning for products should be considered with prime importance to withstand the market competition. It is because, if a competitive product is available at approachable outlets or at low price, there are all chances of foregoing the sale. Therefore, to deal under such competitive market situation a systematic planning for delivering the product to the consumers through different distribution channels, need to be determined. The time and distance factor for the delivery of goods normally influences the buying decisions where the manufacturing of products is subject to consumer order, occasional demands and door to door delivery promises. In this regard the planning needs to be done evolving different methods for efficient product distribution through identified channels. In this process, there is a need to look into the infrastructure factors viz. transport, road, communication etc in support of the channel efficiency. In fact the consumer is only interested in getting the product but a lot of responsibility lies with the marketing personnel in delivering the product at appropriate time and place. Distribution planning may invariably be based on the market survey carried out at the time of preparing the business plan. The distribution planning should be to make the products available to the larger number of consumers at lower marketing costs. To reduce the cost of marketing, it is required to determine the most feasible channel. The product characteristics and the operational area are the major factors to be considered while selecting a distribution channel. In any channel different distribution approach can be adopted to get the products more economically to the ultimate user. The important factor to be assessed in this process is the cost effectiveness. It is observed that, longer the chain of intermediaries in product distribution, higher is the cost of marketing. Since cost is one of the determinants of profit, it should also be viewed from the angle of product distribution. The exclusive distribution approach is always confined to an area. Such distribution plan can be useful in the areas (i) where the demand concentration for the product is low (ii) which are located at distance from the high concentration areas i.e. urban places (iii) the storage, transportation and other overhead costs are higher and (iv) the competition is absent or very low. In urban areas where market competition for the product is high and the retailing is at large scale, selective distribution policy would be more useful. However, retailers and consumers in areas where the purchasing power of consumers is low but a large number of retailers are in business fray feel the approach of extensive distribution of products. In other words, such approach would help the market condition. These factors are inter-related and affect the whole network of product distribution. The distribution chain or network may be long or wide; there is a need for effective control without which the entire business plan may break mid-way. Distribution policy needs to be developed in accordance to the product characteristics and its segmented market. Ethically, in business short path of distribution network leads to minimization of risks and maximization of profit. An ideal network of distribution would be two-tier between manufacturer and end user.

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