Discuss the importance and relevance of sales and distribution function in a manufacturing and marketing organization of your choice.
Marketing role in business
Marketing is perhaps the most important activity in a business because it has a direct effect on profitability and sales. Larger businesses will dedicate specific staff and departments for the purpose of marketing.
It is important to realise that marketing cannot be carried out in isolation from the rest of the business. For example:
The marketing section of a business needs to work closely with operations, research and development, finance and human resources to check their plans are possible.
Operations will need to use sales forecasts produced by the marketing department to plan their production schedules.
Sales forecasts will also be an important part of the budgets produced by the finance department, as well as the deployment of labour for the human resources department.
A research and development department will need to work very closely with the marketing department to understand the needs of the customers and to test outputs of the R&D section.
What is Marketing ?
It is a process by which
-one identifies the needs and wants of the people.
-one determines and creates a product/service to meet the needs and wants. [PRODUCT]
-one determines a way of taking the product/service to the market place. [PLACE]
-one determines the way of communicating the product to the market place. [PROMOTIONS]
-one determines the value for the product.[PRICE].
-one determines the people, who have needs/ wants. [PEOPLE]
and then creating a transaction for exchanging the product for a value. and thus creating a satisfaction to the buyer's needs/wants.
TERMS to understand.
1.Product/Service means a product or service or idea to satisfy the people's needs / wants.
2.Needs mean when a person feels deprived of something.
3.Wants mean when a person's need is formed / shaped by personality, culture, and knowledge.
4.Value means the benefits that the customer gains from owning and using the product and the cost of the product.
5.Satisfaction means the extent to which a product's
perceived performance matches a buyer's expectation.
6.Exchange means the act of obtaining a needed/ wanted
object by offering something in return.
7.Transactions mean a trade off between a buyer / a seller that involves an exchange at agreed conditions.
Marketing is based on identifying, anticipating and satisfying customer needs effectively and profitably.
- market research,
-product planning / development ,
and much more.
ROLE OF (Sales and Distribution)
ROLE OF SALES /DISTRIBUTION in the marketing model refers to how your product or service reaches the customer. It involves not only how you make the sale, but how your distribution system. There are many factors to consider in sales and distribution. You need a well-thought-out plan for conducting the sale and distributing (delivering) your product to the customer. Here are some questions to consider:
Is your sales approach highly persuasive and emotional? Or, is it informational and low-keyed?
What is the average length of the sales cycle?
How many products can you produce in what time frame?
How many products can you store, or what is your inventory capacity? Use sales forecasts to decide what your inventory levels should be in order to meet customer demands.
How often will you "turn" or replenish your inventory? How does this compare with the standards in your industry?
What are the cyclical fluctuations or seasonal changes that affect the demand for or production of your products? For example, if you produce Christmas decorations, how will you manage peak production and sales periods as well as slow periods?
Describe your distribution channel. In other words, how will your products be delivered or distributed to the customers?
For relatively small sales, such as selling your paintings through a local gallery, the distribution method is such a routine part of the sales contact that it requires only a small amount of thought and description. (In this scenario, the painting is displayed and stored at the gallery, the sales approach is probably low-pressure and informational, and the painting is given to the customer at the time of the sale.) At other times, such as when an order is taken over the Internet and the product is mailed, more planning and description of the entire approach is in order.
At first glance, it may seem like the more convenient and available your product is, the better. This isn't always true, however. Often, it's better to be more selective, even exclusive, about sales locations for your product. Take every opportunity to think strategically.
Wide Availability Limited Availability
Use all suitable distribution channels. Example: Brand name chewing gum is available at a wide variety of retail outlets. Selective Distribution
Use channels meeting certain criteria only. Example: Mont Blanc pens are sold only in upscale retail stores. Exclusive Distribution
Retailer or channel is granted exclusive rights. Example: Body Shop products are available only in their stores or from their catalogs.
The selling process has six key steps. Virtually every sales interaction will follow these steps, whether it lasts several minutes or several months:
2. Initial Contact
3. Sales Presentation
4. Handling Objections
5. Closing the Sale
6. Follow-Up and Service after the Sale
As you develop a sales process that is right for you and your business, here are some other pointers to keep in mind:
Continuously improve your sales skills, learn from others and stay open to new ideas.
Be sincere about your desire to help the prospect. Making the sale should be your secondary objective. This attitude will come through in every encounter and will help you build long-term relationships.
Contribute more than just your product. Provide industry news updates, creative ideas, and business advice as part of the service you offer.
Be direct with your communication. Beating around the bush only frustrates people. Answer all questions. Never patronize.
Enclose your business card with every letter and note.
Thank people who refer prospects to you. If the referral results in business, send a small, business-related thank-you gift also.
Never lie. Don't badmouth the competition or say negative things about their clients. Don't gossip.
Don't overbook yourself so much that you don't have time to listen and be available to your customer for their questions and comments.
Distribution refers to how you deliver your product to the customer. If you are in a service business, it may be the way you deliver yourself to the customer to perform the service. Some of the primary categories of sales and distribution channels are named below. You may use one, more than one or various combinations of sales and distribution methods. Additionally, different products from the same company may require different methods.
Your company sells directly to the customer or end user of the product. There is no agent between your company and the customer. Providing financial planning services to individuals is an example of direct sales. Catalog sales or sales over the Internet are also examples of this method.
Indirect Sales: Retail
Your company sells to a retailer whose salespeople then sell to the customer. Selling organically grown herbs to a local grocery store is an example of indirect sales.
Indirect Sales: Wholesale
Your company sells to a wholesaler or agent who sells products to retailers. The wholesaler most likely represents several companies. (It's more efficient for the retailer to have one source for many products instead of dealing with an unwieldy number of individuals.) Selling novelty pet accessories to wholesalers who resell to a variety of pet care stores, animal clinics and other retail outlets is an example of selling to wholesalers or agents. Trade shows and merchandise markets are locations where retailers order your product based on your display and promotion at the show. You can get schedules and names of these shows from trade publications available in most big libraries.
Indirect Sales: Multi-level Marketing
You sell both directly to customers and to other sales people you have recruited to sell products.
You determine which interface between your company and the prospective customer is appropriate depending upon your objectives:
What are the characteristics of your target market and how large is the market for this product? For a high-priced product with a small number of potential buyers, the direct sales approach with plenty of service is probably best. For a low-priced product that appeals to the mass market, like chewing gum, an indirect selling approach is fine as long as it is supported with advertising and effective placements in retail stores so customers can find it easily.
Where are the customers located? Sales through a local retail outlet may be your best distribution method if you have a large number of customers located in your area. However, a small number of geographically dispersed buyers may require you to sell to an agent or wholesaler who, hopefully, will provide the needed individual attention. Industrial purchases are made directly from a manufacturer or manufacturer's representative in most cases.
How large are the orders? You might segment your customer base by order size and sell directly to customers placing large orders and use an indirect sales method for small orders.
are high quality ranges of soaps and shampoos for the upper-mid and mid-market consumer segments. All products offer a unique value proposition of bringing together ingredients that provide the benefit of Nourishment, Protection and Moisturisation through one product, hence providing the ever discerning consumer complete care, which makes her beautifuland confident.
DISTRIBUTION CHANNEL OF VIVEL SOAP FROM ITC NEED:
Distribution channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. From the point of view of making available products and services, the existence of intermediaries between the products and the ultimate end users is inevitable. This inevitability is primarily due to thefact that producers can exploit the economies of scale only if they produce in bulk, which inturn results in the production function getting concentrated in a single location. It is noticedthat channels are created for reaching out to different customers who are spread wide acrossterritories.Each channel addresses the needs of the customer. The mass retail and key retail segmentsaddress the convenience aspect as they are located in proximity to residential areas. TheModern Retail outlets might address the same customer but provides a different value proposition. It addresses a different need of providing a wide array of products under oneroof when the customer values a shopping experience, and would like to have an experienceof picking up his groceries and personal care products.For example in case of VIVEL soap, ITC towards making this product reach the end user had to employ the right channel, and ensure proper strategies are in place towardsmaximizing the off take of the product through the channel by the target customers. Nowthe availability of the same product at different channel members is different. The productmay be available in boxes and in large quantity at the wholesalers point targeting theretailers whereas the same product is available in the base pack with the retailers, heretargeting the retailers. Even at this part of the channel, there is a difference. The product at alocal
Kiryana shop may be available with no offer whereas the same product at a big
departmental store might be available with an offer. This is how each channel member actsdifferently with the same motive of increasing sales and profit.
DISTRIBUTION CHANNEL STRUCTURE:
DISTRIBUTION CHANNEL PLAYERS
: ITC Limited has two manufacturing facilities of soaps in India. These are located oneeach at Bangaluru and Haridwar. Apart from these two there are four other units which manufacturesoaps and other personal care products for ITC. The goods from the factories goes directly to theWholesale service providers. These factories are well connected with the branch offices. From hereexchange of information takes place which guides the flow of products to the Wholesale service providers.
2) Wholesale service providers (WSP):
The role of the WSPs is to simply take delivery of the goods from the factories that the ITC have atsix different locations across India and forward it to the Wholesale Dealers. They are almost thesame as C&F agents in the other companies. They are given commissions for their handling of thegoods. They in turn have to see that the goods reach the next point of the channel that is theWholesale dealers in time and safely. They also have to maintain their stock level and see that thedistributor is maintaining their stock as per the norms of the Company.The stock norms are maintained in ITC as a real time basis. ITC have software named SIFY Forumfor the same. This is a real time software, by the use of which the WSP agent can know the stock level maintained by the Distributor and vice versa. It also helps in ordering of the stock for theDistributor and the other channel members.3)
A Wholesale Dealer is a channel member in the distribution system which plays a vital rolein the reach of the products of a company to the customers. They buy the products from thecompany and in turn deliver to the further channel members at their own cost. They have tomaintain their own Sales force as well all other necessary infrastructure or the manpower necessaryfor them so that the goods pass on smoothly and in time to the customers at the POP.The efficiency of the Distributors can be judged by the ROI that they achieve.ROI or Return onInvestment is the net profit that a Distributor saves for himself. It is determined by the totalInvestments made divided by the total expenses. It takes into account all the expenses for a particular company including the cost of the stock norms that they have to maintain for a particular company. It also takes into account the rotation of the money made by the distributors, the working
capital maintained and the credit policy given by the Company and the credit policy they appliesfurther. It also takes into account the Manpower that they have to keep for the smooth functioning of the channel members. In FMCG industry the healthy ROI is said to be anything between 18%-24%.But in some cases the Distributors can only maintain a ROI of <15%. It is mainly because of theinefficiency of the distributor in his distribution of the Goods from the company to the other members of the Distribution channel. A distributor reduces his ROI if he maintains a high credit period and his rotation of the working capital is very less. If the rotation is twice a month then theROI is said to be 24%. This can be achieved by maintaining a credit period of 10-15 days.To carry out operations, a WD needs to recruit effective manpower. The manpower includes thesalesman (DS), suppliers, supervisors and computer operators. The salesman goes to the market andrepresents the company, hence he needs to be smart and well mannered. It becomes essential for theWD point to recruit a staff which is capable of effective sell in. The WD point is also required torecruit suppliers for supplying the goods in the market. Again the suppliers must be well manneredwith good knowledge of the market. The WD point must ensure enough storing place for the products at the point.The products from the WD point moves to the retailers and the secondary wholesellers.
Any product category which is high selling will have wholesalers. Same is in the case of ITC. In the product category - cigarettes or the next family of product categories - Personal care products, allhave a combination of wholesale and Retail Sale. The only difference between the two is the off take levels, financial capacity and sometimes infrastructure to deliver to retailers. Normally the ratesfor wholesale is cheaper than retail, as it is in bulk. This sometimes led to price cutting in market.Both retail and wholesale have a role to play. Its always good to have high retail throughput (TotalRetail Sales/ Total Sales) to have higher control of organization over the retailers. This will help theorganization to launch new brands in future, increase visibility at the outlets, which is just becauseof relationship of organization salesman with Trade. At the other end, in case of insufficient supplyfrom factories or WSPs, there will be sufficient stock to deliver to outlets to serve the conserve.Also, there are many markets which are practically and financially not possible for muchorganizations to cover like less than 10K markets, Here these small retailers in smaller markets getthe stock from these wholesalers which are located at some distance from them.
These include the retail channels for Personal Care products under the General Tradecategory. Key Retail outlets are other large kirana shops which are not wholesalers. They too cater to residents largely and visitors and passerbys. The average sale of these stores could vary betweenRs 10000 per month and Rs 40000 per month. These again are serviced once or twice a week
depending on the BPM and the company and the range of products it deals with. The mass retailoutlets are typically serviced once a week and cater to the local populace. Their reach & ability tocater to the occasional customer mandate their existence. They generally stock those products whichare in demand from the customers and have a good consumer pull The smaller SKUs such assachets are popular. The company replenishes the stocks on a fortnightly/ weekly basis and has littleinfluence over the portfolio maintained by the retailers. These outlets are the largest in number andare key points for the company in terms of reaching the masses.