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PROMOTION AND DISTRIBUTION

MODULE 4

INTRODUCTION:

In marketing, promotion means all those tools that a marketer uses to take his product from the
factory to the customer and hence it involves advertising, sales promotion, personal selling,
and public relation. It is necessary to flow the information about the product from the producer
to the consumer either along with the product or well in advance of the introduction of the
product. This role is played by promotion.

According to Philip Kotler - “Promotion includes all the activities the company undertakes to
communicate and promote its products to the target market.”

In the words of Masson and Ruth, “Promotion consists of those activities that are designed to
bring a company’s goods or services to the favourable attention of customers”.

IMPORTANCE OF PROMOTION:
 Promotion creates awareness among customers about the availability of a product in
the market.
 It persuades the present and prospective consumers to buy the product.
 It helps in filling the gap between producers and consumers.
 It helps in facing stiff competition in the market.
 It helps in large scale selling of goods which in turn results in mass production.
 It increases the standard of living of the people.
 It creates more employment opportunities.
 It is responsible for creation of demand for the product.
 It increases brand awareness.
 It also helpful to provide informative and educational service to the society. For eg. Ad
against smoking, drinking etc.

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PROMOTION / COMMUNICATION PROCESS:

The steps involved in developing an effective promotion program are as follows:

Identify the Target Audience

Determine the Communication

Objective

Design the Message (AIDA Model)

Select the Message Source

Choose the Media

Collect Feedback

1. Identify the Target Audience:

Potential Buyer/ Current Users; Decision Maker/ Influencer/User; Profile of Target Audience
2. Determine the Communication Objective: Various Objectives of IMC are:
 Create Awareness
 Build Brand Equity and Loyalty
 Influence/ Change Consumer Perception
 Provide Information etc.
3. Design the Message: Need to develop an effective message through AIDA Model
A-I-D-A Model:
A–Attention: It is seen by/ captures the attention of the desired prospects
I –Interest: It is read by them with interest and It is properly understood by them as the
advertiser wants.
D-Desire: It is believed by them and wins their confidence and trust, resulting in the desire to
purchase the product.
A- Action: The prospect acts by reaching to the point of sale.
4. Selecting the message source:
Refers to the actor in the advertisement, company, brand name, salesperson, etc.
5. Choosing the media:
Two broad communication channels:
 Personal Communication: face-2-face, telephone, post, email

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 Non-Personal Communication: Radio, TV, Newspaper, Billboards etc.

6. Collecting Feedback:
Effectiveness of message on the target group is measured:
• Whether they remember the message,
• What they remember, Likes/ Dislikes
• Intention to buy etc.
PROMOTION MIX:
Promotion mix is the compendium of personal selling, publicity, advertising, sales promotion
and public relations.
Firms select a mix of promotional tools to effectively communicate with their target customer
group. The different elements of this group are:
1. Advertising
2. Personal selling
3. Sales Promotion
4. Public relations and
5. Direct Marketing
ADVERTISING:
It is a paid form of mass communication and can be traced to an identified sponsor.
Advertising plays a significant role in awareness creation and attitude formation. In a macro
concept, it stands for the managerial function of an organization intending to send information
to the other members of the society.
American Marketing Association defined it as, “Any paid form of non –personal presentation
of ideas, goods, or services by an identified sponsor.”
In the words of Albert Lasker,” Advertising is salesmanship in print, driven by a reason why?”.
Features of Advertising:
1. It is a mass communication medium.
2. It is a salesmanship in print.
3. It is a paid form of communication by an identified sponsor.
4. It is a non-personal communication.
5. It helps to stimulate sales.
6. It may be written or spoken.
ROLE/ ADVANTAGES /IMPORTANCE OF ADVERTISING:
Advertising is an integral part of our social and economic system. As a powerful technique of
promoting sales, it has been doing wonders in the domain of distribution.
The role of advertising can be analysed from five distinct angles.

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1. Advantages to Manufactures:
a. It maintains the existing market and explores the new.
b. It increases the demand for the product
c. It helps to build up or increase goodwill of the company.
d. It controls product price.
e. It helps to introduce a new product into the market.
2. Advantages to Middlemen:
a. It guarantees quick sales
b. It acts as a salesman.
c. It increases the prestige of the dealers.
d. It makes retail price maintenance possible.
e. It enables the dealers have a product information.
3. Advantages to Salesmen:
a. It creates a colourful background for a salesman to begin his work.
b. It reduces his burden of job.
c. It helps to develop self-confidence and initiative among the salesmen.
4. Advantages to consumers:
a. It ensures better quality product at reasonable price.
b. It provides product related information to the customers and thereby makes the purchasing
an easy task.
c. It helps the consumers to save time by providing information related to the availability of
product. d. Helps the consumers in intelligent buying.
5. Advantages to society:
a. It helps to uplifts the living standards
b. It helps to generate gainful employment opportunities.
c. It provides new horizons of knowledge.
d. It up-holds the culture of a nation.
DRAWBACKS/ ARGUMENTS AGAINST ADVERTISING:
1. Increases the prices of goods.
2. Wasteful expenditure.
3. Enables creation of monopoly by preventing entry of small firms.
4. Some advertising is fraudulent, misleading or deceptive.

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THE ADVERTISING COPY: Ad Copy is the soul of any advertisement. An advertisement

copy is all the written or spoken matter in an advertisement expressed in words or sentences
and figures designed to convey the desired messages to the target consumers.

UNIQUE SELLING PROPOSITION(USP): It is that central idea around which the

advertising campaign is built. The big selling idea is known as USP. It is an offer that an
advertiser makes to his consumers which is unique in relation to the competing offer or offers
and promises to deliver a certain distinctive package of satisfaction. Eg. MRF company says
about its tyres as, ‘the tyre with muscles’, “The beauty soap of film stars” (Lux soap)

PERSONAL SELLING:
Personal selling is also known as face-to-face selling in which one person who is the salesman
tries to convince the customer in buying a product. It is a promotional method by which the
salesperson uses his or her skills and abilities in an attempt to make a sale.
According to American Marketing Association,” Personal selling is the oral presentation in a
conversation with one or more prospective purchasers for the purpose of making sales; it is the
ability to persuade the people to buy goods and services at a profit to the seller and benefit to
the buyer”
FEATURES OF PERSONAL SELLING:
1. It is one of the important tools for increasing sales.
2. It is a two-way communication between salesmen and the prospect.
3. It is a persuading process to buy the goods and services.
4. The objective of personal selling is to protect the interest of both seller and buyer.
5. The essence of personal selling is interpretation of product and service features in terms of
benefit and advantages.
PROCESS OF PERSONAL SELLING:
Selling is the sequence of steps involved in the conversion of human desire into demand for a
product or service. Personal selling process involves the following stages.
1. Prospecting: It is the work of collecting the names and addresses of persons who are likely
to buy the firm’s product of services. While collecting the details, ‘suspects’ must be separated
from ‘prospects’ to avoid waste of time.
2. Pre approach: Pre approach is to get more detailed facts about a specific individual to have
effective sales appeal on him or her. It is closer look of prospects like habits, financial status,
social esteem, family background, material status, tastes and preferences etc.

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3. Approach: Approach means the meeting of the prospect in person by the salesmen. It is a
face-to-face contact with the prospect to understand him better.
4. Presentation and demonstration: A good sales presentation is one that not only gives all the
benefits that the prospect gets but also proves to the latter that he or she will better off after the
product is bought and used. An effective sales presentation demands the sales person use skills
like presentation and explanation.
5. Managing objections: This is the most important stage of personal selling. For every action
of salesman there is prospect’s pro action or reaction, ie, approval or disapproval. An efficient
sales man has the ability to identify the reasons for raising objections by the prospects and the
ways to overcome these objections.
6. Sale: If all the above stages have been concluded successfully, then the next stage is ultimate
sale of the product.
QUALITIES OF A GOOD SALESMAN:
 Sound health
 Sound judgment
 Self confidence
 Self-discipline
 Empathy
 Communication skills
 Awareness of the product
 Company details
 Good listener
 Multitasking skills
 Honesty
MERITS OF PERSONAL SELLING:
1. Flexibility and adaptability: It is capable of providing more flexibility and adaptability.
2. Minimum waste: The chances of wastage are minimum in case of personal selling while
comparing to other methods of sales promotion.
3. Acts as feedback: Being in direct contact with the consumers, he can understand the feeling
and reactions of the customers. It helps to modify the product according to the requirements of
customers.
4. Creates lasting impression: It helps to create a long-lasting relationship with the customers
through the personal contact of salesmen.

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LIMITATIONS OF PERSONAL SELLING:

1. It is expensive: Personal selling as a method of promotion is quite expensive. Getting
salesmen and retaining him for a long period is very difficult and expensive.
2. Difficulty of getting right kind of salesman: In practice, it is very difficult to get a trained
salesmen from company’s point of view.
3. More administrative problems: Personal selling involves more administrative problems than
impersonal selling.
SALES PROMOTION:

Sales promotion is another major component of promotion mix. It refers to all those activities
that supplement, co-ordinate and make more effective the efforts of personal selling and
advertising. It collectively comprises of the tools used to promote sales in a given territory and
time. It consists of short-term incentives designed to achieve a specific marketing goal in the
immediate future.
According to American Marketing Association,” those marketing activities other than personal
selling, advertising and publicity that stimulate consumer purchasing and dealer effectiveness
such as display, shows and exhibitions, demonstrations and various non-recurrent selling effort
in the ordinary routine.”
It includes:
Price deals - Special discounts are offered over and above the regular discounts.
Free goods - Attractive and useful articles presented to the dealers when they buy a certain
quantity.
Ad Materials – Distribution of ad materials for display purpose.
Contests - It is a competition organized among dealers or salesmen or customers.
Trade shows - To familiarize a new product to the customers.
Rebates - Price reduction after the purchase and not at the retail shop.
Samples - While introducing a new product, giving samples to the customers at their doorstep.
Free trials -Inviting the buyers to try the product without cost.
ROLE/ADVANTAGES OF SALES PROMOTION:
The role or advantages of sales promotion to various parties like manufactures, middlemen and
consumers are given below:
1. Manufacturers and sales promotion:
(i) It helps to retains the existing customers
(ii) It helps to create new customers.

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(iii) It promotes sales

(iv) It helps to enhance the goodwill of the firm
(v) It helps to slash down the cost
(vi) It helps to face the competition.
2. Middle men and sales promotion:
(i) It reduces strain of the middlemen to a greater extent.
(ii) It helps to increase the sales of middlemen
(iii) It builds and enhance the goodwill of the shop.
(iv) It gives some personal benefits to the middle men.
3. Consumers and sales promotion:
(i) It helps to improve the standard of living of people by making available goods and services
at least cost.
(ii) It gives knowledge of new products available in the market.
(iii) It gives both cash and non-cash incentives.
(iv) It helps to get more credit facility and special concession because of his brand and store
loyalty.
DISADVANTAGES OF SALES PROMOTION.
1. It has the shortest life impact as promotion tool like advertisement.
2. It is only a supplementary device of personal selling and advertising
3. In most of the cases, too much sales promotion may damage the brand image.
4. Sales promotion techniques are non-recurring in their nature.
PUBLIC RELATION:
It is the actions of a corporation, store, government, individuals, etc. in promoting goodwill
between itself and the public, the community, employees, customers, etc.
It can be defined as the practice of managing communication between an organization and its
public. Public relation is used to build rapport with employees, customers, investors, or the
general public.
This method of marketing does not aim at promoting a single product/service but the company
as a whole. This is done by spreading a positive feel about the company through various stories
and articles or positive feedback from customers about the company in different media
channels.

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Advantages of Public relations:

1. Credibility: The information communicated through public relation department is more
reliable and it has more credibility.
2. Cost: In both absolute and relative terms, the cost of PR is very low, especially when the
possible effects are considered.
3. Lead Generation: Information about the technological innovations, medical break-through
and the like results almost immediately in a multitude of inquiries. These inquiries may give
the firm some quality sales lead.
4. Ability to reach specific groups: If the firm does not have the financial capabilities, to engage
in promotional expenditures, the best way to communicate to these groups is through PR.
5. Image Building: Effective PR helps to develop positive image for the organization. A strong
image is insurance against later mis-fortunes.
6. Stimulate awareness: Public relation techniques helps to stimulate awareness among the
customers regarding the products of the company and thereby creating demand for your
product.
The important types of tools available to carry out the public relations function include: Media
Relations, Media Tours, Newsletters, Special Events, Speaking Engagements, Sponsorships,
Employee Relations, Community Relations and Philanthropy.
FACTORS AFFECTING PROMOTION MIX DECISIONS:

Promotion mix includes all those activities undertaken to promote sales. The important factors
among them are briefly explained below:

1. Nature of the Market: It is an important factor which affect the promotion mix. Depending
up on the customers the promotion strategy may vary. For individual customers the strategy
may vary according to the age, sex, income etc. For industrial customers it directly depends up
on size of the company, bargaining power etc.

2. Nature of the Product: Depending up on the nature of product, the promotion mix may vary.
For marketing consumer goods, a mass advertisement is necessary. But at the same time
marketing of industrial goods and speciality goods requires personal selling. Complex and
complicated products are also required personal selling.

3. Market size: If the market size is comparatively very small, then direct selling is used. For a
market having large number of buyers, advertising is the most suitable promotion tool.

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4. Buyer readiness stage: The choice of different elements of the promotion mix is also
dependent on the buyer’s readiness and awareness of the brand. Advertising will play a major
role in creating awareness, while demonstration and samples will help to bring about a change
in the behavioural level.

5. Overall marketing strategy: It means, whether the firm wishes to “push “the product or create
a “pull” for the product. A push blend is related to personal selling and a Pull blend give
emphasis on impersonal selling. Often the marketing strategy of a firm is a combination of both
these strategies.

6. Product life cycle stages: This will also play a role in deciding on the promotion mix. For
eg. In the introduction stage, advertising and publicity are very important. But in the maturity
stage, sales promotion and personal selling are very necessary.

7. Cost: Cost of promotion element is also very important. If the total cost incurred for using a
particular element of promotion tool is not affordable to the manufacturer, then it is better to
select the next best promotion mix.

CHANNELS OF DISTRIBUTION / PHYSICAL DISTRIBUTION:

It involves management of the physical flows of raw materials and finished products from the
point of origin to the point of use. It covers all the activities in the flow of goods between
producer and consumer.
Philip Kotler – “A set of independent organizations involved in the process of making a product
or service available for use or consumption.”
LEVELS OF CHANNEL: This indicates the number of intermediaries between the
manufactures and consumers. Mainly there are four channel levels. They are:

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1. Zero level channel: Here the goods move directly from producer to consumer. That is, no
intermediary is involved. This channel is preferred by manufactures of industrial and consumer
durable goods.
2. One level channel: In this case there will be one sales intermediary ie, retailer. This is the
most common channel in case of consumer durables such as textiles, shoes, ready garments
etc.
3. Two level channel: This channel option has two intermediaries, namely wholesaler and
retailer. The companies producing consumer non-durable items use this level.
4. Three level channel: This contains three intermediaries. Here goods move from manufacture
to agent to wholesalers to retailers to consumers. It is the longest indirect channel option that a
company has.
TYPES OF INTERMEDIARIES:
Marketing intermediaries are the individuals and the organizations that perform various
functions to connect the producers with the end users. These middlemen are classified into
three:
1. Merchant middlemen, who take title to the goods and services and resell them.
2. Agent middlemen, who do not take title to the goods and services but help in identifying
potential customers and even help in negotiation.
3. Facilitators, to facilitate the flow of goods and services from the producer to the consumer,
without taking a title to them. Eg. Transport companies
MERCHANT MIDDLEMEN:
Merchant middlemen are those who take title to the goods and channelize the goods from
previous step to the next step with a view to making profit. They buy and sell goods in their
own risk and the price for their effort is profit. They act as intermediaries between producers
and consumers. These merchant middlemen are broadly classified into wholesalers and
retailers.
WHOLESALERS: Wholesaler is a trader who deals in large quantity. He purchases goods
from the producers in bulk quantity and sell it to the retailers in small quantity.
According to American Management Association, “Wholesalers sells to retailers or other
merchants and/or individual, institutional and commercial users but they do not sell in
significant amounts to ultimate consumers.”
Wholesaling refers to the sale of goods to retailers, to industrial, commercial, institutional or
other professional users or to other wholesalers and related subordinated services.

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Functions of wholesalers:
1. Assembling and buying: It means bringing together stocks of different manufactures
producing same line of goods, and making purchases in case of seasonal goods.
2. Warehousing: The warehousing function of the wholesalers relieves both the producers and
the retailers from the problem of storage.
3. Transporting: In the process of assembling and warehousing, the wholesaler do undertake
transportation of goods form producers to their warehouse and back to retailers
4. Financing: They grant credit on liberal terms to retailers and taking early delivery of stock
from the manufacturers to reduce their financial burden.
5. Risk bearing: Wholesaler bear the risk of loss of change in price, deterioration of quality,
pilferage, theft. Fire etc.
6. Grading, Packing, and packaging: By grading they sort out the stocks in terms of different
size, quality shape and so on.
7. Dispersing and selling: Dispersing the goods already stored with them to the retailers.
8. Market information: Finally providing the market information to the manufactures
Services of wholesalers:
A. Services to Manufacturers:
1. The wholesaler helps the manufacture to get the benefit of economies of large scale
production. 2. Wholesalers helps the manufactures to save his time and trouble by collecting
orders from large number of retailers on behalf of the manufactures.
3. The wholesaler provides market information to the manufactures which will helps him to
make modifications in his product.
4. The wholesaler buys in large quantities and keeps the goods in his warehouses. This relieves
the manufacturer the risk of storage and obsolescence.
5. The wholesales helps to maintain a steady prices for the product by buying the product when
the prices are low and selling when the prices are high.
B. Services to Retailers:
1. He gives valuable advices to the retailers on his business-related matters.
2. He helps the retailer to get the goods very easily and quickly.
3. He render financial assistance to the retailer by granting credit facilities.
4. The wholesalers bears the risk associated with storage and distribution of goods to a certain
extend.
5. The wholesaler helps the retailers to keep price steady.

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RETAILERS:
The term ‘retail’ implies sale for final consumption. A retailer is the last link between final user
and the wholesaler or the manufacturer.
According to Professor William Standton, “Retailing includes all activities directly related to
the sale of goods and services to the ultimate consumers for personal or non-business use.”
In other words, retailer is one whose business is to sell consumers a wide variety of goods
which are assembled at his premises as per the needs of final consumers.
Retailing includes all activities directly related to the sale of goods and services to the ultimate
consumers for personal and non-business use.
Functions of retailers:
1. Buying and Assembling: A retailer buys goods from the best and most dependable
wholesalers and assemble the goods in a single shop.
2. Warehousing: It helps the retailer to ensure adequate and uninterrupted supply of goods
3. Selling: A retailer sells the products in small quantities to the needy consumers.
4. Risk bearing: It is the basic responsibility of a retailer to bear the risk arising out of physical
deterioration and changes in prices.
5. Sales promotion: Retailer undertakes some sales promotion through displaying of goods in
the shop, distribution of sales literature, introduction of new product etc.
6. Financing: A retailer granting credit in liberal terms to the consumer and it helps the
consumers a lot to purchase the required goods.
7. Supply of market information: As being in close and constant touch with the consumers, a
retailer can supply the market related information to the wholesalers and manufactures at the
earliest.
8. Grading and Packing: Retailers undertake second round grading and packing activities left
by the manufacturers and wholesalers.
Services rendered by Retailers: A retailer render several services to the manufacturers,
wholesalers and to the final users. These services are outlined below:
A. Services to the manufacturers and wholesalers:
(1) Providing information: Retailer do provide the wholesalers and manufactures the
information about the latest consumer movements and it helps the manufactures to produce
goods according to the needs of consumers.
(2) Looks after the distribution process: A retailer, in general, looks after the entire distribution
process and it helps the manufactures to concentrate on production.

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(3) Creation of demand: By giving local ad and display of goods, retailers helps to create
demand for the goods.
(4)A big relief: A retailer gives a relief to the manufacturers and wholesalers from the problem
of selling goods in small quantities.
B. Services to the consumers:
(1) No need to store goods: A retailer holds goods on behalf of the customers at a convenient
place and in convenient lot. Hence, the consumer need not buy and stock in large quantity.
(2) Largest choice: Retailers collects products of different manufactures, and it enables the
consumers to have a largest choice at cost, quality and so on.
(3) Providing information: A retailer supplies information about the introduction of a new
product in the market and its features.
(4) Granting credit: Most of the retailers granting credit facilities to regular customers.
(5) After sale services: In certain cases, a retailer provides after sales services to the ultimate
consumers to ensure the customers shop loyalty.
TYPES OF RETAILERS:
On the basis of the size of the business, product mix, pricing and service level and ownership
of the business, it can be classified into the following categories:
i. Itinerant or Mobile Traders, ii. Fixed shop small retailers, iii. Fixed shop large scale retailers

1. Itinerant or Mobile Traders: The traders who have no fixed place of sale are called
Itinerants. They move from one place to another place in search of customers. They are also
known as Mobile traders. Mobile traders deal in low price, daily usable items such as fruits,

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vegetables, fish, clothing, books, etc. They require small amount of investment. The types of
itinerants are as follows:
a. Peddlers and Hawkers:
Peddlers are individuals who sell their goods by carrying on their head or shoulders moving
from place to place on foot. Hawkers are petty retailers who sell their goods at various places
such as bus stop, railway station, Public Park and gardens, residential areas and other public
places using a convenient vehicle to carry goods from place to place.
b. Street Vendors:
The traders sit on the footpath of the road or at the end of the road (pavement) and sell their
goods such as fruits, vegetables, books, etc. are called Street vendors.
c. Market Traders:
Small traders open their shops at different places on fixed days or dates such as every Sunday
or alternative Wednesdays and so on. They deal in one particular line of merchandise and in
low priced consumer items of daily use.
d. Cheap Jacks:
Those retailers who have independent shops of temporary nature in a business locality are
depending upon the potentiality of the area. They deal in consumer goods and services such as
shoes and chappals, plastic items, repair of watches, etc.

2. Fixed Shop Retailers:

The retailers who maintain permanent establishment to sell their goods are called Fixed Shop
Retailers. They do not move from place to place to serve their customers. The fixed shop
retailers can be classified into two types based on the size of their operations. They are
a. Fixed Shop Small Retailers and b. Fixed Shop Large Retailers
Fixed shop small retailers are of the following categories:
a. Street Stalls:
These small shopkeepers are commonly found at street crossings or other busy street corners
attract floating customers and deal in cheap variety of goods like hosiery products, toys, soft
drinks, etc. They get their supplies from local suppliers and wholesalers.
b. General Stores:
General Stores sell a wide variety of products under one roof, most found in a local market and
residential areas to satisfy the day-to-day needs of the customers residing in nearby localities.
They remain open for long hours at convenient timings and often provide credit facilities to
their regular customers. For example, a provision store deals in grocery, bread, butter,
toothpaste, soaps, washing powder, soft drinks, confectionery, stationery, cosmetics, etc.
c. Single-line Stores:

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Single-line Stores are small shops which deal in a particular line of products such as garments,
stationery, textiles, medicines, shoes, etc. They are generally situated in marketplaces and deal
in a variety of goods in that line of product.
d. Speciality Stores:
Specialty Stores deal in a particular type of product under one product line only.
For example, sweets shop specialised in Tirunelveli Halwa, Bengali Sweets, etc.

e. Seconds Shops:
These shops deal with second-hand goods or used articles in a low price such as books,
furniture, utensils, clothes, automobiles, and new defective goods.

3. Fixed Shop Large Retailers:

The retailers having permanent establishment and dealing in large scale are called Fixed shop
large scale retailers. They are popular due to urbanisation, modernisation, and other reasons.
The most common forms of large-scale retailers are as follows:
1. Departmental Stores
2. Chain Stores or Multiple Stores
3. Super Markets
4. Consumer Cooperative stores
5. Hire purchase and Instalment Traders
6. Shopping malls
7. Mail order houses
8. Automatic Vending Machines
9. Tele-marketing
10. Online Shopping

1. Departmental Stores:
A Departmental Store is a large retail establishment offering a wide variety of products,
classified into well-defined departments. Each department specialise in one line of product
aimed at satisfying every customer’s needs under one roof. Each department is like a separate
shop with centralised purchasing, selling, and accounting. Administrative activities of the
departmental stores are managed by a General Manager. The General Manager appoints
department managers of each department.
Features:
i. Large Size: A department is a large-scale retail showroom requiring a large capital
investment by forming a joint stock company managed by a board of directors.
ii. Wide Choice: It acts as a universal provider of a wide range of products from low priced to
very expensive goods (Pin to Car) to satisfy all the expected human needs under one roof.
iii. Departmentally organised: Goods offered for sale are classified into various departments.
Each department specialises in one line of product and operates as a separate unit.
iv. Facilities provided: It provides several facilities and services to the customers such as
restaurant, rest rooms, recreation, packing, free home delivery, parking, etc.

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v. Centralised purchasing: All the purchases are made centrally and directly from the
manufacturers and operate separate warehouses whereas sales are decentralised in different
departments.
Advantages:
i. Convenience in buying: A large variety of goods available in all the departments enable
customers to save time and no need to run from one place to another to complete their shopping.
ii. Attractive services: It aims at providing maximum services and facilities to the customers
such as home delivery of goods, execution of telephone orders, rest rooms, restaurants, salons,
children game centres, etc.
iii. Central location: These stores are usually located at central places so that more people can
approach easily.
iv. Elimination of Middleman: A departmental store combines both the functions of retailing
as well as warehousing. It helps in eliminating undesirable middlemen between the producers
and the consumers.
v. Economies of Large-Scale Operations: The Departmental stores are organised at a large
scale i.e., buy goods in bulk, therefore they enjoy the benefit of special discount
Limitations:
i. High cost of operations: A departmental store requires a large building with ample parking
at a central place. It has to incur heavy expenditure on salaries, maintenance of building,
customer services, advertising, etc. As a result, establishment and overhead cost of operations
are very high.
ii. Higher prices: Due to high operating costs, prices of goods in a departmental store are
comparatively high.
iii. Distance: It is located at a central place of a city, away from people living in suburban areas
must travel a long distance to reach the store.
iv. Lack of personal touch: The management of a store finds it very difficult to maintain
personal contact with the customers. The salaried staff may not take interest in securing the
satisfaction and goodwill of the customers
v. Difficult to establish: A large amount of capital investment and a large number of specialised
persons are required to establish a departmental store.
vi. High risk: Due to central location and large-scale operations, risk of loss is very high.
Change in tastes and fashion and market fluctuations may lead to heavy loss.
2. Chain Stores or Multiple Shops:
A number of identical retail shops with similar appearance normally deal in standardised and
branded consumer products established in different localities owned and operated by
manufacturers or intermediaries are called as Chain stores or Multiple shops. In USA, these are
known as chain stores but these are popular as multiple shops in Europe. They deal only in

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particular line of product and specialise in the same. Many such shops are in India. For
example: Bata.
Features:
i. Location: These shops are in fairly populous localities where sufficient number of customers
can be approached.
ii. Nature of product: These shops deal in a particular product line and specialise in the same
product, i.e, standardised and branded consumer products.
iii. Centralised management: The manufacturing or procurement of goods for all the retail units
is centralised at the head office, from where the goods are despatched to each of these shops.
iv. Fixed price: The prices of goods are fixed, and all sales are made on cash basis.
v. Role of Sales personnel: The salespersons play an active role in helping the consumers to
complete their shopping i.e., in the selection and choice of their goods as per the tastes.
Advantages:
i. Economies of large scale: Multiple shops are owned and operated by manufacturers or
intermediaries. Centralised and bulk buying, results in lower costs.
ii. Elimination of middlemen: Goods are sold in multiple shops at relatively low prices. By
selling directly to the consumers, it is able to eliminate unnecessary middlemen
iii. No bad debts: All the sales are made in these shops on cash basis only. So, no bad debts
will arise and no reduction of working capitals.
iv. Convenience in shopping: Shops are in all important areas. Therefore, customers are not
required to travel long distances for long distances for making purchases.
v. Public confidence: Multiple shops enjoy public confidence due to fixed prices, standard
quality, uniform appearance, and selection of goods with the help of salesmen.
Limitations:
i. Limited variety: Multiple shops deal only in limited range of products.
ii. Absence of services: Customers do not get credit, home delivery and other facilities.
iii. Lack of personal touch: The owner loses direct personal contact with the customers. The
paid staffs do not take personal interest in every customer.
iv. Inflexibility: All the branches centrally controlled and uniform policies are adopted for all
the shops.
3. Super Markets:
A Super market is a large retail store selling a wide variety of consumer goods on the basis of
low-price appeal, wide variety and assortment, self-service and heavy emphasis on
merchandising appeal. The goods traded are generally food products and other low priced,
branded and widely used consumer products such as grocery, utensils, clothes, house hold
goods, electronic appliances and medicines. For example: The Nilgiris

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The important characteristics of a super market are listed below:

1. Supermarkets are generally situated at the main shopping centres.
2. The goods kept on racks with clearly labelled price and quality tags in such stores,
3. The customers move into the store to pick up goods of their requirements, bring them to
the cash counter, make payment and take-home delivery.
4. The goods are sold on cash basis only. No credit facilities are made available.
5. Supermarkets are organised on departmental basis.
6. It requires huge investment.

4. Cooperative Store:
A consumer’s cooperative store is a retail organisation owned, managed and controlled by the
consumers themselves to obtain products of daily use at reasonable low prices. Its objective is
to eliminate profits to middlemen by establishing a direct contact with the manufacturers.
People belonging to middle- and low-income groups, at least 25 persons have to come together
to form a voluntary association and get it registered under the Cooperative Societies Act.
The capital of a cooperative store is raised by issuing shares to members. The management of
the store is democratic and entrusted to an elected managing committee, where one man one
vote is the rule.
5. Hire purchase and Instalment Trade:
Hire purchase trading is a system by which the seller agrees to sell the articles to the buyer on
condition that the payment of the article will be made in a fixed number of instalments till the
sale price is paid. Though the buyer gets possession of the goods immediately on signing the
contract the ownership does not pass on till the payment of last instalment. Only durable articles
like television, air conditioner, refrigerator, washing machines, etc., are suitable for hire sale.
Instalment system is a type of purchase in which the price amount of the product is not paid
initially but in instalments. It is also called as deferred payment system. Under this system, title
or ownership of articles as well as possession is passed on to the buyer as soon as the first
instalment is paid.
6. Mail Order Houses:
Mail order houses are the retail outlets that sell their merchandise through mail. There is
generally no direct personal contact between the buyers and the sellers in this type of trading.
Procedure:
a. Advertisements provide information about the products to consumers
b. Order receiving and processing- On receiving the orders, the goods are sent to the
customers through the post office by Value Payable Post (VPP).
c. Receiving Payments - The customers may be asked to make full payment in advance or
at the time of receiving the goods. In this arrangement, there is no risk of bad debt. Perishable
goods like milk are not suitable for sale by mail order. Suitable goods are books, watches, etc.

7. Automatic vending machine:

Automatic vending machine is a new form of direct selling. It is a machine operated by coins
or tokens. The buyer inserts the coin or the tokens into the machine and receives a specified

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quantity of a product from the machine. AVMs are placed at a convenient location such as
railway stations, airports, petrol pumps, etc.
8. Shopping Malls:
Shopping malls are developed due to change in departmental stores in modern time. A shopping
mall functions in a multi-storey building. Many small to big shops are commenced under the
separate ownership. Various types of branded goods of daily requirement and luxurious
products are available. Modern facilities such as refreshment hall, entertainments for children,
wi-fi, auditorium, etc. are provided in shopping mall.
9. Telemarketing:
Telemarketing can be divided into two parts.
i. Telephonic Marketing
Potential Customers are contacted through telephone or mobile to provide information about
the products. Willing customers visit the office and place the orders. This method is useful for
loan, financing, insurance services, credit card, etc. No middlemen in this marketing and cost
reduced accordingly.
ii. Television Marketing
In this method, customers are attracted by providing full information of product or service
through TV demonstrations. Customers are given either phone number or name of the website
to place the order. Payments for these products are made through two methods.
i. Advance payment by debit/credit card. ii. Payment in cash at the time of delivery.
For example- Tablemate and other home appliances
10. Online Shopping or Internet Marketing:
Electronic retailing (E-tailing) is the sale of retail goods and services through the internet. They
maintain a website on which products, their pictures, features, price, etc., are displayed. The
buyers can log on to site, select the goods, place the order and make payment all through the
internet. Their goods get delivered at their home. For example – Ebay, Snapdeal, Amazon,
Jabong, etc.
Advantages of E-Tailing:
(i) Cost – The price comparison section allows consumers to quickly compare prices from
several e-tailers offering the same product/services such that consumer can compare different
prices and pick the best option.
(ii) Access (no physical location) – The consumer does not have to travel or go anywhere to
see the products/services of online retailers.
(iii) Inventory – Larger number and variety of inventory, both products and services can be
placed online without worrying about limited space and product placement on shelves.
(iv) Flexible time – From the comfort of one’s home, individuals can access the E-tailing sites
24/7 and even shop in the middle of the night.

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Disadvantages of E-Tailing:
(i) Cost for website maintenance – Having an online retailing business is an added cost
including maintenance, updates, server fees and other such fees.
(ii) Fulfilment problems – Slow delivery time is the concern mentioned by most online
shoppers. Even though payments are made right away, the product takes approximately 5-7
days to reach the customer.
(iii) Payment and security concerns – With major problems like credit card frauds and scams,
people are worried that their private information will be used and abused if it is given online.
(iv) Technological issues – Some entrepreneurs feel helpless, as they must be dependent on
others to run their online retailing sites. They feel technologically behind and not able to run
the company like they run their retail stores.
FACTORS INFLUENCING CHOICE OF DISTRIBUTION CHANNEL:

Product Market factors Institutional Company Environmental

factors factors factors factors

Price of the No. & location Financial ability of Company’s Economic

product of consumers channel members financial
factors
position

Perishability Size & Promotional Extent of Legal

frequency of ability of channel market control
constraints
order members desired

Technical Objective of Post-sale service Company

nature purchase ability marketing
policies
Size and Availability of Cost of channel Company
weight the channel reputation

Length of the Competitors Volume of

product line channel production
It is very important to select a channel for the distribution of goods and services to the ultimate
consumers in an effective way. The marketer has to select the most suitable channel. While
selecting the channel of distribution, the marketer has to consider the following factors:

1. Nature of Product: The selected channel must cope up perish ability of the product. If a
commodity is perishable, the producer prefers to employs few middlemen. For durable and
standardized goods, longer and diversified channel may be necessary. If the unit value is low,
intensive distribution is suggested. If the product is highly technical, manufacture is forced to

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sell directly, if it is not highly technical, intensive distribution can be selected. Seasonal
products are marketed through wholesalers.

2. Nature of market: If the market is a consumer market, then retailer is essential. If it is an

industrial market, we can avoid retailer. If consumers are widely scattered large number of
middlemen are required. When consumers purchase frequently, more buyer seller contacts are
needed and middlemen are suggested.

3. Competitors’ Channel: The distribution channel used by the competitors will influence the
channel selection. There is nothing wrong in copying the channel strategy of the competitor if
it is a right one.

4. The financial ability of channel members: Before selecting the channel, the manufacture has
to think about the financial soundness of the channel members. In most of the case financial
assistance are required to the channel members in the form of liberal credit facilities and direct
financing.

5. The Company’s financial position: A company with a strong financial background can
develop its own channel structure. Then there is no need to depend other channel intermediaries
to market their product.

6. Cost of Channel: The cost of each channel may be estimated on the basis of unit sale. The
best type of channel which gives a low unit cost of marketing may be selected.

7. Economic factors: The economic conditions prevailing in the country have bearing on
channel selection decision. During the period of boom, it is better to depend channels directly.
During the periods of deflation direct relation with the consumers are desirable.

8. The legal restrictions: Before giving the final shape to channels of distribution, we have to
consider the existing legal provisions of the various Acts. For eg. MRTP Act prevent channel
arrangements that tend to lessen competition, create monopoly and those are objectionable to
the very public interest.

9. Marketing policy of the company: The marketing policy of the company have a greater and
deeper bearing on the channel choice. The marketing policies relating to channels of
distribution are advertising, sales promotion, delivery, after sale service and pricing. A
company has a heavy budget on advertising and sales promotion, the channel selected is bound
to be direct as it requires a few layers of people to push the product.

DR. SAVITHA S BENGALURU CITY UNIVERSITY