By Jagdeep Kapoor

Circa 1999 , the number of McDonald's franchisee outlets increased; HLL, the biggest proponent of distribution-network management, adopted a direct-selling approach for its Aviance range; and Motilal Oswal, the first stock-broking firm trying to build a brand, widened its spread by appointing 27 channel partners across the country. All were path-breaking channel initiatives in their own right. Thus, in this new millennium, we are certain to witness revolutionary new distribution strategies.

This, in itself, is a fundamental change because, between 1947 and 1999, changes in the distribution strategies of companies were evolutionary-not revolutionary. Since these strategies are, in effect, one of the company's responses to customer needs, let us evaluate the efficacy of each channel in helping companies get the most out of their distribution strategies till, say, 2025.

First things first: distribution will continue to be an integral part of corporate marketing strategies. The role of an efficient channel is to serve as a network of people and agencies that facilitates the flow of products and services to customers. Products and services are not the only things that flow through a channel; so do elements related to the informational, financial, and promotional aspects of buying. Together, these make the product convenient and attractive to try out, buy and-buy again.

THE DIRECT SALES APPROACH. One of the most underutilised channel-types is the direct face-to-face approach. In the 1980s and 1990s, this channel was not popular because most companies preferred the indirect channels, which were best-suited to the size of the Indian market.

However, in the first few decades of this millennium, the direct-sales channel will grow at the rate of 100 per cent since the base is small. Indeed, not only will there be more companies whose primary channel is direct selling, there will be many more that use it as a secondary channel. There will also be a move towards personal selling. Companies will use the direct-sales channel in 3 ways:

• Creating their own salesforce.
• Selling through someone else's salesforce.
• And using direct sales dealers.

Direct sales dealers have salesforces of their own, and are in a position to sell directly to the customer based on marketing inputs from the company. They will play an important role, especially in the infotech, telecom, and financial services industries. The only caveat: in direct selling, the sales processes need to be well-executed, subtle, and sensitive to the customer's frame of mind.

THE INDIRECT CHANNEL STRATEGY. This has been used (successfully) by the pharmaceutical and consumer-goods majors. Consumer durable manufacturers too have had some degree of success in replicating the model. When companies first began using it, this model had just 3 levels-manufacturer to dealer to consumer-or one intermediary. Today, there can be 5 levels-manufacturer to C&F agent to distributor to retailer to customer-or three intermediaries.

The indirect channel is, by default and by necessity, the primary channel for most Indian companies. It is, probably, the most cost-effective way of reaching a large country with over 3,700 towns and close to 6 lakh villages. This strategy has been responsible for the creation of new kinds of retail outlets. For instance, it morphed the paan into a small grocery-store. In this millennium, the indirect channel is likely to retain its relevance, and will grow more disciplined, with better territory-planning and sales-management techniques.

Today, even companies like Eureka Forbes have started tapping the indirect channel as a secondary channel to their direct sales teams. However, across categories of products, there is a high degree of ad hocism in the way the indirect channel is managed. In some cases, the distributor or dealer wields tremendous clout; so much so that the end-customer is all but forgotten by the company. Dealer-management replaces customer-management as the central focus of marketing initiatives. This will now change, with companies focusing on the customer's convenience instead of pandering to the distributor's whims.

At the same time, companies should not forget that progressive elements of the channel do contribute to brand-building, and should make a contrived effort involve them in their marketing process. The indirect channel is, therefore, set for a shake-out.

FRANCHISING. This is set to emerge as the fastest-growing channel of this millennium. In the US, a franchised outlet opens every 17 minutes. This will happen in India too. Franchising provides an opportunity for companies to spread their wings across the country rapidly. Even in the 1990s, this trend was clear: Monginis became the largest food-store chain in the country with 203 franchise outlets; brands like McDonald's, Domino's, and Croissants also grew the same way; and so did educational brands like NIIT.

The best part of a franchise arrangement is that the company offering the product or service does not have to invest in real estate. Besides, the franchisee often takes care of the local promotional expenditure. This symbiotic relationship is a win-win situation for the company and the franchisee, and will be the basis of successful channel strategies in this millennium.

Irrespective of whether it is a product or a service that is being sold, it must be branded, and the franchisee must service customers the same way that the company would. The company also needs to ensure that, no matter where she shops, the customer ends up with standardised products.

NEW CHANNELS. Although direct response isn't really a distribution strategy-it is really an advertising strategy-it will continue to serve as a channel of sorts for certain categories of products. The volume of products sold through direct response will continue to be small. However, this channel won't grow rapidly in the near future. The one that will, although it is still in its infancy at the beginning of the millennium, is the Net. Although on-line revenues in India will not be significant for some time to come, all companies should maintain a selling-presence on the Net.

In the 21st Century, distribution-management will emerge from the back-benches of the marketing discipline, and is set to become a highly specialised area of expertise, critical to the success of any brand.

Jagdeep Kapoor is the Managing Director of Samsika Marketing Consultants 

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