2.3 Distribution Analysis
Your challenge in distribution analysis
The research phase of marketing often involves digging, analyzing and the recording of facts in your market and organization. The distribution analysis is no exception. Take nothing for granted, try as a successful marketer to always ask and look beyond. You will notice that the everyday things are put together on a complex level. To reinforce this idea, I can fall back on the following statement by Einstein.
What are the different paths from raw material to end user? Where is your organization located within this supply chain? How many parties are active in this supply chain and which one add value to the product or process? To get you started here are some terms that can help you. 1. Raw material producer (eg. Iron ore mining or musicians) 2. Collection (eg. Iron ore distributor or record company) 3. Basic Industry (eg. Blast Furnace) 4. Half manufacturers (eg. Car doors producer) 5. End producers (eg. Car manufacturer) 6. Wholesale (eg. Car importer or wholesaler of CDs) 7. Retail (eg. Car dealers or record shops) 8. Consumer
Forward integration in the value chain is when your organization takes over an activity that is below you in the value chain.
If you as a company expands your business and takes over a link in the distribution chain, we speak of integration in the supply chain. There are two forms of integration backward integration and forward integration. We speak of backward integration when you take over an activity that is above you in the chain.
Distribution Analysis of Spotify
The music example of the supply chain where CDs go through wholesalers and record stores to end up in the consumer lap, is not of this time. The mainstream record stores are all but disappeared from the streets. This is due to technological progress and some companies who seized the oppertunity to integrate backwards into their supply chain. I’m talking of course about Spotify. Spotify is not alone in this arena, but for the sake of this example, we shall keep it at Spotify. In 2008, the Swedish startup saw the opportunity to ignore record stores and wholesalers outright and to start a new distribution channel instead.
Distribution Channel and startup
The startup won the trust of major record companies such as BBC, Sony, EMI, Warner Music Group and Universal. Not an easy task since it was an unknown distribution channel at the time. Meanwhile, the model has proven itself and Spotify again slowly applies backwards integration. This time, the major labels are pushed aside in the market of smaller, more independent musicians. The possibility for independent musicians to get their music via the platform Spotify to the consumer, would mean that they now have acces to the entire supply chain. It still is restricted to a niche market, but the value addition of record companies is slowly decreasing. A great example of value creation through distribution analysis.
A distribution channel is about how your products reach your client. For example you can think of a physical store, a shop, a telephone channel, take a written approach, a market stall, network marketing, home sale events, mail-order, canvases, fairs, kiosk and so on. You can use distribution channels in various ways that reinforce each other. The following terms will indicate how you can use your distribution channels.
The most traditional way of supplying your products to your customers. You give your customers only one choice to purchase products from you. Example; a physical store in the street.
The term multi-channel distribution is used when you keep multiple distribution channels with their own communications, contact details, sales, and / or stock. Not unusual to have separate brands for different distribution channels. example; a physical store in the street and a webshop. The webshop has a different service level and selling prices than the store. When the customer chooses a specific distribution channel, the customer experience will be completely different from the other channel.
At the front, the customer experiences no differences in the various distribution channels. In the sales process, the customer can choose one of the channels and getting the customer experience that is tailored to them. example; a customer chooses a delivery through the webshop. At the front the client is no difference between the shop and the shop of the brand. Payment must then be made through the Internet and éventuel after-sales customer contact is assigned to the service desk of the shop.
We speak of omni-channel with a complete ‘blend’ of the various distribution channels. The customer sees one brand and witnesses one experience, wherever the product might be bought. Omni-channel approaches are rapidly gaining in popularity. This is partly because of the ever-improving technology advancements. Example; the customer opts for a purchase via the webshop. The customer would like to exchange the product for a different type and tweets about the Web-care team. Advises customers to use the return form or to go along with a physical store. Once arrived at the store to its decision, the customer still to return the purchase and get his money back in cash. The client experience any perception whatever the initial distribution channel and decides his next purchase again do through this brand.
What position do you take in your current distribution channels? Can you strengthen the existing distribution channels and you need to tap new distribution channels for revenue growth? Or are you planning to reduce your exposure to certain distribution channels to generate more focus on other channels? Your position distribution is the share that your organization has within the whole of available distributors and the proportion within the range of distributors.
Which dominance have different players in your distribution channel? Which factors that position determined? What developments can be distinguished in there? Concentration distribution concerns the dominant position which may take sides in your distribution channel. Whether the organization has the freedom to determine its own policy?
Marketing function of distribution
Distribution performs a marketing function. Distribution can make the difference in your success. Dell, Spotify and Albert.nl are examples. Do not underestimate the marketing function of your distribution is not.
Physical distribution function
We talk about the physical distribution function if we look at the possibilities – and limitations – of physical deliveries. Think include the following. • ordering quantities • packing • flexibility in location and delivery
Logistics and distribution
Distribution goes beyond the logistical supply of your products. The physical delivery of your product is just one part of your distribution. Note that the physical delivery (logistics so) has a marketing function.
Marketing distribution function
When we zoom in on the way distribution adds value for the customer, we talk about marketing distribution function. Attention is paid to the manner of distribution to meet the needs of customers and customers of your customers. This can be illustrated with the following examples.
Apple takes the experience of its products very seriously. Thus, there is created a department within the company that is only concerned with the experience that a package entails. This department is day in, day out working with the open draw of adhesives and join lugging computer boxes. This Apple goes beyond the physical function of its packaging – safely from A to B bring their computers – but looking at the customer experience that delivers the package. An example of marketing distribution function. Do you dare to look at it this way your distribution? The Kennisplein has an e-learning ready on running your distribution analysis.
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