Distribution_Strategy

Week 4, Topic 2 November 2012 Distribution Strategy Joyce Richards DU Introduction By now most of us probably have a pretty good understanding of the first three P’s of the marketing mix—product, promotion, and price (Grewal & Levy, 2011). However, until now, we may not have given the fourth P, place [or placement] much thought. Actually, the third P really doesn’t represent a place, but distribution. Distribution happens behind the scenes and is a very complex function. It involves coordination and cooperation between the intermediary channels and/or organizations through which a product passes to reach the consumer. Each intermediary (i.e. warehouse firms, wholesalers, banks, retailers, and advertising agencies) performs a specific function that adds value to the product as it moves toward the customer (Grewal & Levy, 2011). Good marketing strategy efficiently and effectively integrates the special functions of each component of the supply chain. That is, the distribution channel should provide cost effective, value-building services (2011). Marketing is by no means a selfless endeavor. Each partner in the supply channel expects a pre-calculated measure of return for its efforts. Every participant has weighed the benefits against the cost of performing a certain distribution activity. Simply stated, value itself does not come without a price. To move a product from its point of origin to a wide base of customers requires money! Supply chain managers work to ensure that the cost of distribution does not exceed customer demand for a given product. The goal is to keep profits and revenue high relative to cost for all partners in the supply channel. Surely we can understand now why competent distribution management is the single most important link between product origin and sales. The Case Organic balsamic vinegar is a special kind of vinegar. It is organic. What does this mean' According to Lallanilla, expert environmental designer and architect, advises that organic foods have been grown and produced naturally (“Organic Food Worth the Cost'”, n.d.) For instance, organic foods are produced in the absence of chemical fertilizers, herbicides, pesticides, and antibiotics. He also says that the U.S. Department of Agriculture regulates the production of organic foods--only the foods that meet USDA standards earn the department’s green and white label. Lallanilla also says that foods must be at least 95% organic to wear the green and white USDA label. So how do we get our specialty vinegar to our target customers—both households and chefs' I propose that we use a multi-channel distribution system (KnowThis.com, 2012). This type of distribution channel is a hybrid all three levels of distribution coverage—exclusive, selective, and intensive (or mass coverage). (KnowThis.com, 2012). Through multi-channel distribution, we will build a broad customer base within the market (2012). By using this approach over time we can build both online and physical [privately] owned stores. In the meantime, we can enjoy the opportunity to expand into the direct retail system—organic retail grocery stores, chain supermarkets, wholesale intermediaries, and other company-owned stores. Moreover, we can explore partnerships with existing online specialty food stores and other non-store establishments. Real Life Multi-channel Firms. Starbucks utilizes the multi-channel distribution approach successfully. According to KnowThis.com (2012), they exploit numerous sales opportunities (i.e. retailers, direct mail, grocery stores, and other distribution opportunities). Icebreaker also reaches out to its global customers via multi-channel mechanism as follows: o Wholesales to retailers—80% in over 2000 retail stores around the world o Ownership of six retail outlets (outdoor markets) in New Zealand, Portland, Oregon, and Canada o Online sales in the U.S. Conclusion In a nutshell, the multi-channel (hybrid) approach exploits all levels and structural channels to create robust, thriving businesses. Organic-premium quality vinegar can be sold in numerous store settings and locations. Multi-channel marketing structures often create a wealth of sales opportunities for producers. Therefore, it will be profitable to exploit different types of sales platforms as long as conflict between partners is managed effectively. References Grewal, D. & Levy, M. (2011). Supply Chain Management. In B. Gordon. & D. Hughes (Eds.). Marketing. (pp. 271-291). New York, N.Y. 10020: The McGraw-Hill companies, Inc. Icebreaker. (n.d.). Standford Graduate School of Business. [Case Study]. Available from http://www.discoverzque.com/casestudy/icebreaker.php Lallanilla, M. (n.d.), Organic Food: Worth the Cost' About.com. Retrieved from http://greenliving.about.com/od/healthyliving/a/Organic_Foods.htm United States Department of Agriculture: Agricultural Marketing Service (2008). National Organic Program. National Organic Program. http://www.ams.usda.gov/AMSv1.0/ams.fetchTemplateData.do'template=TemplateN&navID=OrganicStandardslinkNOPCertifyingAgents&rightNav1=OrganicStandardslinkNOPCertifyingAgents&topNav=&leftNav=NationalOrganicProgram&page=NOPOrganicStandards&resultType=&acct=nopgeninfo