Place of Distribution in the Marketing Mix - Essay Example

Full topic and Section # of INTRODUCTION Distribution is one of the most important elements of the marketing mix. It can also be refereed to as place when it is seen in combination with the other three elements of the marketing mix i.e. price, product and promotion. Together, they are called the 4 Ps of marketing and if a company has to sell its product successfully to its consumers, it needs to give an appealing and lucrative marketing offer in which all 4 Ps should be carefully designed. Every element has its own importance but when we study distribution is isolation, we can see that it might be the most vital factor in making the product work because how good, hard hitting or emotionally appealing its promotional mix and cost might be, it will always fail if it is not distributed properly to reach the target audience of the product. PLACE OF DISTRIBUTION IN THE MARKETING MIX Distribution is a mysterious element of the marketing mix. Basically, it incorporates the delivery of the goods and services to the customers who are going to consume them. In today's dynamic environment the kinds of goods and services are changing and importance of the timely delivery has increased threefold (Moir et al, 1992). With the complexities of organizational communication increasing day by day, the relationship between these companies needs to be handled carefully to benefit the organization and the end user of the product. The ability of an organization to satisfy the needs and wants of its customers is highly dependent on the organization's relationship with its suppliers and other institutes in the supply chain. The supply chain is an important part of any organization today, as each organization be it small or humongous, it is playing a part in the supply chain of a certain product or service. In today's increased competition times, with new and more competitors entering the market with various versions of products and service, it has become mandatory for the existing or the new organizations to constantly innovate and increase efficiency so that they are able to provide the benefit of the efficiency effectively to the customers in the form of reduced prices of the product, better quality etc. Strategically planning out the locations for the warehouses present in the distribution chain can also provide an organization with a competitive edge over other companies existing in the same industry. This is because, due to the strategic importance of the location of the warehouse, they will be able to cater to a wider variety of customers which might not be possible if warehouse management was weak or poor. Distribution is also a very important aspect of the marketing mix because it helps in cost cutting for the organization in the short and the long run. It covers a wide variety of operations and activities (Frederick, 2004). It can be defined as a mixture of management and choosing of the availability of the product through various means and methods at the lowest possible cost to the prospective customers. This means that with proper planning of the distributive resources, cost cutting can be achieved which will benefit both the organization and customer with the help of reduced prices. These two basic perspectives of distribution don't completely define what distribution truly is. In reality it is much bigger and gives a holistic picture with clarity about the methods employed in the organization with regards to the proper customer satisfaction and reach. Its importance can be gauged by the fact that just by thinking innovative means to distribute the products and the services to its prospective customers, new industries such as the telephone banking industry and telephone insurance industries have born and are booming with passing time. Both these industries were a result of re-evaluating the distribution channels and creatively changing to it meet the changing advancements in technology, importance of faster delivery of information and needs of the typical customer. Online Banking can also be termed as another example of re-evaluating the distribution channel of information to the customer and re-vamping it to become faster, available for the customer. IMPORTANCE OF DISTRIBUTION IN THE MARKETING MIX Distribution channels are now becoming much more complex than they were ever before. Intermediaries are increasing in size and number, the number of people involved is increasing and so is the risk associated with the increase of dependents. However, the importance of these intermediaries and the kinds of services that they provide to the organization and the end user are tremendous and they more than make up for the lost revenue which would have been the organizations' had there been no intermediaries. The first advantage that they provide is that of specialization; the experience and skill that these intermediaries have in doing their specialized tasks provides the companies who use them with that extra bit of advantage over others. Customer utility also increases and intermediaries increase the availability of the product to the customer. As the manufacturing industry is increasing, the complexities are also increasing, as mentioned earlier. The amount of networking required between the different parts of intermediaries and development of a product will alone let anybody realize the importance of these complex distribution systems present to facilitate the movement of goods and products in the organization to the end-user (Kotler et al, 1999). As geographical boundaries are dying and multinationals are emerging and becoming bigger and bigger, it is becoming difficult for a single organization to transport its goods to all its prospective customers, hence the need for proper networked of distribution channels is required to make the product or service readily available to the customer. Therefore, in using distribution channels, the cut in the profit margins are huge, and there is an aroma about it being various people standing in line for their share in the profit margin before the profit reaches the organization and the product reaches to the customer. However, the advantages of using distribution channels outnumber the disadvantages. DISTRIBUTION STRATEGIES AND THEIR IMPLEMENTATION There are various kinds of distribution strategies that are employed for the distribution of various products and services. The choice or selection of these strategies depends heavily upon many factors. 1. Customers: satisfaction of their customers is the focal point of all the organizations. In selecting the distribution strategy, it is made sure that the strategy helps the proper distribution of the product to the required customers with ease. 2. Middleman: the middle man or the intermediaries present in the supply chain should also be able to carry out the strategy that is to be implemented. Otherwise the sought result will not be achieved. 3. Product: usually the kind of product itself calls out for the right kind of strategy. Perishable items such as tomatoes cannot stay in stock for more time when compared to the non-perishable items such as electronic items. Therefore, the prior will need faster delivery systems to the required retailers or end points from where the customers can get them before they expire. 4. Customer: sometimes, when the strategies employed by the customer are reaping in more profits than yours, one need to consider switching to that kind of distribution considering if the organization has all the resources to implement that kind of distribution strategy. 5. Price: the price of the product is also important in choosing the right channel. A low priced product can't be distributed through an expensive distribution method as the cost of this distribution would be transferred as an increase in the price of the product. 6. Environment: the external and internal environment of the organization has a huge impact on the kind of strategy used. Political as well as technological changes account for many new and innovate ways of distribution that have been employed by organizations in the ever changing environment. Keeping the above factors in mind, companies device their distribution channels in a way that best suits all the factors. In generalization, there emerge basically three kinds of distribution strategies that organization choose and use for the proper and timely distribution of their product to the prospective customers. Intensive Distribution: Intensive distribution strategies involve the presence of the product in every outlet possible. Items such as confectionery, food items are usually distributed using intensive distribution strategy. Such products which are also called 'convenience' products require wide presence in almost every food store, supermarket chain, and hypermarket chain as they are frequently purchased. These products are easy to market as well. Another reason that these convenience products are distributed intensively is that their replacement rate is high as they are used frequently and require no servicing after sales. An example of a company which uses intensive distribution by employing all kinds of distribution channels is Procter and Gamble; Unilever being another example of a multinational, employing intensive distribution. Selective Distribution In selective distribution, the pattern that is followed is less general. Some outlets are chosen which usually meet the specified minimum criteria set by the organization. The product distributed through this network are usually shopping goods that require searching on the part of the consumer, buyer. The buyers like to search for the right kind of product and hence look for variety. Also, in these products, comparison is high. A huge advantage of using selective distribution is that unauthorized dealers can be identified and steps can be taken to eliminate them which is not possible in intensive distribution strategy. Also in many cases, retailer promotional support is also present with the help of sales promotions provided to them by the organization. Examples for products which are distributed through this strategy are electronic items. Exclusive Distribution Exclusive distribution only allows the presence of the product at specific contractually appointed outlets (Hill et al, 1996). These are usually high-priced products which require high amount of after sales services. These products are also acquired for a last period of time. It is easier for the companies to keep track of the outlets and provide after sales support that they require. Products such as automobiles and jewelry require exclusive distribution. This method also provides the sellers with an incentive of no competition. Usually, brands use this kind of exclusive distribution techniques in order to bring prestige to their product. Consumer brands such as Gucci are not available everywhere because they are high priced and hence are acquired over a period of time. DISTRIBUTION AND PROMOTION Distribution and promotion share a very important relationship with each other. This relationship is very important from the marketing point of view. Promotion has an important influence on distribution. Distribution intermediaries play an important role in push and pull promotional activities and strategies. Distribution channels are responsible for the timely availability of the product to the customers. For any promotional strategy to effectively work and benefit the organization, it is mandatory for the distribution channels to distribute the product in the right places. Promotion to empty shelves would reap no reward; it will in turn result in the bad name of the organization (Kotler et al, 1999). CHANNEL CONFLICT & VERTICAL MARKETING SYSTEMS Channel conflicts and the governance of these conflicts in the form of vertical marketing systems is another prime domain of the distribution campaigns that are used by organizations. Channel conflict can occur vertically and horizontally between the intermediaries. Horizontal conflict occurs between the intermediaries existing at the same level in different supply chains. It may occur between two retailers in the similar area catering to the similar product range, one of whom wants to increase its opening hours due to increased competition in the area. The other kind of conflict which requires attention from organizations whose products are being delivered by these organizations is between intermediaries of the same supply chain. To counteract this kind of conflict, integrated marketing systems are used that make the supply chain as a system only. These are called vertical marketing systems. Usually these kinds of strategies require governance and management by a common force. Corporate VMS caters to this kind of governance, where two or more stages of the supply chain come under common ownership, for example, owning the wholesale stage of the channel. Advantages of proper informational flow, payment systems are obvious. In administered VMS, the bargaining power of the organization is such that it has considerable control over the whole channel. In contractual VMS, official agreements are signed by the various mediators of the channel including dealerships and franchises or exclusive rights to sell a product or service (Hill, 1996). GOVERNANCE AND MANAGEMENT IN DISTRIBUTION STRATEGIES: AT A GLANCE As mentioned above, governance and management in distribution is very important in order to effectively and efficiently market the product and make it available to the consumer. Vertical marketing systems are formulated for this purpose, to make sure that proper governance of the organization's interest is taken care of. Also, with the help of choosing the right channels for the product and service, the management techniques that are used to properly channelize the product through the various intermediaries is a task of its own and require a vigilant observation by the management over the intermediaries and their functioning in order to make them efficient for the organization. Therefore, in order to make full use of the intermediaries that an organization is using, the company needs to make proper governance and management strategies which are in line with the organization's betterment and goodwill (Grant, 1968). COSMETIC INDUSTRY AND PROCTER AND GAMBLE 250 The use of cosmetics can be traced to Ancient Egypt in 4000BC. Natural cosmetics were used at that point in time. As technological advancements took place, the methods and means of cosmetics have also changed. The cosmetic industry globally is worth of almost $ 18 billion with L'Oreal as being the ancient and the biggest one (Mayell, 2004). Due to use of chemicals in the formulation of many cosmetics, all the products have to comply with the rules and regulation set by the FDA to ensure to safety of the consumer. Procter and Gamble is a global American Corporation based in Ohio that manufactures consumer goods. Its global position can be gauged from the fact that there is hardly any country in which it does not have customers. It was a merger that has given the world one of its biggest corporation till now. It continues to grow, innovate and provide to the customers. Their distribution channels are extensively networked all over the world. With the acquisition of Gillette in 2005, it became the world's largest organization in the world bringing the Anglo Dutch Unilever to second place (Associated Press Msnbc.com, 2005) . One of the biggest corporations of the world, Procter and Gamble, is also known for its role in the corporate social responsibility. They are known to indulge in activities for the betterment of mankind all over the world with the help of different programs. They have also entered the widely expanding cosmetic market which serves as added advantages in their extensive range of products. PROCTER AND GAMBLE: CHANGING DISTRIBUTION CHANNELS WITH THE DRIFT It is mentioned on their website that the products produced by their company touches the lives of customers three million times a day around the world and help to make them better for today and for future as well. The company boasts of providing a variety of products to the global market and enjoys the position of one of the most trusted and valued global organization in the world. Its extensive range of products include Pantene, Braun, Tide, Oral B, Duracell, Folgers, Charmin, Always, Crest, Pringles, Downy and many more; this shows their widely differentiated products, from a toothpaste to batteries, they are present in all industries (Procter and Gamble, 2008). Such a big organization requires strategically incorporated distribution strategies and carefully outlined distribution channels so that their products enjoy the same product space everywhere. Also, this is not a multinational but rather a globalized phenomenon. In order to continue to provide to their customers, they are constantly innovating and changing their distribution strategies to bring them in line with the product's demands and the changing environment. Distribution techniques are dependent on the kind of product that is present under their hat. As almost all their goods are considered to be consumer goods, therefore they use to most appropriate strategy for their distribution. For consumer goods, they employ extensive distribution strategies market their goods in the area. For examples, shampoos such as Pantene are distributed extensively throughout the world with many franchising operating in many of the countries to facilitate the movement of their good in that country. They make sure of conducting a thorough marketing analysis before venturing into a new market and launching a product. No matter their size has increased by they continue to work from their headquarters in Ohio, the place where it all started. With the passage of time they have acquired various cosmetic companies such as Max Factor and manufactured other products such as 'Prell' and 'Pantene' shampoo and have entered the cosmetic market. Although, in this domain, L'Oreal stands are the market leader. However, Procter and Gamble's carefully integrated marketing techniques are spreading the company's product availability in the United States of America. For these basic products the company has successfully implemented the extensive distribution strategy in almost all the countries; the product's reasonable prices and enhanced quality make them as the market leaders in most of the countries. They have entered into franchises, taken over their distribution channels in smaller countries like Bangladesh to facilitate the movement of their products. Over the years, they have taken over their competition to improve their position in the market. Their innovations have become the generic name for many of the products. Their revolutionary invention 'Pampers' has become a general name for disposable diapers all around the world. In countries where customer base is not sophisticated, consumers are made to buy disposable diapers because for them any disposable diaper denotes 'Pampers". They are not the market leaders in the cosmetic industry, however, they are slowly making place in the One of their biggest products 'Braun' is the leading brand in consumer beauty electronic goods. 'Wella Professionals' along with 'Pantene' is another brand present in this category. They are now signing contractual agreement between distributors of many Southern American states in order to increase their customer base. A recent advancement towards increasing their base was the contract that was signed between Procter and Gamble (P&G) and The Beauty Systems Group (BSG) which will now help the company to strengthen and increase the position of the company as the market leader in hair care industry (cosmeticbusiness.com, 2007). BCG incorporates the biggest number of professional beauty supply stores (about 720) stores present in the whole of United States. This move of theirs is a prime example of integrating their supply chains into a contractual vertical marketing system that provides them with enhanced customer base all over America. They are now using the targeted approach or selective approach to market their professional hair care line in the beauty salons. According to the contract, BSG will use direct targeted approach or the selective approach to market their hair care products in the north and south east regions. This will be done in order to increase the customer base of their hair care products in the respective areas. Their electronic brand 'Braun' is also one of the most trusted brands in the hair care products and personal care products. The contract with BSG will also help in increasing the base for these machines as well. As the trends of marketing are changing, companies are now using innovative methods to market their products and make them available in the areas in which their customers are present. The example of Procter and Gamble was instrumental in understanding the importance of choosing the right channel for distribution and taking effective care in management techniques and governance issues present in the distribution channels today. CONCLUSION In conclusion, it can be said that as times are changing, the whole world of marketing is evolving. The customers are becoming more sophisticated than ever and they need bigger and better products day by day from the companies who are on the supply side. The companies should experiment and use innovative distribution channels to make sure that they gain that competitive advantage and that they do not lose out on the competition. Bibliography 1. Christopher Moir, John A Dawson, (1992) Distribution. Great Britain. CRC Press 2. David Frederick Ross (2004). Distribution: Planning and control: Managing in the era of supply. Springer. 3. Elizabeth Hill, Terry O Sullivan (1996). Marketing. Longman Publishing. New York 4. Philip Kotler, Gary Armstrong, (1999). Principles of Marketing. Prentice-Hall Europe. 5. Roy Grant (1968) Distribution Management. Business Books 6. Martin Christopher. (1985) The strategy of distribution management. Quorum Books. 7. James Cooper. (1990) Logistics and Distribution Planning: Strategies for Management. Kogan Page 8. Cosmeticsbusiness.com (2007). P&G expands Distribution Channels.. Available from http://www.cosmeticsbusiness.com/story.aspstorycode=1247 [Accessed 9 June 2008]. 9. Proctor and Gamble.com (2008) Procter and Gamble. Available from http://www.pg.com/en_US/index.jhtml [Accessed 9 June 2008] 10. Associated Press, MSNBC.com (2005). Procter and Gamble to buy Gillette for $57billion. Available from http://www.msnbc.msn.com/id/6878219/ [Accessed 9 June 2008] 11. Hillary Mayell (2004). As consumerism Spreads, Earth suffers, Study says. Available from http://news.nationalgeographic.com/news/2004/01/0111_040112_consumerism.html [Accessed 9 June 2008] Read More