The distribution channel is one of the four Ps of the marketing mix, providing many essential services to end-customers that the firm cannot efficiently provide itself. But the distribution channel is not just the route through which the supplier reaches its end market. Channel members are customers in their own right, with their own needs. Further, they usually market not only the supplier’s products but also competitors’ products and, increasingly, their own private label products. Their motivations and objectives are typically not aligned with those of the supplier, hence the challenge of “coordinating the channel”. Managing the distribution channel or route-to-market through which a firm’s products reach end customers was never easy but it has never been more challenging than it is today. Firms have to employ a multitude of sometimes complementary and often competing channels in a way that satisfies consumer needs for products, services, and information, and is sustainable for all parties involved. At the same time as suppliers of products ranging from packaged foods and sporting goods to hotels and cars are bypassing middlemen to go directly to end consumers, others are inserting themselves between suppliers and their end customers to perform narrow functions and take slices from an-often shrinking profit pie.
The objective of this course is to help students appreciate the complexities involved in managing and/or being a part of the route-to-market in today’s multi- and omni-channel distribution system, and to provide frameworks that can be used to manage these complexities. Throughout the course, we will take the perspective of suppliers, retailers, and other intermediaries to underscore that an effective channel partnership can be sustained only if one understands the value added by each channel member, as well as the constraints and alternatives facing them. We will discuss what is expected, what is fair, what is legal, and, most importantly, what is sustainable in channel
Course materials include the book titled Getting Multi-Channel Distribution Right, cases, and some related articles. In-depth classroom discussion of these materials and their application to two integrative assignments will be the primary vehicles for learning. Analyzing the cases will require you to deal with a variety of situations and decision contexts each with their own unique complexities and idiosyncrasies. You will need to immerse yourself in the specifics and institutional details of each case, but you will also need to extract from them the thought processes and frameworks that generalize across situations. The general frameworks in the readings and the module introductory sessions will serve as a bridge between the specifics in each case we analyze and the situations you will encounter in your own careers. I expect you to explicitly draw on them as we discuss the cases in class.
Students who intend to work in marketing, product management, start-ups, or consulting should take this course. The relevance of this subject to the first three career paths is obvious, but the last is worth noting. In the last decade, internet and mobile technology, the availability of extensive customer data, the growth of digital intermediaries and of large retailers in multiple formats, have put issues of distribution, multi- and omni-channel management, front and center in business. Several consulting companies now have special practices in this field, so a good understanding of route-to-market and distribution is a valuable tool for students interested in marketing or strategy consulting.
The course is structured in four modules. The modules in this course are not “air-tight” because marketing is not air-tight – designing and effectively managing the distribution channel requires coordination and integration among all the elements of marketing strategy in the face of a constantly
The first module and the Stainmaster case will make that very point by providing a bird’s eye view of how important and challenging managing distribution is in a firm’s marketing strategy. It will lay out the issues involved in designing the channel, as well as the role of power dynamics and regulation in effectively coordinating it.
Our emphasis in this module will be on the firm’s choice of channel types and individual channel members. What channel structure is best given market needs, the firm’s own capabilities and the nature of the product? What challenges does a firm face as it tries to get and keep distribution support in the channels it selects? The Sorrell Ridge case exposes us to the challenges and decisions involved in acquiring shelf space in the grocery retail channel. It will help us appreciate how the demands of the channel can influence every aspect of a manufacturer’s marketing mix, and introduce the controversial but well-entrenched practice of slotting allowances to gain distribution. The Snapple case illustrates how even a successful brand can find it challenging to retain distribution at sustainable levels, especially with a long product line.
We begin this module with the trade-offs between coverage, costs, and control in direct to- consumer, franchise, agent, and independent channel options. Then, we transition into the challenges and opportunities facing all parties as the market environment evolves and new channel options emerge. Here, we will cover topics such as the role and challenges of platform-based intermediaries, and how to manage conflict particularly between online and offline and between a supplier’s direct-to-consumer channel and its independent resellers. The Arrow Electronics case highlights the challenge of simultaneously managing portfolios of products, customers, and channels, and offers our first peek at how electronic commerce should be incorporated into a company’s channel strategy. The Flipkart and hotel industry cases illustrate the frictions that online aggregators and platforms try to eliminate for consumers and the frictions that are generated in their interactions with suppliers. The hotel industry case also gives us an opportunity to address issues in opening the direct to- consumer channel. The Brooks case illustrates how a disciplined and carefully executed multichannel strategy helps build a brand and business, and how that discipline is an ongoing challenge in the face of changing consumer behavior. The Natura case gives us the opportunity to assess the channel evolution and performance of a supplier that has the opportunity to become not only multi but also omni-channel.
Even when a supplier has the right type and intensity of distribution coverage, ongoing channel management is necessary. How can a firm influence the actions of its channel members and reduce conflict through its product line, pricing, promotion, and other channel incentives? In turn, how can the channel members use their pricing, promotion, private label brands, and customer data to gain leverage and improve their performance? These questions are the subject of the final module. The readings in this module will help us to integrate channel management strategies encountered in the first three modules, but we will also use two additional cases. The H-E-B case puts us in the position of a retailer making decisions about its store brand positioning and trying to decide how best to balance its store brand and national brands to compete with other retailers and gain leverage with manufacturers. The Catalina case further highlights the difference in manufacturer and retailer perspectives by having us consider how Catalina Marketing, a company that prints targeted manufacturer coupons at check-out, should refine its value proposition for retailers.