ADVANTAGES AND DISADVANTAGES

OF ALTERNATIVE CHANNELS OF DISTRIBUTION

There’s a well-established notion that teachers often learn more from their students than the reverse. The information you’re about to review is a good example. The data were gathered and refined during my leadership of marketing training courses for the AMA. What you'll see is a bulleted array of the pluses and minuses associated with the various alternative channel options a manufacturer faces.

                                              TYPES OF DISTRIBUTION DISCUSSED

If the past is a guide, I’ll probably make revisions as I teach more courses; eh, I mean learn more.

●          Personal, CRM

●          They have a relationship with the customer

●          Customer knowledge, esp. BIG customers

●          Better/expert/technical product knowledge

●          Loyalty, pride in company/product

●          They work for you—control

●          Very focused/total mind share

●          Possibly high ROI

●          Repeat business

●          Can offer service

●          Control brand image, positioning

●          Less expensive, more profitable than agents

●          Faster communications

●          Very expensive, not suitable for most goods/services, or for most customers

●          Limited coverage

●          Limited network

●          Salesman can leave with the business

●          Lacks overview

●          Might focus on bonus and not customer satisfaction

●          Cannot call on large customer base

●          Big commitment to recruiting and training

●          Sometimes identify too closely w/customer

●          Large territories may limit contact

●          Low cost, overhead

●          Higher profit potential  

●          Instantly global if desired, wide exposure

●          Always current

●          Can target segments

●          Instant access for the customer, convenient

●          Easy to use

●          Can be cross-sold by other sites

●          Can obtain high visibility on right sites

●          Open 24/7/365, access growing w/wireless

●          Good source of customer feedback/research

●          Better and better security

●          Less data entry error

●          “Free” customer information

●          Cookies

●          Educates customers

●          Can be customer friendly

●          Limited audience (not everyone has it or will use it for shopping)

●          Lack of one-to-one interaction, impersonal

●          Spamming/laws

●          Security problems, trust

●          Over 65 misses the market

●          Requires a big logistics investment (inventory, warehousing, packing, shipping, record keeping, billing, AR)

●          Three click rule

●          No human contact, not personal

●          So far limited to price-driven customers

●          Fear of fraud, ID theft, security

●          Product limitations

●          Lack of post-purchase service, returns an issue

●          May not reach late majority and laggards

●          Cannot touch, feel, smell products, concerns about colors, not tangible

●          Direct contact

●          Inexpensive

●          Efficient

●          Quick

●          Can reach remote areas

●          Can be part of a CRM system

●          Easy

●          Personal contact

●          Can be a good source for leads

●          Cold calls

●          Actually is impersonal

●          Regulations

●          Unpopular with customers

●          Often outsourced, off-shore, comprehension issues

●          Intrusive

●          Annoying

●          Unsolicited

●          Order-taking vs. selling

●          Poor follow-up

DIRECT DISTRIBUTION--MAIL

●          Relatively) inexpensive

●          Measurable results

●          Testable packages

●          Can reach a large audience

●          Can find hard to reach/new customers

●          Can be altered segment by segment

●          Can be personalized

●          Non-threatening

●          Can build brand recognition

●          Introduce new products

●          Offer can foster goodwill

●          Catalog shopping is fun

●          Low levels of effectiveness/response

●          Postage costs rising

●          Targeting may be questionable

●          Huge waste—will it be opened

●          Low ROI

●          Requires investment in logistics (like the Internet)

●          Not prestigious, negative image, “junk mail”

●          Customer must buy w/o touching/seeing

●          Considered a nuisance, “junk” mail

●          May foster emotional backlash

●          Not environmentally sound

●          Catalog shopping is fun

●          Very wide distribution, size, exposure, # of outlets, volume, adds web services

●          Carry our inventory, cost sharing

●          Offers aggressive marketing, upsell opportunity.

●          Can offer personal consumer assistance, service

●          Data rich environment, market research

●          Create markets by offering clusters of competing brands

●          Adds its own brand luster to our brand

●          Might offer financing

●          Post-sales service, added personal services

●          Trusted by consumer

●          Impulse purchase possible, and instant gratification

●          Some people like shopping stores, comparison, hands-on for customers

●          POP and can cross-merchandise

●          Assumes some overhead: sales, inventory, promotion

●          Long channel—lots of work, complexity

●          Low level of control by us, they set price

●          Can be expensive, e.g., slotting, volume return, and promotional allowances

●          Can return items that don’t sell

●          Can use us as a loss leader and thus hurt our brand reputation

●          Also sells our competitors

●          Store reputation may be neutral or negative

●          May offer poor customer service

●          Can be demanding, controlling

●          High employee turnover

●          Customer must leave home to buy

●          We don’t know the ultimate customer

●          Lose control of product presentation

●          Low margins

INDIRECT DISTRIBUTION--AGENTS/BROKERS/REPS

●          Expertise

●          Broad network

●          Good relationships with customers

●          Personal, face-to-face

●          Pricing and competitive intelligence

●          Minimal distribution costs

●          Established channel

●          Quick access to market, mores sales people

●          Regional expertise/location, penetrate markets and channels not covered

●          Carry complimentary lines; easy for customer

●          Can add quickly, flexibility

●          They assume some promotional duties

●          They assume some overhead

●          Very independent, difficult to control

●          Expensive commissions

●          Expensive/difficult to train

●          Lack of product knowledge/less than captive

●          Loyalty to their biggest selling lines

●          No direct customer contact by you

●          If they leave, you lose the customer

●          They also represent others—focus is limited

●          Less loyalty

●          Loss of brand image control

●          No control over their tactics

●          More sensitive to competitive pricing, customer price pressure

●          Focused customer base

●          Assume financial and inventory risk

●          Additional sales force

●          Cover more geography

●          Assume final shipping expense

●          Technically trained

●          Can offer bundled pricing

●          Love--Hate relationship

●          Carry competitive products, less loyal

●          Control final pricing

●          Unmanageable; have own agenda

●          Control issues

●          Added costs

●          Don’t know end-user

●          No control of product presentation

●          Training/education costs

●          Limited product focus

●          Love--Hate relationship




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