Multi Channel Marketing – Distribution Expansion or Cannibalisation

25 Aug

Bricks and Mortar Retail

My young nephew Dhruv came home very agitated the other night. He is planner and brand manager in charge of the store experience of a leading lifestyle brand. They were running a promo and he had spent many hours planning for the activation – he is a geek, so has devised simple but interesting models for inventory optimization, repricing etc.

Problem – in classical copybook style, he had planned that all “unique”, limited stock, special merchandise would be sold at their own retail showrooms during their heavily advertised promo. Makes sense, right? This is where you plan your retail experience, where you keep your best trained storefront people, where you spend megabucks on displays and merchandising.

What happened — yes, you all know it! 2 days before the activation was to hit the market, he figured that the dealer network had already booked all of it, and before he could say “activate….”, that inventory had all vanished!

Gives rise to classical undercutting!

This is a common problem in all dealer network sales systems, specially in India. Long ago, when I was leading area sales for Mattel toys in one of the toughest markets in the North of India, we kinda had the same problem. There was a dominant “wholesale” market in the center of town, and one fat cat distributor who supplied to those guys. Because the wholesalers bought in bulk, they got higher slab discounts – infact, all the the distributor kept for himself was a small margin. The rest of the city got supplied by other distributors, and since the retailers were smaller, they got no/ lesser trade discounts. Prime ground for channel conflict. Many retailers, who anyway visited the wholesale market for purchases of other/ less well distributed products would then get our merchandise cheaper at the wholesalers, leaving their distributors high and dry. This ugliness climaxed one fine day, when we had invited all distributors over for a meet and greet, and many of them almost came to blows!

Barbie Wall of Pink

(We did resolve this – and fairly innovatively too! But it took great guts and a strong belief in the power of our brand’s consumer pull to implement the strategy! We essentially cut down the slab discount mandates to retailers – and made the distributors accountable and penalizable for any contraventions! Would this have meant a reduction in revenues? Yes, a temporary dip – but our theory was that given the fact that we were selling a branded product in a largely unbranded products’ market, anyway, our retailers stocked our products only as the “hook”. Also, kind of following a not-price-led-but-brand-led version of the bait and switch tactic, they always attempted to switch the customer to a non branded – higher margin product that relied on trade push and therefore incentivized trade heavily to execute! Which meant, that all sales that we were seeing of our products were actually happening DESPITE the retailers, and not BECAUSE of them! That was the strength of our brand! Hence, crossing our fingers, we took the HUGE trade discount rationalisation step, which almost made history in trade sales!)

Coming back to channel conflict – my husband was ranting about this recently in another context. Attempting to invest some of our money in some bonds (or whatever), he asked the relationship manager of the bank what percentage interest we would get. (remember, we are so called ‘HNI’ so we merit a relationship manager who, btw, calls me everyday to give annoying snippets like – NIFTY has crashed/ the blasted ruppe is at 65 blah blah…). Imagine his disgust when the RM quoted him a rate that was – hold your breath – LOWER than that quoted on the bank’s website!!!!! (That poor RM i think didn’t get sleep that night since he was probably nursing a wounded ear – post the blasting that Manoj gave him!)

This online sales or “own store” sales vs dealer/ brick and mortar sales is a true conundrum.

Kind of rubs off on marketing as well maybe. The biggest thing that brands and companies nowadays are trying to achieve, is Multi Channel Marketing. ( we saw many RFPs on precisely this task last year). This is particularly relevant in the digital world – so, your offline presence needs to be synched to each of your digital avatars – your website/ blog/ forum presences/ social networking pages or channels. Since this is still fairly new, most brands are at the entry level of figuring this out – which largely means making sure that the visual identity in each channel is more or less similar (not as easy as it sounds – since most of these channels evolved at different times, and were probably executed by different departments within the company).

But, the true test of, and resolution to this is when you can remember the main reason behind having different channels – just greater/ higher reach. You know your customer now doesn’t have the will, or the need to – try too hard to get what she wants. So, you have to go where your customer is! This is true of the offline/ bricks and mortar space and of course online. And of course, different segments on your customers will go to different places – that is after all, the raison d-etre of distribution! So, you expand/ diversify/ have multiple avatars. Then the real way to avoid conflict is – differentiate your offering! Have merchandise as well as communication specific to each channel/ that suits the channel’s peculiarities and also that segment of your consumer that visits that channel. So, LinkedIn needs to have a more professional orientation, while Facebook can be/ is gimmicky/ polls and freebies…Dhruv’s own store needed the one off/ special merchandise because consumers come there expecting the widest range, NOT the most common!

The dichotomy though – how do you standardize visual identities/ simplify SKU hierarchies/ rationalize pricing while at the same time customizing offerings for every channel??? The answer – you do a bit of both! Have visual identities that cue the same stuff, but adapt to the channel – but DO differentiate the offerings for different channels – respect your channel – there is a reason why it is different – recognize that difference! Only then will your channel give you love back!

conflict resolution

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