The third element of the marketing mix is place or also called distribution. Distribution is described as the movement of goods and services from the source through the distribution channel, right up to the final consumer and the movement of payment in the opposite direction, right up to the original producer. Distribution is a very significant aspect of the marketing mix; it can decide whether a small business can compete with the big businesses. Distribution takes a major role in the growth stage of the product life cycle due to its ability to not only help sell the product, but to also allow their product to advertise itself. If a company focuses mainly on promotion and never really sets up a good distribution channel, their efforts will be lost due to the lack of ease for a consumer to purchase their product. Even the perfect product, attractively priced and ingeniously promoted, cannot be sold without a means of distributing it to consumers (Russ & Kirkpatrick, pg.297).
A distribution channel is the sequence of firms that sell, buy, or hold products as those products move from manufacturers and producers to end buyers (Russ & Kirkpatrick, pg.297). Every channel must have at least two members or levels. These levels are the producer or seller, and the user or buyer. There are also two different kinds of members that are known as middlemen, these middlemen are known as retailers and wholesalers. The distribution channel is and will remain a problematic marketing subfunction for most firms because of the built-in conflicts between manufacturer and reseller (Bonoma, pg.49). Manufacturers must work through these different channels to attain diverse markets to reach their ultimate goal; provide their customers with what they want, where they want it, and when they want it.
Orange Crush Soda
An example would be the soft drink business and how they manage to distribute their product through the different channels so that they are able to distribute in large areas. An enormous consumer goods company, known as Procter and Gamble, decided in 1980 to buy Crush, a soft drink business, with intent to try and compete with Coke, Pepsi, and other large soft drink businesses. Procter and Gamble were famous for being a leader in a great many product categories because of their marketing powerhouse. P & G remained at a serious disadvantage with its big competitors and the difference was distribution. The large soft drink companies had well-established networks of bottlers around the country who mix the products in quantity and distribute them to sellers in their area (Russ & Kirkpatrick, pg.296). P & G had the capacity to manufacture their soft drinks in large quantities and were able to promote their product well, but lacked the resources to help them distribute their resources around the country.
Logistics and Supply-Chain Management
Logistics and supply-chain management are part of the distribution strategy. Logistics is the process of coordinating the flow of information, goods, and services among members of the distribution channel (Kurtz, pg.416). Supply-chain management is the control of purchasing, processing, and delivery through which raw materials are transformed into products and made available to final consumers (Kurtz, pg. 416). Manufacturers use these kinds of companies to distribute their product to other parts of the country instead of trying to establish new manufacturing buildings their self.
Kane is Able is a logistics company who concentrates on beverage warehousing and logistics. They have 6 warehouses across the United States, which makes it easier for them to distribute across a wide area. KANE works with Coca-Cola to help distribute their product. They use physical distribution to focus on customer satisfaction, inventory control, materials handling, protective packaging, order processing, and warehousing. Well-planned marketing channels and effective logistics and supply-chain management provide ultimate users with convenient ways for obtaining the goods and services they desire (Kurtz, pg. 416).
High Costs of Distribution
Middlemen are business firms that help the company find customers or make sales to them (Kotler & Armstrong, pg.118). Middlemen or resellers make it easier for a company because a soda bottling company can work with a logistics company; such as Kane is Able, who will keep their product in stock, package their product, distribute it around the country, and even promote their product. These services have never been cheap and have actually increased because manufacturers no longer have small, independent middlemen. Instead they now face large and growing middlemen who have great power to dictate terms or shut the manufacturer out of large markets. Critics charge that there are too many middlemen or that middlemen are inefficient, provide unnecessary or duplicate services, and practice poor management and planning (Kotler & Armstrong, pg.520). Consequently, distribution costs are high and consumers end up paying higher prices.
Jones Soda is a company who started out in the beverage world as a distributor in western Canada and eventually established itself as a full line beverage manufacturer. Jones was able to utilize its experience and knowledge gained in the distribution industry to create some of its own brands. Jones Soda Co. placed its own coolers in some truly unique venues, such as skate, surf and snowboarding shops, tattoo and piercing parlors, as well as in individual fashion stores and national retail clothing and music stores. Once they were able to execute these means of distribution they began to place their product in convenience and food stores, and eventually in larger chain stores such as Starbucks, Panera Bread, Barnes & Noble, Safeway, Target, Cost Plus, Meijers, Winn-Dixies stores, Albertson’s, and 7-Eleven stores.
Vertical Marketing Systems
Unlike conventional channels, vertical marketing systems are preplanned and centrally managed distribution networks (Russ & Kirkpatrick, pg.300). The three different categories of vertical marketing systems are corporate, contractual, and administered systems. Coke and Pepsi are examples of administered vertical marketing systems. Administered systems involve comprehensive merchandising programs that are developed and agreed to by both the manufacturer, or sometimes wholesaler, and the retailer (Russ & Kirkpatrick, pg.305). It would be foolish if Coke or Pepsi were to open a store that only sells its product, because it sells best when offered with other products.
In an administered system Coke would achieve coordination in the channel through support of other channel members rather than through ownership or contractual agreement. In order for Coke to succeed with an administered system it must be based on mutual respect and understanding. Suppliers recognize the problems, goals, and policies of retailers, while the retailers respect the manufacturer’s capabilities (Russ & Kirkpatrick, pg.305).
The soda companies that make the most profit are the companies that have a well-established plan for distributing their product. Soda manufacturers must realize that in order to be the best they are going to need help distributing their product. It is a team effort to move a product from a manufacturer, to a retailer, and then to a consumer. There are many different channels available to take in order to reach a consumer, but in the end soda companies will need the help from middlemen in order to compete with big businesses and to become one of the best.
Bonoma, T. V. (1985). The marketing edge. New York, NY: The Free Press.
Kotler, P., Armstrong, G. (1987). Marketing: An introduction. Englewood Cliffs, NJ: Prentice-Hall Inc.
Kurtz, D. L. (2008). Contemporary marketing. Mason, OH: South-Western Cengage Learning.
Russ, A. R., & Kirkpatrick, C. A. (1982). Marketing. Canada: Little Brown & Company.