Marketing Channels Delivering
We now arrive at the third marketing mix tool—distribution. Firms rarely work alone in creating value for customers and building profitable customer relationships. Instead, most THE CONCEPTS are only a single link in a larger supply chain and marketing channel. As such, an individual firm’s success depends not only on how well it performs but also on how well its entire marketing channel competes with competitors’ channels. To be good at customer relationship management, a company must also be good at partner relationship management. The first part of this chapter explores the nature of marketing channels and the marketer’s channel design and management decisions. We then examine physical distribution—or logistics—an area that is growing dramatically in importance and sophistication. In the next chapter, we’ll look more closely at two major channel intermediaries—retailers and wholesalers. We’ll start with a look at a company whose groundbreaking, customer-centred distribution strategy took it to the top of its industry.
uick, which rental-car company is number one? Chances are good that you said Hertz. Okay, who’s number two? That must be Avis, you say. After all, for years Avis advertising has said, “We’re #2, so we try harder!” But if you said Hertz or Avis, you’re about to be surprised. By any measure—most locations, revenues, profits, or number of cars—the number-one North American rental-car company is Enterprise Rent-A-Car. What’s more, this is no recent development. Enterprise left number-two Hertz in its rear-view mirror in the late 1990s and has never looked back. What may have fooled you is that for a long time, Hertz was number one in airport car rentals. However, with estimated revenues of US$9.5 billion and growing, Enterprise now has 30 percent more overall car rental sales than Hertz. What’s more, analysts estimate that the privately owned Enterprise is twice as profitable as Hertz. How did Enterprise become such a dominating industry leader? The company might argue that it was through better prices or better marketing. But what contributed most to Enterprise taking the lead was an industry-changing, customer-driven distribution strategy. While competitors such as Hertz and Avis focused on serving travellers at airports, Enterprise developed a new distribution doorway to a large and untapped segment. It opened off-airport, neighbourhood locations that provided short-term carreplacement rentals for people whose cars were wrecked, stolen, or being serviced, or for people who simply wanted a different car for a short trip or special occasion. It all started more than half a century ago when Enterprise founder Jack Taylor discovered an unmet customer need. He was working at a St. Louis auto dealership, and customers often asked him where they could get a replacement The tagline “Pick Enterprise. We’ll Pick You car when theirs was in the shop for repairs or body work. To meet this need, Up” remains the company’s main value Taylor opened a car-leasing business. But rather than competing head-on with proposition.
the likes of Hertz and Avis serving travellers at airports, Taylor located his rental offices in centre-city and neighbourhood areas, closer to his replacement-car target customers. These locations also gave Taylor a cost advantage—property rents were lower and he didn’t have to pay airport taxes and fees. Taylor’s groundbreaking distribution strategy worked and the business grew quickly. As he opened multiple locations in St. Louis and other cities, he renamed his business Enterprise Rent-A-Car after the U.S. Navy aircraft carrier on which he had served as a naval aviator. Enterprise continued to focus steadfastly on what it called the “home-city” market, primarily serving customers who’d been in wrecks or whose cars were being serviced. Enterprise branch managers developed strong relationships with local auto...