Managing multi channel systems

Topics: Brand, Resale price maintenance, Price fixing Pages: 23 (1087 words) Published: April 24, 2015
Managing multi channel systems
• Understanding the practical differences between
intensive and exclusive distribution
• Look at different forms of ‘RTM Networks’
• Understand the benefits and difficulties associated with RTM networks
• How multiple RTMs might be used
• Recognise the relevance of the law upon channel control
• Understand how ‘grey markets’ develop within the law and what the implications aof these are for brand
owners.

Background factors
• New norms – declining exclusivity in RTMs
• Brands search for new products, new markets,
new distribution
• Dynamism of retail – new formats and ways of
retailing – decline of the traditional
• Growing variety of consumer and shopper
needs
• Diffusion of IT/mobile – new ways of shopping

Legislative context






In the EU and elsewhere …
Liberalisation of markets
Wish to see intra-brand competition
IE Opposition to forms of ‘exclusivity’
And to systems that ‘tie up’ distribution

A reminder
• Intensive distribution
• Selective distribution – the brand owner HAS TO
specify criteria that are required by the brand
• Exclusive distribution – a territory is given to the
distributor
• Products often seem to be selective – but this
may be by default

Some products have a window of exclusivity
• Intended as mass products
• Eg Schweppes (part of Coca Cola) – adult soft
drinks market
• 3 weeks in Asda before wider distribution
• And, in this case, before advertising
• Then are intensively distributed

In practice – for a lot of products
• A ‘product life cycle’ tends towards ever more intensive distribution (you hope!)
• Eg Glaxo Smith Klein – Maxi Nutrition
• http://www.maxinutrition.com/index
• Expanding distribution MAY be associated with brand
extensions – eg RTD
• It SHOULD be associated with new consumer segments
• It probably will impact on brand image and possibly % gross profit
• But that may be off-set by growth of sales and efficiency gains

Intensive distribution
• Resellers have limited investment in the
product
• Resellers have lots of other options
• There will be intra-brand competition
• Conflict over operational and trade issues
• Both might ‘test’ their relative power

For example …. Tesco
• March 2015 de-stocked 25 Schweppes (CCE)
lines
• 2013 – de-stocked 75 Princes lines
• 2011 – de-stocked 25% of premium food lines
(cost £10 million)

Conflict within a channel in an intensive
system
• Divergence of interests and objectives
• Divergent role expectations
• Divergent perceptions
• Can be ‘played out’ – simply who needs who
more

55%
45%

4.3%

10 distributors

9.6%

17.6%

8.2%

15.1%
Toys R Us
Argos

Index
(Littlewoods)
Woolworths

Early Learning
Centre
Independents

(Figures taken from OFT enquiry)

Can you restrict which resellers you will work
with?








A ‘product life cycle’ tends towards ever more intensive distribution (you hope!) Eg Glaxo Smith Klein – Maxi Nutrition
http://www.maxinutrition.com/index
Expanding distribution MAY be associated with brand extensions – eg RTD It SHOULD be associated with new consumer segments
It probably will impact on brand image and possibly % gross profit But that may be off-set by growth of sales and efficiency gains

• What if poundland want to sell maxinutrition?

• Selective systems
• The criteria have to be defined – they have to
be reasonable for the brand needs.
• ANYONE who matches the criteria has to be
allowed to sell the brand

But, how distinct or confused are the channels in practice? Are some channels ‘free-riding’ on others

APPLE
Premium resellers
Big Investment
In store branding (£100,000)
Higher margins
Better delivery system
Restrictions on other products

Standard resellers

Multiple channels and conflict can be caused
by horizontal links
• Divergence of interests and objectives
• Divergent role expectations
• Divergent...
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