Distribution Analysis Report Channels of Distribution Analysis

Distribution Analysis Report

Channels of Distribution Analysis Report

The current investigation looks at the marketing mix for Erb Asia, an Australian's company, which Keerati Plodprong, a Thai lady is the principle of Jowjin Pty Ltd. "Having examined the environment… the manager is prepared to design a marketing mix that will effectively meet customers' needs" (Etzel et. al, 1997, p. 552). But it is not just the manager's job at Erb: if they are working as an active listener as well as communicator, they will then be able to make creative decisions based on a framework of team thinking. "To the extent that the information is made public and transparent, it will make people better informed and able to make better choices. New economy organizations tend to be flat, decentralized, and open to employee initiative" (Kotler, et. al, 2002, p. 4).

The foundation of any effective multichannel management strategy is the ability gain insights into its performance using analytics (Kotler, et. al, 2002). Distribution channel strategies as a result continue to become more digitally-based as these mediums or channels are inherently more measurable in terms of their performance and tracking capability than their off-line counterparts. Internet-based communications, selling and service channels are flourishing today as a result of how effectively the performance of individual strategies can be measured over time (Lester, 2004). In addition, there is a gradual shift in how customers are choosing to learn about and buy new products, and this includes personal care and fragrances as well. Erb Asia can capitalize on this trend by concentrating their channel growth strategies to the Web, using e-commerce as a means to expand rapidly into other nations. One other aspect of how quickly companies are adopting Internet-based means of learning about products and buying is the rise of social networks. The growth of Facebook, Twitter and other social networks is now eclipsing any other type of website or portal by nearly 80% according to estimates from Forrester Research (Bernoff, Li, 2008). The use of social networks is now so dominant as a means to educate prospects with regard to new products and services that Facebook fan pages, blogs and Twitter accounts are routinely used to launch more products than traditional print media campaigns (Bernoff, Li, 2008). Integrating marketing mix factors into the distribution channel strategies needs to start with social media

Social networks are the foundation of the future of e-commerce. One of the key foundational elements of social networks is the concepts and design goals of Web 2.0. The concepts of Web 2.0 were originally designed by Tim O'Reilly, founder and CEO of O'Reilly Media (Bernoff, Li, 2008). Maps of the design goals for Web 2.0 are shown in Figure 1. These concepts of Web 2.0 need to also anchor the distribution channel strategies for Erb Asia, as prospects continue to expect this level of support and communication from brands they are interested in (Bernoff, Li, 2008).

Figure 1: Web 2.0 Design Objectives

Source: http://oreilly.com/web2/archive/what-is-web-20.html and (Bernoff, Li, 2008)

Social networks give prospects and customers alike greater freedom and flexibility in how they interact with Erb Asia. They also can personalize their experience using the many options available on Facebook, Twitter and other social networking sites (Bernoff, Li, 2008). Erb Asia needs to take the perspective of Web-based social networking applications as being crucial for the development of a personalized, highly interactive shopping and purchasing experience. If this can be accomplished, Erb Asia will be significantly more successful in its multichannel distribution strategy over the long-term. It is critical to see how all these channels coordinated together deliver an experience first, and a means to complete transactions second.

II. Background Information

The promotion strategy at Erb should focus on advertising almost exclusively, since personal selling is less of an option and sales promotion is limited to the purchaser. The advertising should be mainly in the form of television commercials and web ads aimed at the consumer, preferably during high traffic areas. The television commercials need to be produced with a focus on how to quickly get them onto YouTube and make them go viral on the Web. They need to underscore the exotic, rich heritage of Erb Asia and also make the unique value proposition of these beauty products so clear that prospects are motivated to buy quickly to try them. A few daytime spots should also be included, however, to keep the purchaser in mind as a specified target of promotion as well as the consumer. This shows one substantial benefit to instituting a system of promotion as a way of integrating in terms of two segments for target marketing, individual buyers and representative buyers.

The next step in product positioning is to determine how to convince these segments that they will be making a wise decision in buying this particular kind of herbal product, which is better than the competitors' choices, and that they can rely on the company to meet their needs. To do this, one needs to keep in mind that in terms of the marketing mix, there must be a balance of customer segmentation and product segmentation. All elements of the marketing mix need to take into account how best to create trust and value over the long-term. Having customer testimonials will definitely help, as will the use of video showing how the beauty products are made. All of these factors need to work together in order to create a high level of confidence in the product and also get prospects motivated to try it.

A key assumption of the marketing strategy across all channels is that there will need to be a high level of product trial in order to convert prospects into customers. The greater the level of activity on product trials, the higher the level of eventual loyal customers to the brand. This is critically important as each distribution channel needs to invite prospects to try the product at least once and see if they like it. It would be an excellent strategy for launching all digital or online channels to concentrate on free trials to begin with, as Erb Asia will certainly see churn of prospects to customers over time. Reducing this churn aspect of their marketing strategies with free trials will serve to more quickly grow the customer base over time. Second, a product trial also can be used effectively for creating trust throughout distribution channels over time (Neslin, Shankar, 2009). Third, using trial versions will also give Erb Asia insight into which demographic customer segments are most and least drawn to the scents and beauty products. This insight into the product, promotion and distribution or place aspects of Erb Asia's products will be invaluable in defining more effective strategies in the future. What Erb Aia needs to concentrate on is how to align their marketing mix variables of product, price and promotion to ensure that the emerging distribution channels of social networks

(Bernoff, Li, 2008) and long-standing e-commerce channels are used to the maximum extent possible. Realizing that consumers are more reliant than ever on social networks as a means to learn about new products, and Web-based channels are delivering more analytics and measures of performance than any off-line channel, Erb Asia needs to re-orient its channel management strategies to capitalize on these two strengths.

III. Marketing Channel Characteristics

The many benefits of relying primarily on a Web-based distribution channel strategy are discussed here, in addition to the marketing mix factors critical for their success. A pro-of marketing on the Internet would be a greater access to a larger customer base, 24-7. Another pro-is that it cuts down on the costs of having to operate an actual physical franchise. A con is that sometimes Internet-based sales can require complicated infrastructure. There is also the possibility that the network can crash. Overall it would be relevant for Erb to sell herbal products on the Internet. The company should be willing to take the risk that being the first mover entails in terms of moving fast in a changing market. There are also drawbacks to this situation: this can sometimes be traced to substitute products, which are increasingly available in the Internet's increasingly international marketplace.

What is also going to be very critical for the success of Erb Asia's channel management strategies is how they choose to create their channel partner organization. In the Visual Aids section of this analysis, the sales-oriented channel organization model illustrates how critical it is to have channel marketing, channel management and channel development all integrated with each other. The graphic illustrates how the design of an organizational structure needs to support and strengthen the channel management strategies of the company. Erb Asia needs to pay close attention to how their channel management organization is structured, as it will be an essential foundation for supporting its multichannel marketing strategies and efforts to attract resellers, distributors and dealers (Neslin, Shankar, 2009). Creating an effective multichannel management strategy will also be predicated on providing resellers with online applications and tools that are suitable for completing complex reseller tasks as well. As the business model for Erb Asia is to initially sell entirely over the Internet and eventually branch into supporting a multitier distribution strategy that includes distributors, dealers, resellers and partners, the needs of channel partners is critical for the long-term success of any marketing strategy. For Erb Asia to grow into a globally-based brand, they will eventually need to also rely on distribution channels for the majority of their revenues as well. All of these factors are the most critical characteristics of their business, and the specific needs of their channel partners are discussed in this section.

Erb Asia needs to concentrate on how to make their resellers and channel partners successful over the long-term by concentrating on three distinct phases of the marketing cycle. Studies have shown that to the extent a company can Assist resellers in these three phases is the extent to which they themselves also benefit from a greater clarify of focus and execution. The Attract- Sell -- Serve paradigm is critical for any company relying on channel partners (Neslin, Shankar, 2009). The characteristics of successful marketing channels are predicated on creating an effective balance between attracting new customers, selling to them cost-effectively over time, and finally serving them over the long-term. Erb Asia needs to take into account how their unique value proposition can be supported and strengthened with this approach of segmenting their channel strategy across these three areas. Beginning with the Attract Phase, Erb Asia needs to concentrate its marketing mix on lead generation and lead management on behalf of its resellers and also to better understand the specifics of a given market. The Attract Phase of the paradigm is also where the offer of free trial samples needs to be made, and the coordination of strategies to ensure a high elvel of trust over time (Neslin, Shankar, 2009). The Attract Phase of the Attract -- Sell -- Service paradigm can also be indispensible in seeing how best to manage sales opportunities, product messaging impact on prospects, and how effective multichannel strategies are in attracting and holding onto new customers. The Attract phase is also very analytically-based as companies often go through extensive trial-and-error testing to see which strategies will be the most effective over the long-term (Lester, 2004).

The Sell phase of the paradigm is equally important across both the Erb Asia reseller base and for the success of its direct selling strategies as well. This is the area of the channel management strategy where pricing and the impact of product messaging, positioning and competitive differentiators play the most critical role (Lester, 2004). It is also the area of the multichannel management strategy where the value of trust-based initiatives in the Attract phase are either proven or refuted, and the level of success from free trial programs can be clearly valuated. In short, the Sell phase can provide insights into which strategies are best performing, which are weakest, and why. It can also help to explain why one type of strategy is highly effective with channel partners and another is not.

The final phase of the Attract -- Sell -- Serve paradigm is service. This is also critical for continually creating and sustaining a bond of trust with the customer, regardless if they have purchased for years or just the first time (Neslin, Shankar, 2009). The service phase of the paradigm is also the most costly for many companies to support, especially when it comes to managing their channels effectively. For Erb Asia the challenge will be to ensure that product returns are managed quickly and accurately, and that if any customers have any dissatisfaction at all, it is dealt with quickly and professionally. Service also needs to rely heavily on a social networking and conversation-based approach to staying in touch with customer needs and wants (Bernoff, Li, 2008). Relying on social networks for this aspect of the marketing mix can significantly reduce the lag time associated with other mediums often used for this purpose. It can also provide for greater tracking and measurement of customer satisfaction as well. For all of these reasons and the fact it is very cost effective, more companies are using social networks than any other for channel partner and customer support (Bernoff, Li, 2008).