Businesses spend years in building an efficient distribution network. Through the distribution network, every business strives to make its products available for consumption at the right place at the right time and at the right price point. Not being able to do that can easily lead to loss of revenue and customer churn. This holds especially true in low involvement products where there isn’t much differentiation within competitors.
On the other hand, efficient distribution can be a huge differentiator for a business and gives it an edge in the marketplace, irrespective of any differentiation in the product or price. Just the availability of the products as per consumer’s comfort can help a business grow. All the investments in customer acquisition initiatives like marketing, advertisements, promotions etc. can go for a toss in the absence of a robust distribution setup. It is like generating the demand for your products but not being able to fulfill it. It is a straight opportunity loss – apart from the customer experience and perception thatgets impacted, which is one the toughest challenges in marketing to correct.
You would already be aware of the above facts. Businesses have been working on it since last 2-3 decades. Most large players have extremely strong distribution networks now. They have done all the heavy lifting in setting up their supply chain which moves goods from factories till it hits the shelves.
While you may have a robust distribution network, here are a few things that you may have overlooked:
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Is your differential advantage through a strong distribution network sustainable?
An organization may be having a world class distribution network, but it is something that competitors would be able to catch up with. In fact, competitors have an advantage of knowing your channel partners and the strategies that you deployed in terms of distribution. The lead time for them would be shorter in reaching the same stage. They also have access to the same talent pool. They have an advantage of not repeating the mistakes that you did. The question then arises, what are you doing to make your distribution network a sustainable differential advantage?
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Are the efforts and budgets allocated towards innovation in distribution management sufficient?
Innovation is definitely important in this fiercely competitive market across all industries. But, businesses have to be mindful of the fact that innovation might not be in just developing new products or a first-of-its-kind marketing campaign. Innovation can very well be in the tools and technologies that you deploy in your distribution network. These can give you an edge over your competitors who may have an equally strong distribution network. The investments in such innovations are comparatively lesser and can deliver a better RoI. At the same time, it gives a business the flexibility of going through PoC, pilot and phase-wise implementation stages. So, even if you have to fail, you would fail fast without too much of an impact to business, consumer perceptions and investments.
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Is the right data being used to measure the success of your distribution network, or to assign targets to your channel partners and sales teams?
There are weekly, monthly, quarterly reviews with sales targets which happen in every sales organization. These numbers usually indicate what you were able to sell to your channel partners. It also indicates your profitability. Is it in line with the product-wise, geography-wise, channel-partner-wise forecasts and targets? Are you meeting the targets or exceeding them? If yes, it is considered to be a success and it is assumed that all is good with the network. There are many questions which are based on actual end-consumer demand rather than sales numbers.
- Do you know what was the total end consumer demand for your products?
- Were they able to fulfill this demand later or they lost that demand to a competitor?
- What percentage of the end consumer demand is being fulfilled by your channel partners?
- How is the financial health of your channel partner, is he sitting on piles of non performing inventory?
- How many times and for which products did your channel partners run out of stock?
- Is the spike in sales because of a promotion or because of seasonality effects?
Only when you have answers to such questions, you can call your distribution management a success or failure. It may be a case that your marketing and customer acquisition initiatives were capable of delivering more than they actually did. You may have not realized the true value out of these initiatives. But do you have the data to measure that? A target v/s actual measurement would never give you all the answers that you need.
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Is your distribution network capable of providing the required data for adopting new age methodologies like AI, ML, Predictive Analysis etc.?
The answer to this question is as good as a YES or a NO. If yes, you are geared up for technological disruptions that your competitor may use as a differential advantage. If no, you must embark on the data acquisition journey as soon as possible.We have more interesting insights to share with you in this space. In our coming blogs we would be touching upon different aspects of leveraging technology to add value to distribution, promotion, channel sales etc. for your brand.
Deepak Parwani
Senior Consultant, EdgeVerve
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