The history of marketing and distribution systems
1. Marketing & Distribution
2. Marketing & Distribution Origins Modern marketing and distribution systems are
a result of: rise of living standards new spending habits technology
advances wide variety of products inter-firm competition substitute goods
transportation advances national markets Companies need to shift focus from
„optimizing to creating markets by: investing in customer loyalty developing
techniques of mass marketing developing wider distribution networks
3. Marketing & Distribution Three distinct time periods I. „The Emergence of the
Mass Market (1880 - 1920) II. „The Maturing of the Mass Market (1920 - 1940)
III. „Reconstruction, Economic Growth and Consumer Boom (after 1940)
4. Marketing & Distribution „The Emergence of the Mass Market (1880-1920)
marks the beginnings of modern marketing & distribution Characteristics: • large-
scale companies & national markets • high volumes, low margins, large profits •
department stores, mail-order companies Strategies: • diversification and
expansion of consumption • change of life habits & consumption patterns • shift
from price & production to product, advertising & branding.
5. Marketing & Distribution 1880-1920: Great Britain Conditions: • growth of urban
population • increase in real wages Marketing: • focus on quality, product identity
and branding to secure customers loyalty • advertising in urban areas & through
mass newspapers Distribution: • long-distance deliveries • development from
fixed shops & multiples to national retailers: Marks & Spencer, Sainsbury, W.H.
Smith • department stores in cities: Harrods, Selfridges
6. Marketing & Distribution 1880-1920: U.S.A Conditions: • extensive railway
system national markets • increase in urban population • high living standards
Marketing: • focus on mass advertising ng campaigns: Coca-Cola, Royal Baking
Powder, Sapolio soap • shift from product-orientation to customer-orientation:
values, status, prestige, desirable lifestyles Distribution: • general stores in small
towns and rural areas • chain stores, department stores and mail-order
companies in cities • big manufacturers operated own wholesaling networks:
P&G, Colgate, Gillette, Heinz
7. Marketing & Distribution 1880-1920: Continental Europe Conditions: • population
more scattered in rural areas • focus on other industries than consumer goods
(Germany, France) • differences in living standards between regions (Italy) no
national markets & less advanced mass consumption Marketing: • few
transformations in branding, packaging, advertising Distribution: • department
stores in cities: Wertheim (Germany), Au Bon Marche, Le Printemps, Galleries
Lafayette (France) • regional mail-order companies (Italy & Germany)
8. Marketing & Distribution 1880-1920: Japan Conditions: • high level of
urbanization • expanding demand for goods (BUT not like G.B. or U.S.A.)
Marketing: • first attempts to use advertising and brand identity for traditional
products: rice, soy sauce, sake Distribution: • extensive network of general
stores, later specialist stores and department stores in urban areas
9. Marketing & Distribution 1920-1940: „The Maturing of the Mass Market
Characteristics: • USA – leading world economy • higher segmentation of
markets Strategies: • expanding marketing operations • value-based pricing •
psychological understanding of consumers through marketing research •
techniques to forge a consumer culture based on choice, lifestyle, prestige rather
than price & basic wants • emotive, associational advertising
10. Marketing & Distribution 1920-1940: U.S.A. Conditions: • USA – leading world
economy • booming consumer demand • large-scale comp
11. Companies Marketing: • marketing becomes a key business function within the
company • advertising focuses on emotional wishes rather than basic wants,
uses radio, TV • advertising & market research agencies use statistical testing &
demographics to understand consumers Distribution: • department stores in cities
• chains like A&P, Woolworth, J.C. Penney expand
12. Marketing & Distribution 1920-1940: Great Britain Conditions: • far behind the
USA in terms of living standards • consumption patterns change Marketing: •
focus on statistics to plan output & distribution • focus on sales efforts and
intensive advertising Distribution: • concentration of retailing outlets &
supermarkets like Tesco, Sainsbury advantages in bulk purchase, price &
image
13. Marketing & Distribution 1920-1940: Japan Conditions: • concentration of the
population in urban areas Marketing: • need for new approach in marketing
beginning of the „modern marketing era in Japan Distribution: • arrival of station
terminal shops that competed with small retailers for the urban middle class •
producers establish own wholesale & retailing networks
14. Marketing & Distribution 1920-1940: Continental Europe Conditions: • different
development pace of countries • focus remains on technology & production
(Germany) • increase in consumption (France) Marketing: • foreign brands enter
Germany (Rama, Coca-Cola) • imitation of marketing techniques from U.S.
(Holland, Italy, France) • advertising intensifies, using slogans & illustrations,
psychology of consumer • sophisticated advertising campaigns: Pirelli, Ollivetti,
Cirio Distribution: • department stores start operating on national scale
15. Marketing & Distribution after 1940: „Reconstruction, Growth & Boom“
Characteristics: • USA – international lead in marketing techniques • huge gap
between US and Europe/Japan (war costs, reconstruction) • post war boom
narrows the gap, European & U.S. life standards become similar Strategies: •
shift from statistics-based to psychological analysis of human desires –
„motivational research“ • TV becomes an important medium for advertising •
supermarket chains like Auchan, Metro, Edeka become dominant suppliers
(Germany, France) • new low-cost chains & discount stores threaten traditional
multiples • shopping mall – center of life outside home (U.S.)
What is 'Distribution'
Distribution occurs when the trading volume of a security is greater than that of the
previous day without any price increase. Distribution is the disbursement of assets from
a retirement account. The assets from the account are paid directly to the retirement
account holder or beneficiary either electronically or by check.
BREAKING DOWN 'Distribution'
Distribution also refers to a company's payment of stock, cash or physical products to its
shareholders. Mutual fund companies give earnings and other payouts to shareholders
as a distribution. Distribution is an allocation of capital gains and income that mutual
funds generate for their investors periodically during a calendar year. Distribution is a
payment of interest, principal or dividend by the issuer of a security to the shareholders
on a regular basis.
The income generated from an investment trust is awarded to investors, typically as
monthly or quarterly distributions. For this reason, distributions function similar to stock
dividends. However, distributions typically offer higher yields that can be as high as 10%
a year. The distributions received lower a trust's taxable income and, as a result, little or
no income tax is paid.
How Distributions Work
When a corporation earns a profit, it can reinvest the funds in the business and pay a
portion of the profit to shareholders in the form of a dividend. If the company offers a
dividend reinvestment plan, the amount can be paid out by the company as cash for
further shares or share repurchase.
Mutual funds give dividend and interest income collected from their portfolio holdings as
dividends or income distribution to fund shareholders. Furthermore, capital gains from
the fund’s trading activities are disbursed as capital gains distributions at the end of the
year.
Mutual fund distributions are generated from net capital gains made from the sale of a
mutual fund's investments and dividend income and interest earned by a mutual fund's
holdings minus the fund's operating expenses. For example, if a stock is bought for $75
and later sold for $150, the capital gains is $75 minus any operating expenses.
Distributions from individual retirement account can occur at any time. However,
account holders must meet specific requirements before distributions can occur from
qualified plans, such as 403(b) accounts and 457 plans.
Retirement account distributions fall into two categories. One category is those taken
prior to age 59½, which are subject to an IRS penalty and ordinary income tax. The
other category is those taken during or after an individual turns age 59½, which is taken
without penalty. The retirement account holder may be bound to pay income tax on
distributions paid during the year.
Once dividends and distributions are disbursed, the fund’s share price declines by the
total of the per share distribution to the fund’s shareholders. The price declines because
the distribution is withdrawn from the fund’s assets, which decreases the net asset
value.
WHAT IS DISTRIBUTION MANAGEMENT?
A study on the basic tenets of distribution management is better anchored on a
comprehensive appreciation of distribution as a function of the marketing strategy. A
quick review on the concepts of marketing mix, the market and customer segmentation
is therefore important as a segue to the discussion of the fundamentals of distribution
management.
Placement in the Marketing Mix
In the light of sound marketing framework, a firm needs to formulate, implement and
evaluate a plan that focuses on the elements of the marketing mix that marketing
practitioners must find creative ways to control in order to best satisfy target consumer
segments. We define consumers here as those who will finally consume or use the
product or service.
There are the classical four Ps, or elements of the marketing mix to be managed by the
marketing organization, namely:
Product: A product is not always necessarily tangible like an anti-dandruff shampoo. A
product could be intangible like an idea, music or information. Your cellphone load or
credit is an intangible product. It could also be a service (e.g. spa, hotels, resorts), or
any combination of the three;
Price: This refers to the value of a good or service for both the seller and the buyer,
which can involve both tangible and intangible factors, such as list price, discounts,
financing, and likely response of customers and competitors;
Promotion: This is any communication used by a seller to inform, persuade, and/or
remind buyers and potential buyers about the seller’s goods, services, image, ideas, and
the impact it has to society, to influence buyers to make purchasing
decisions. Promotions are effective tools to increase demand and differentiate a
product or service;
Placement or distribution: This refers to the process that ensures the availability,
accessibility, and visibility of products to ultimate consumers or business users in the
target channels or customers where they prefer to buy. Distribution decisions include
market coverage, channel member selection, channel coordination and conflict
management, logistics, and service levels.
in addition to the abovementioned four Ps, four other elements are suggested by various
authors to form a more comprehensive mix of marketing strategy:
Packaging: a product’s physical container, label, and inserts;
Public: the company’s corporate social responsibility (CSR) practices affecting the
community where the firm operates;
Profit: the primary goal of a business.
In this new era, distribution is not just about moving the products from the point of
producers to the point of consumers. It involves such functions
as gathering and sharing of relevant information that can be used to identify key
opportunities for growth and competitiveness in the market. Most progressive
companies utilize their distribution forces to obtain market intelligence that are vital in
assessing their competitive position.
There are basically two types of distribution: Commercial Distribution or commonly
known as sales distribution (the book will delve only on this type of distribution);
and Physical Distribution - also known as logistics. It involves such diverse functions
as customer service, shipping, warehousing, inventory control, private trucking-fleet
operations, packaging, receiving, materials handling, and plant, warehouse, store
location planning, and the integration of information. Its intent is to efficiently deliver raw
materials, parts, partially and completely finished products to the right place and time in
proper condition. Physical distribution planning should be aligned to an overall channel
strategy.
Distribution Management as a Marketing Function
The fundamental idea is that as a marketing function, you now manage your distribution
while considering all of the marketing “Ps”. It is not just selling your product, but it is
selling your product while ensuring sufficient stocks in channels, carefully considering
your promotions in those channels and their varying requirements. It is ensuring that
your supply chain is efficient enough that your costs to distribute are low enough and
your product can be sold at the right price, thus supporting your marketing strategy and
maximizing profit. Even before considering commercial or physical distribution, you
would have to start at the product itself, reviewing its specifications and making sure
that it sufficiently tackles a consumer’s needs. In considering distribution management
as a marketing function, we step away from “supply-side thinking” and start with a view
of the whole picture, the consumer now in the center.
What is a 'Distribution Channel'
A distribution channel is a chain of businesses or intermediaries through which a good
or service passes until it reaches the end consumer. It can include wholesalers,
retailers, distributors and even the internet itself. Channels are broken into direct and
indirect forms, with a "direct" channel allowing the consumer to buy the good from the
manufacturer, and an "indirect" channel allowing the consumer to buy the good from a
wholesaler or retailer.
BREAKING DOWN 'Distribution Channel'
A distribution channel is the path by which all goods and services must travel to arrive at
the intended consumer. Conversely, it is also used to describe the pathway that
payments make from the end consumer to the original vendor. Distribution channels can
be short or long, and depend on the amount of intermediaries required to deliver a
product or service.
However, goods and services are sometimes passed to consumers through multiple
channels, a combination of short and long. While increasing the number of ways in
which a consumer can find a good can increase sales, it can also create a complex
system that sometimes makes distribution management difficult. In addition, the longer
the distribution channel, the less profit a manufacturer might get from a sale due to the
fact each intermediary charges for its service.
