Systems Approach to Marketing: Your Marketing Communication Costs, Product Development, Packaging & Sales are Connected to Your Distribution System

Your marketing communication costs are very closely linked to your distribution channel. Many people don't get this connection until they pause and reflect.

Look at the following case - product category: toys in 4 distribution scenarios:

1) Time Period 1, Distribution System 1 --- If a large percentage of toy sales happen through the conventional channel of dedicated toy stores (Like it happened in 1970s and 1980s) The product would introduced, explained and demonstrated to the consumers (kids) and buyers (usually, the parents) by the employees of the stores as it was their job at conventional stores.

2) Time Period 2, Distribution System 2 --- Now, if MOST consumers shift to departmental stores for their toy shopping. In departmental stores, floor employees shift frequently between departments and hence, might not have that expertise or time to introduce, explain and demonstrate my toys. Therefore, the time and effort for this activity would reduce until and unless there are dedicated employees to handle the toy section and they do it consistently (which is less likely).

3) Time Period 3, Distribution System 4 --- Now suppose, with time if MOST customers start buying toys from the big box retailers (walmart, decathlon etc) which are focused on achieving cost leadership focused and therefore do not even put employees dedicated to specific sections of the store then there is often no one present to introduce, explain and demonstrate the toys to the customers and consumers.

4) Time Period 4, Distribution System 4 --- if most of the toys are bought online where I can use images and videos for introducing, explaining and demonstrating my toys. I also have customer reviews and FAQs to explain things or my point of view.

It would be easy to understand that the advertising budget would increase and decrease with this movement of customers from one retail format to other.

As we move from scenario 1 to scenario 3, the opportunity to introduce, demonstrate and explain the product reduced drastically and in scenario 4 it again increased. when I cannot introduce, explain and demonstrate my product through 1 channel I will have look for another channel. So, in this case, till scenario 3, the economical and inter-personal marketing communication which was happening through the store salesman in the first scenario will shift to other mediums like TV or/and online. Accordingly the costs would vary.

In fact, we can have a Scenario # 5 where all the retail formats give me almost equal sales. Now, as you can see, 2 out of 4 formats give me a platform to showcase my product but for the remaining 2 I would need to deploy other mechanisms. That would affect my marketing communication costs accordingly.

Distribution system is also connected with packaging - If I get a medium that can introduce, explain and demonstrate my toys well in the store to the consumers and buyers alike (like in in scenario 1 and 4), then it is also affects the packaging of the toy as the packaging can be simple. However, if there is scenario 2 and 3, where I dont have that medium, my packaging will have to be very informative. Extremely informative packaging of a toy generally makes it non-appealing to kids (consumers) and confusing to parents (customers).

Distribution system is also connected with the choice of target segment - If it is felt that the toys are not explained and demonstrated in the store and if the cost of other mediums of marketing communication is too high, I will need to shift my target market towards adults, who can read the package and understand the product themselves. I might also start targeting them completely, that is, developing toys for them as they get more involved in getting to know the products.

Distribution system is also connected with what ultimately sells and what we end up making - when I use other mediums like advertising to explain my toys to the target market, I might realize that the sales of those products (toys) increases which can be explained properly in a short time period (10 - 30 seconds of TV commercials). This might affect my product development, as the mandate would be to develop products which can be explained properly in that small time window.

Thats the point! Marketers need to understand these interconnections and plan accordingly. This is one of the things we teach in "Systems Approach to Marketing".

By the way - this happened in US as the retail format of choice shifted the toy industry's advertising budget which was $9 million in the 1960s to approx. $1 billion by 1980s.

Inspiration - Predatory Marketing by C B Beemer