Distributed Marketing

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Distributed Marketing

Distributed Marketing is a particular type of marketing in which organizations with corporate marketing departments market branded products or services through local partners such as retailers, affiliates, channel partners, value added resellers (VARs), field agents, or other local entities.

The essence of distributed marketing is decentralization. The corporate entity or brand must execute all aspects of marketing through local partners in a decentralized fashion where messaging emanates from the local partner even though it is greatly facilitated by the brand. Often times, the marketing and sales pathway between brand, distribution point, and end consumer is a called a channel, thus Channel Marketing is a synonym for distributed marketing.

History

In the 1960s "unrelated diversification" was common and vertical integration (in terms of owning the whole sales channel) was the default; companies like Sears embodied this dynamic. By the early 1980s intense competition and stockholder demands for bigger returns forced companies to realize that they could make greater returns by focusing on their core competencies and competitive advantages. That reevaluation reached over into a questioning of which channel functions were appropriate for firms to own in-house and which should be outsourced to specialized firms due to lack of scale or competency. For the purposes of distributed marketing it is notable that over time manufacturers became less interested in forward integration into retailing, and retailers became less interested in backward integration into manufacturing.[1] Coordination between manufacturer (brand) and local partner (retailer) in regards to generating demand in local markets through marketing efforts further evolved and gave rise to distributed marketing.

Channel Conflict

Brands selling through local partners came to be the dominate model, but the proliferation of ecommerce allowed brands that traditionally distributed products and services through local partners to sell to customers directly. As more brands have begun selling directly to customers local partners have voiced discontent that those sales would have passed through local distributor networks had it not been for the brand’s direct sales program.

Some brands that had started direct sales programs dropped them all together to avoid this channel conflict, while others assure their local partners that direct selling addresses different segments of buyers, thus avoiding sales cannibalization between brand and partner. Retailers have every right to be concerned, but the reality is that online sales only account for six percent of the of the US retail industry. (Department of Commerce) Brands maintain that direct marketing associated with direct selling programs benefits local partners by contributing to the awareness of the brands they sell. [2]

Channel Coordination

Marketing through a distribution channel requires control structures many of which are dictated by the nature of the distribution channel, open or closed. Open (conventional) distribution networks are composed of independent firms that sell branded products while closed (corporate) distribution networks are intrinsically part of the same corporate entity or under contract that obligates them as an extension of the corporate operation.

Three general control mechanisms have been proposed to coordinate channel activities for distributed organization: authoritative, contractual, and normative.

Authoritative – One party authoritatively controls channel functions due to an imbalance in power resulting from one member in the relationship having greater resources that the other member values disproportionately.

Contractual – Roles, responsibilities, and recompense is defined by the parties involved in carrying out channel activities.

Normative – For conventional channels, norms govern channel activities such as how both parties interests are considered in decision making (fairness norm), how information is shared between brand and local partner (openness norm), and how defined policies can be modified as needed (flexibility norm).

All structures remain in existence today, but those involved in managing distributed marketing / channel activities shifting towards the normative structure that relies on relational trust and attitude. [3]


References

  1. Weitz, Barton; Sandy D. Jap (1995). "Relationship Marketing and Distribution Channels". Journal of the Academy of Marketing Science 23: 305-320. http://faculty.mu.edu.sa/public/uploads/1360935626.7652relationship%20mark71.pdf. 
  2. Chiang, Wei-yu Kevin; Dilip Chhajed, James D. Hess (January 2003). "Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design". Management Science. 1 49: 1-20. http://web.nchu.edu.tw/pweb/users/hsiaolu/lesson/9916.pdf. Retrieved 12/11/2013. 
  3. Weitz, Barton; Sandy D. Jap (1995). "Relationship Marketing and Distribution Channels". Journal of the Academy of Marketing Science 23: 305-320. http://faculty.mu.edu.sa/public/uploads/1360935626.7652relationship%20mark71.pdf.