Tuesday, 22 June, 2010

It's not Advertising ... It's the Boring Distribution..

Why is it that all Marketing Strategy articles in business papers or by self proclaimed analysts talk about only how advertising has helped the blue-chip companies..the advise they give, the examples they cite do not have much relevance to actual sales..Why do we tend to forget that marketing is not a synonym for advertising rather advertising is a part of marketing as a whole..

So few other important aspects , include Packaging, Distribution etc.

Advertising is a tool to create brand awareness in 99% cases it does just that(we have zillion reports stating this obvious fact) whereas a Purchase decision by an individual is a result of a good dose of other factors.

Distribution is one such factor which is mostly overlooked( not given its due importance) and if done smartly can really work out for your Brand's success..

Let's talk practically..

ITC came out with Bingo an new brand of chips in this over crowded/competitive market..and evidently they rolled out a massive Ad- Campaign ,With some really down right stupid ads,their Ads solved only for one purpose, that of buliding Brand awareness and and they did manage to achive that.The ads were so abstract and bland that they could hardly entice the consumer to buy.

Then what did the trick for Bingo?? well the answer lies in the massive Distribution which is infact ITC's shining armour .

You had Bingo everywhere.. n infinite varities..at places and shops which may have never even kept any chips brand...n this Distribution forte which Is ITC's strong point helped them in the end..

We can take a number of examples where the success or faliure of the brand has been due to the Distribution, Irrespective of the Ads or lack of them.

For e.g. Chevrolet - It has slowly build for itself a vast distribution network and its sales can be directly related to This very fact, not that they give 3 years of free servicing n etc..

Let me point another unique example, Have you heard of a beer called Kalyani Black Label, Those who have would agree that it is one of the finest beers ever, It has won various awards in which it had some serious local as well as global brands as competitors.

But sadly,Particularly in North India this brand now owned by UB group is hardly avaiable.. it does a brisk business in North-East ..Calcutta n Guwhati etc.

The reasons is simple UB wants to promote it's Kingfisher Brand more..

Others also do it, very famously Coca Cola did it with Thumps up, It purposely censored the distribution for Thums-up , but after years of cowardness .. Thumps-up was made available again.. and now it out sells both Coke n Pepsi in the Indian market, but even now its hard to find a Thumps-Up Can in Tier-2 cities (don't know why..or maybe the answer is below)

Another example is how these days you hardly find retailers keeping the Glass bottles of Coke ,Pepsi, Thumps- Up etc (specially in Tier 1 cities) wha you get is the Pet Bottle, this is wonderful strategy which helps them sell the larger size of their product and increase their Top-Line,just another way of what you distribute..

Ok so now from above examples you may see some merit in the notion that Distibution plays an important part in the eventual sales..

Now what I really wish to understand and learn is,

How do those companies which can't advertise ensure that they have a good distribution network?

Well there are host of companies who can't advertise, the whole unorganized sector, which is 95% of the retail sector consist of such companies and brands.

Example-- have you ever seen an Ad or even heard of the following :

JK files

Pye Tools

Jhalani Tools

Ramchandra Sahai

SS Fitting

Unique Fittings

All of the above are the market leaders in the various industries which they are in.. they are not white goods(consumer durables) It is these brands I'm more keen to learn about.

How does SKF bearings manage to Distribute it's product so well ?

How does a Pye Tools whose screwdriver is in every hardware shop?

Today its easier to sell an Audi to a customer than selling a new Biscuit Brand to the retailer.

This is precisely what is not taught at B-Schools and what is never mentioned in a Bussinesworld or an ET.

My Point is that the well known Brands can easily expand their sales with an efficient distribution network, which they really don't make the most of.

But how does a small unknown or New Brand embark on this journey to have a presence everywhere?

So what are the options:

a.Start and concentrate one place at a time

b.Expand at the expense of squeezing margin

c.Exploit existing market dynamics

Well combination of a. and c. is what we see when we go outside any city where you find these Local Brands of mineral water. They are priced the same and sell because their is no alternative.

b. Is done by a Halidram which launches it's brand of Chips, or a Tropicana to compete with Real Juice, or any non FMCG or Non- consumer durable brand like a Supreme Tools which come out with their set of screwdrivers.

I'm again back to these Co's who live in shadow markets which we don't know about.

They are more for specialists like an engineer, a mechanic, a plumber, Or a computer technician n etc.

But why I'm after these boring products well:

Min 400 shops in chawri bazaar..

Min turnover 1 Cr each

Total- 400cr..

The above is a hypothetical case, The Real turnover is in Thousands cr's a year.

Now you know why i wanna know about them...

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