Channel Pioneer

When Doug Ivester was the CEO of The Coca-Cola Company, one evening he was shopping on Nanjing Road in Shanghai, accompanied by several senior executives from the Chinese branch. When he walked into a few street shops to buy Coca-Cola, he found that there was no trace of Coca-Cola at all. This disturbed him deeply. "Why can't I buy frozen Coca-Cola anywhere?" Aihuas sighed when he walked to the end of Nanjing Road.

The point of the story is that while Coca-Cola may already be the most famous brand in China, and it accounts for half of the Chinese beverage market, it always needs to find opportunities for more, and more and more consumers, to get its products.

“Our job is not to distribute Coca-Cola or any other product into the hands of hundreds of millions of consumers, but to build a personal connection with each consumer at every purchase.” Ai So said Huashi's successor, Doug Daft.

To do this, companies must make themselves ubiquitous—a golden rule that all marketers have taken to heart, and one that Coca-Cola's management relentlessly pursues. "The more ubiquitous we are, the more certain we are of success," said Irial Finan, a confidant of Neville Isdell, the current president and chief executive of Coca-Cola.

Making your products ubiquitous and readily available is the ultimate goal of any business' marketing team, especially the distribution channel management team. Some teams have adopted new channel management approaches, reorganizing their distribution channels to suit the needs of different products, consumer groups and markets. We are seeing more and more companies breaking the rut of the past by transforming their distribution channel processes.

These businesses are known as channel pioneers. It is they that make the channel increasingly flat, and it is they that make the channel narrower and deeper. These companies tend to adopt advanced science and technology, but sometimes rely only on common sense. Not only do they allow channels to do their best, but they also unlock many new uses.

With their continuous efforts, these channel pioneers have been rewarded handsomely: greatly reduced logistics costs, satisfactory order fulfillment rates, shrinking cost of sales, enhanced bargaining power with suppliers, and the ability to Customers offer a wider selection of products, double-digit operating margins and, of course, sales expansion.

The end is the starting point, everything starts from the consumer

The channel strategies adopted by these channel pioneers may vary, but one thing is the same, that is, no matter what they do, it is always from every end consumer starting point. “In order to connect with every single consumer, we have to understand their lives,” says Du Dafu.

Innovative companies have worked for decades to better understand their consumers' lives, and then, based on that understanding, develop new channel models to meet their needs.

Many consumers who buy personal computers need someone to help them choose from a wide variety of computers. In order to meet the needs of these people, Dell has abandoned the traditional distribution system and adopted telephone ordering and sales.

When Dell entered the personal computer industry, many companies in the industry were shifting from a distribution model of small franchise stores to large retail chains. As its rivals struggled with the shift to retail channels, Dell found a way to help consumers while skipping a network of resellers or distributors to sell PCs. Through the use of communication technology, Dell has created a new channel to replace the traditional distribution channel. The Dell model was later successfully used in other industries. Daewoo, for example, has also ditched the traditional network of car dealers.

Many well-known market leaders are using sales and distribution channels to create a competitive advantage for themselves. Andersen, a manufacturer of windows and doors, is one example. The windows sold by Anderson are not available in retail stores and can only be made to order. The only chance to see their products in retail stores is when the company attends special events, which are often training homeowners, contractors, and do-it-yourselfers.

Direct selling provides a very flat marketing channel for businesses. Motor control maker Allen Bradley and commercial air conditioner maker Trane Company each formed a network of independent sales representatives. These direct sellers are usually extremely well-connected in their respective local markets.

Hilti, which makes screwdrivers, created a competitive advantage by selling directly from the company's own trucks. In order to truly "understand the consumer's life" as the starting point for its channel management, Hilti emphasizes that going deep into the market must be part of its senior management's job. Members of the executive board are in the market at least 50 days a year to listen to consumers.

Perhaps the most famous of the flat channel pioneers is IBM. During its most successful years, IBM had the best direct sales force, each of whom maintained excellent relationships with the information technology managers of the client companies. This personal relationship with the end customer enables IBM to provide a higher level of service.

Varies by channel, turning products into services

Most channel pioneers are manufacturers. However, at heart these companies are actually distributors. The famous tool maker Snap-on is one of them. Schneeble invented its own channels to sell its high-quality tools. The company skips traditional retail channels and sells its high-quality products to end customers through franchised dealers who operate mobile stores.

In "Channel Champions," by Steven Wheeler and Evan Hirsh, describes how this direct selling model is a recipe for success in improving consumer satisfaction. : "Snabel's famous white van - also known as the retail store on wheels - has become a sight in many countries around the world. Snippet's franchisees are carrying $100,000 of inventory to their mobile stores Drive to places frequented by mechanics and car enthusiasts. In addition, Schneider's own technical representatives drive 325 vans to provide training and technical support to dealers who are on the road.

“Schneider Bao's business model looks complicated, but it's actually very simple. Consumers know when to meet them again. All contact is face-to-face, one-on-one. The blood on which Snippet lives is an ongoing connection between franchisees and their customers. Essentially, Schneider created a marketing channel based on a network of personal relationships. Compared with its competitors, Schneider has long realized that consumers have no time to put down their jobs to buy tools. They are willing to pay the extra price for the delivery of high-quality tools to their door.

In addition to selling via mobile vans, Schneider has also expanded its sales to the Internet. This allows the company to reach new consumer groups that are not accessible to vans. The website also enables traditional consumers to Shop online at your convenience.

Like other channel pioneers, Schneider offers not only products, but a collection of different services through various channels.

Integrated services, composite channels maintain competitive advantage

This combination of services and channels has led to the birth of another innovation, the so-called "composite channel" or "integrated channel" ". A composite channel is a complex that brings together companies with different specialties such as sales, order fulfillment, installation, and repair. For example, a lead pipe manufacturer might use lead pipes from a building materials supermarket, while installation and repair services are provided by other contractors.

Sometimes, multiple channels are a great opportunity to maintain a competitive advantage. Gateway Computer's channel is a form between Dell's direct sales model and HP's retail model. Gateway can customize the computer to the needs of consumers, while also allowing them to see physical products and have face-to-face conversations with salespeople.

Volvo GM Heavy Truck Corporation is another pioneer in the composite channel. Volvo's adaptation of its channels to various conditions has become a model in channel management. Between 1993 and 1995, Volvo-GM Heavy Trucks dealers began reporting shortages of key parts. The phenomenon of out-of-stocks was not found during the regular maintenance period, and the dealers were quite good at forecasting the demand for spare parts in this case. However, for emergency roadside repairs, parts forecasting is less accurate. Because this type of demand is unpredictable and dealers are reluctant to keep all spare parts in warehouses all the time, there is a shortage of stock.

In response to this situation, Volvo built a warehouse that could store parts for its entire line of trucks and contracted with FedEx to provide courier services for emergency repairs. As a result, supply chain management of inventory has improved, dealer profits have increased, and three warehouses have been closed to save on warehousing costs.

In both of the examples above, the business has made improvements to its channel model. First, they study the function of the channel, and then determine how best to implement its function. Sometimes this requires innovations in traditional channel structures.

Find your hardest-to-reach consumers

If you want to reach consumers you can't reach traditionally, you have to go beyond traditional channel models. Those looking to break into the Chinese market should take some cues from the following example of a multinational company entering another huge market.

Hindustan Lever Ltd., is a subsidiary of Unilever in India. Since more than 50% of the company's soap and detergent business comes from rural India, the company wants to expand its product penetration in rural areas. Hindustan Lever's management couldn't help but ask themselves, "How can we distribute our products to small towns with a population of less than 2,000?"

The traditional hub-and-spoke distribution model has given the company a leading market share in urban markets , however, this model is useless for small villages: these places have tens of thousands of potential consumers, but there is no retail distribution network, no advertising, and poor road and traffic conditions.

Hindustan Lever's solution: a bold and innovative distribution model - Project Shakti. This distribution model reaches out to a self-help group of more than a million Indian women. The purpose of these organizations is to help women save money and finance each other. The women were invited by Hindustan Lever to become direct-to-consumer sales representatives.

The company trains them in sales, business knowledge and accounting, effectively teaching them how to start a business. According to Hindustan Lever's website, women in training can choose to start their own businesses or become distributors of the Shady scheme. Every woman who becomes a distributor needs to invest more than $200 to buy the product—often with the help of a company to finance it. Each distributor targets about 500 customers, mainly from self-help groups in their villages or villagers in small nearby villages.

Today, the program has more than 13,000 Shady women entrepreneurs, whose business covers more than 50,000 villages in 12 Indian states, selling the company's products to 70 million consumers. For Hindustan Lever, this means a 30% increase in the rural population it covers.

Company President MS Banga concluded in a statement to shareholders: "We are re-creating distribution channels - creating new channels while redefining the services of existing channels. The ability to provide training from those who are rebuilt is also getting stronger. Through these activities, our brand and consumers are getting closer and closer.”

One of the secrets of running the Xia Di channel is, It not only has a high degree of humanization, but also has a high technological content. Hindustan Lever provides PDA systems to distributors, enabling distributors to operate in places where there is no PC connection or mobile communication network. The Economic Times reported that the PDA system provides consumers and users with an integrated complete enterprise network application.

Hindustan Lever has not stopped after the Shady project. The company has developed a differentiated service portfolio for a variety of channels, including grocery stores, pharmacies, wholesalers, commissaries, general merchandise stores, and Hartford entrepreneurs.

“We should create opportunities for our brand to reach more consumers based on the size and nature of the Indian consumer base. We are actually building a new set of consumer bases across all levels of urban and rural India. channel system,” Banga said.

China's channel pioneers will also have many opportunities to innovate their traditional distribution models, improve existing models or create entirely new channel models. Crucially, they must keep in mind that regardless of the structure of the channel, be it flat, thin, wide, deep, or high-tech, high-touch, the key is to understand each consumer’s Life is the starting point, and then products are transformed into services to meet their needs, and finally customized channels for different service content.

The author, Jet Magsaysay, is a consultant for this magazine, translated by Wei Li.