Part 3: How Distribution Can Be Used To Improve Sales Revenues
Previously we discussed how a firm might use pricing to increase sales revenue. We broke down the problem of increasing revenue by looking at Price x Volume.
In this report (Part three of six), we move to the volume side of the logic tree; starting with Distribution.
Firms likely need no introduction to the growth opportunities presented by expanding distribution. Especially considering tools like the Ansoff Matrix have been in use since 1957. The matrix is used to identify the strategic direction for growth in a firm by serving new or current markets with new or current products.
Professor Byron Sharp and his colleagues at the Ehrenberg Bass Institute have found that the two most essential ingredients for brand growth are mental and physical availability.[i] This means that brands not only need to be present in the buying situation but also need to come to mind easily at that time. The distinction is also made that availability is not only about being present but making the brand as easy to buy as possible.
A prime modern example would be the Coca Cola Company. Since its inception in 1886, Coca Cola has grown from selling products in Atlanta to having a global presence. Today, Coca Cola always seem to be within arm’s reach. Similarly, Amazon has been steadily growing its global presence both online and offline.[ii] Their pursuit of an omnichannel strategy is perhaps a testament to the benefits of capitalising on the synergies between online and offline distribution channels.
Sharp’s findings are also supported by Steenkamp, Kushwaha and Rajavi. Through their research, they found that regardless of macroeconomic trends, brand expensiveness or category involvement; expanding a brand’s distribution is one of the most effective marketing activities.[iii] On top of these direct benefits of increased distribution, their research also found that it leads to an increased trust in the brand, improved quality perceptions and greater long term brand equity.
Additionally, Say's Law in classical economics implies that some level of demand is generated simply by the fact that supply exists. ie. a small number of people will buy the product simply because it’s on the shelf. Considering all these factors, we can clearly see that distribution is one area of the marketing mix that firms would want to pursue.
In this age of eCommerce, Amazon, and online advertising, firms have more channels at their disposal than ever. However, being present on a specific channel does not necessarily mean a brand is physically available. Prof. Sharp proposes 3 specific components of physical availability that drive its effectiveness: Presence, Prominence, and Relevance:
Based on the research, there are 6 major implications managers need to consider:
In the next report, we’ll dive further into the Ansoff Matrix by looking at Product. How can a firm increase sales revenue by innovation or product development?
i. Buy Byron Sharp’s book: How Brands Grow
ii. Read this article on Amazon's omnichannel plans
iii. The Effect of Marketing Mix Instruments on Brand Equity in Good versus Bad Times; K. Rajavi, T. Kushwaha, J.B. Steenkamp
iv. Read this article on the profitability of D2C brands
Some of the links above may be affiliate links (in the case of paid books or reports). We may earn a small commission on purchases made using such links.
This report was a collaborative effort and without the aid of our colleagues, it might've looked very different. The following individuals have made significant contributions to this series of reports: J.Moolman, I.Barnard, S.Brealey, and E.Gentle. We thank you all for being so generous with your time.