Distribution Strategy

Senior managers of most of the companies involved in moving goods or services from suppliers to end users would agree: Their distribution channels are outdated and unwieldy, serving neither customers nor channel partners as well as they should.

In a few cases, distribution channels are streamlined and satisfying for all participants. In some cases, technology has improved things dramatically. But in most scenarios, distribution channels, taken as a whole, seem more like a repository of lost opportunities than an effective delivery system that appropriately serves and rewards all participants. Powerful channel members routinely impose their will; weaker participants suffer along because they see no way out; and customers . . . ? Despite much talk of customer-focused companies, customers are often ignored when it comes to distribution.

Most participants agree on the problem, but solutions have been elusive. From our decades of research, teaching, and working with top managers of companies that have tried to improve their go-to-market strategies, we have learned that almost everyone agrees it is difficult to effect significant change in distribution channels. Even though technology has made access to customers easier, transactions faster, and business processes more integrated, distribution channels tend to exhibit a strong inertia. Of all the elements of a company's marketing strategy, distribution channels are perhaps the hardest to change.

Three primary factors explain why:

1. Any change in distribution necessarily involves many different parties and is influenced by a host of factors. Intermediary relationships, institutional commitments, legal restrictions, entrenched customer behavior, and competitive practices often limit the type and extent of changes that a firm can realistically make.

2. Within companies, channels often are functions in search of a home. The various components of a channel (whether within a supplier or within a third-party vendor) may be able to improve