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“Both the market and the distributive channel are often more crucial than the product. Products are within the business as the accountants define it. They are within its legal boundaries. Economically the other two areas are as much part of business.” - Peter Drucker, Managing for Results.
According to Peter Drucker product actually does not exist at all, economically speaking, except within a market, bought by a customer for an end-use, and brought to him through a distributive channel. Markets as well as distributive channel do exist, however, independently of any one product. They are primary, the product is secondary.
Product management is a sub – section of a management. But market and distributive channel exists outside of management control. They are the most crucial and along with that most difficult part of business to understand and dominate.
A product needs to find its niche market. And to reach this niche market, it needs a niche distributive channel. The whole supply chain should be friction free for smooth functioning of product profitability. According to Nirmalya Kumar, marketing consultant, brand owner of yesterday world are still thinking themselves an emperor. But in reality they are barely standing in nude. Distributive channels, wal-Mart, Tesco, Aldi etc, has found their place in the sun.
Market logic is very simple. These retailers use to act as a link between customer and the product manufacturer. But sooner than never, this distributive channel recognized their power. They are lot efficient than the product brand owner. They know their customer much better than brand owners. So they can mould their strategy in a very swift speed.
Apart from that manufacturer use to made their product for in east in China, Indonesia etc. This global supply chain has shown a remarkable efficiency in last decade of 20th century. All the best brands on 20th century use to get their product manufacturer in low labour countries. Now distributive channel want to replace brand owner to dominate the supply chain. According to data from market, 80-90% of American consumers buy from Wal-Mart, target etc. 50% of all sale of brand number one and two are recorded by these biggies channels.
These biggies have now started copying these manufacturer products. Given the advantage of 10-15% saving in advertising, 5% in sales force and 5% in R&D, these distributive channels are cutting the brand owner throat by reducing the prices at rock bottom. Wal-Mart knows how to discount lowest and still be profitable to thwart any competition. Marketers at these distributive channels know very well that brands are passé. Only customer experience and access to the product matters, as Jagdish Seth’s 4 A’s defines.
Products brand owners need to understand the fact. It is market and distributive channels century. And they must learn to live with the tigers.
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