Procter & Gamble Co., also called as P&G, which is a global leader multinational company in fast-moving consumer goods. It includes many famous brands, such as Oral-B, Olay, SK-II, as well as Gillette and so on. Also, the products are very popular because of its quality and innovation. At present, the products are distributed in around 180 countries to approximate five billion consumers. The corporation has obtained total Revenue of 76.27 billion US dollars in 2015 (Annual Report of P&G, 2015). It cannot be denied that it has benefited from its excellent marketing mix, especially the place, which ensures the products are available almost all over the world.
Why does the P&G Company use the distribution channels?
There is a saying, “No one is an island,” P&G effectively uses the channels of distribution to run its operations, and it established powerful distribution network, which includes manufacturing firms, distributors, retailers, consumers, and so on. These channel members are able to make a marketplace more cost-effective and efficient (Iacobucci 2013, p. 127). Hence, the products of P&G are distributed intensively and widely. They are sold in many kinds of stores, such as supermarkets, convenience stores and discount stores, etc. It is an extensive distribution system. Moreover, as fast-moving consumer goods are regard as low-cost items so that they are typically purchased impulsively and frequently. Hence, the products need to be widely available to customers in order to stimulate sales. Also, P&G Company focused on offering consumer packaged goods (CPGs), which are relatively inexpensive and replaced frequently (The Procter & Gamble Company SWOT Analysis, 2015). Accordingly, to make big bucks, the company require extensive distribution to obtain big sales volume. In addition, given that the products are relatively small and easily transported, thus they are easy to box up a great number of units to many different channel intermediaries. Furthermore, as the products are simple and no sales force, the company employed direct advertising to the customers. As a result, P&G Company effectively make access easier for customer by the Intensive distribution, and its channel design is consistent with all the other marketing strategy, just as the products generally goes with heavy promotion and relatively low price.
What marketing strategies are used by P&G Company?
In order to encourage customer demand, P&G Company uses the pull marketing strategies to improve the consumers’ awareness and loyalty. For instance, temporarily reduce pricing or enhance quantity or size is usually used to stimulate sales. Moreover, the marketers frequently provide trials or free samples or offer coupons, rebates, discount or some rewards by loyalty programs for the customers. These pull strategies are effectively helpful to improve the consumers’ awareness and loyalty so that increasing its sales volume.
On the other hand, the distributors of P&G spread all over the world, thus the push strategies are targeted to the distributors so that managing their corporate relationship effectively. For example, the marketers of P&G usually offer various kinds of incentives to distributors, such as an allowance to help cover marketing activities, offering a temporarily reduced pricing and a discount for purchasing larger quantities. As a consequence, these incentives for the sales force is beneficial to sell product to the final customer.
How does the P&G Company manage conflict in channel relationships and how to design a smart distribution system?
Given the globally interconnected world, the network of channel are amorphous as well as complex. The existence of conflict in channel relationships is objective. In order to avoid the impact of double marginalization to maximize profitability. P&G Company use its absolute control power to design more effective distribution channels. It streamline the number of distributors so that making the distributors is more stable and competitive. Moreover, P&G Company is investing in a more agile and faster distribution network to optimize inventory and reduce out-of-stocks. Furthermore, P&G Company understands consumer behavior by marketing research, it reasonably allocates resources across channel options, and it is also investing in its sales force to establish more profitable distribution system (Annual Report of P&G, 2015). Additionally, P&G Company has built an official online trading platform to offer a direct touch point for customers, it is handy for consumers, and it is not only helpful for allowing the products to reach distant parts of the world, but also beneficial to provide customers with the option of worldwide vendors. (Learn more, please enter the online shop website of P&G: http://www.pgshop.com/pgshop-brand-olay/) What’s more, in order to improve American revenue and promote its goods, the P&G Company plans to put its brands to work selling services, thus it rolled out franchised Tide Dry Cleaners in U.S. by franchising (Bloomberg BusinessWeek, 2010). It is clear that the brand has huge value for appealing to more customers, and franchising can makes P&G relieve much of the financial burden.
In conclusion, although there are many business means to manage conflict and build an efficient distribution system, however enhance the communication to establish trust with channel members is also important, and that negotiating through a third party to determines the two parties’ utility functions arbitration and makes a binding decision for the corporate parties that is also so necessary.
‘Annual Report of P&G’ 2015, viewed 13 May 2016.
Iacobucci, D 2013, MM4, Mason, Ohio: South-Western: Andover: Cengage Learning [distribution], . Viewed 10 May 2016.
‘The Procter & Gamble Company SWOT Analysis‘ 2015, Procter & Gamble SWOT Analysis, pp. 1-9, Business Source Complete, EBSCOhost, viewed 11 May 2016.