In my previous blog post, I sought out to bring to everyone’s attention, Australia’s popular Liquor store Dan Murphy’s. The objective was to bring to light, Dan Murphy’s Pricing approach. Another P in the marketing Mix is Place. Iacobucci (2013) explains how pricing is what the customer relates to first. Then place/channel distribution is Dan Murphy’s battle formation.
Dan Murphy’s has managed to create a brand image with its ‘barn-like’ retail outlets with extensive range and not to mention nostalgia, shielded by the Lowest Price Guarantee and Woolworths coat of arms.
*How do they do it?
You already know the answer, online retailing and standard retail outlets (keeping in mind, Dan Murphy’s uses their own stores exclusively).
Now according to Iacobucci (2013), there are various methods to reach a product to the customer; known as Distribution Channels. From the picture below, its understood that Manufactures directly reach out to consumers via retail units. Sometimes these units get access to products from wholesalers. Safe to say, Dan Murphy’s incorporates all three modes.
Distribution channel modes. Source: Iacobucci 2013.
My claim is this; Dan Murphy’s is a retail outlet for alcohol, they not only sell well known brands, they also sell niche brands and locally made brands. Thus, catering to both, a mainstream audience and rest. This is possible because, as I stated in my previous blog (Gomez 2016), Dan Murphy’s owns a fair share of the brands they display on shelf, along with the availability of international known brands. Thus, Dan Murphy’s is a manufacturer, a retailer and a wholesaler.
Distribution Systems
Iacobucci (2013) shows how the distribution system (DS) is classified into two forms; Intensive (widely available) or selective (limited availability).
Intensity of distribution is a function of consumer convenience in access, information search, etc. (Iacobucci 2013).
Dan Murphy’s own retail outlets show it is a more ‘limited availability’ type. Being that a customer has to approach its own stores. Since alcohol is a more complicated product, Iacobucci (2013) claims that customers seek information and require deliberation. Hence, customers will be willing to travel to acquire what they seek. Dan Murphy’s tends to this by employing trained and knowledgeable Salesforce. Salesforce and storage leads to costs, which means the firm has to be selective with regard to distribution of their product. This caters to Dan Murphy’s uniqueness. Requiring strategic placing of their outlets leading to exclusive promotional effort, higher prices and higher-quality merchandise.
But Dan Murphy’s claims lowest prices. *Shocker!!*
Selective distribution leads to adopting a push strategy to get the product to consumers (Iacobucci 2013).
- Employing high knowledgeable and trained sales force
- Includes selling niche products and exclusive products.
- Discounts
- Advertising to partners and customers
Being selective, consumer share will be less. But Dan Murphy’s incorporates along a pull strategy to gain higher market share,
- Includes more locally and well-known brands
- Distributing widely via. online retailing
- Sampling of brands during in-store tasting times
- Coupons and offers
- Quantity discounts
- Inexpensive trial
- Loyalty programmes and benefits via My Dan Murphy’s
- Lowest price strategy
This gives Dan Murphy’s an edge. In other words, the best of both worlds. Creating a system that attracts manufactures, reducing costs by full or partial ownership of brands (exclusiveness), attracting customers by lowest price guarantee, wide variety, salesforce, online retailing and loyalty programmes.
Thus the distribution is both Selective yet wide (Online retailing), Exclusive yet with lower prices.
Power
Over Manufacturers
Dan Murphy’s as a wholesaler and retailer gains power over manufactures. Dan Murphy’s enables manufactures to sell their product under the brand name yet keeping its own private label. This helps manufactures to reach wider customers, a win for new product entrance. But Dan Murphy’s take a fair slice from the profits.
Over Competitors
Ownership (Full/partial), like under Pinnacle Drinks which is a cost reduction technique gives Dan Murphy’s the power over competitive stores.
But storage space and back-log items will endure additional costs. Dan Murphy’s Connections uses the drop ship model, where suppliers/manufactures provide a virtual deal and self-manage their own range of products. This includes picking and packing (Atkinson 2014). James France (cited in Atkinson) calimed their, 34 different SKUs benefited from high exposure (Dan Murphy’s online website sees over 2 million users) due to connections.
Drop Ship Vendor and Range Extension program (Evans 2014): Dan Murphy’s approaches alcohol producers across Australia. This model will give Dan Murphy’s 25% of retail+ GST. A positive aspect with respect to sales (AFR, 2015). Drop Ship Vendors charges vendors with a monthly fee of $49 (Evans, 2016).
Dan Murphy’s Connections. Source: Dan Murphy’s
Online Retailing
Euromonitor International (2015) claims that online sales of alcoholic drinks reached 6% from 3% of total sales in 2013 to 2014. Dan Murphy’s dominates the online marketing with it’s click and collect, click and delivery and most of all Dan Murphy’s Connections. With the drop ship model as mentioned earlier and MyDan Murphy’s loyalty membership program attracting over 2 million user (Woolworths 2016) and catering to various consumer needs.
Online retailing helps avoid costs of maintain conventional retail stores and the focus can be completely laid on warehouse spacing. Thus making the sole concentration on range of products and availability. Dan Murphy’s prides on their customer satisfaction in-stores and online.
Competitive Advantage
With Dan Murphy’s wining the Roy Morgan Award for Customer Satisfaction 2015 (Roy Morgan 2015) and its intense distribution network makes Dan Murphy’s a category killer. This gives Dan Murphy’s the power to lay down prices as I explained in my previous blogpost. Thus attaining competitive advantage in the long run.
APPENDIX
Morgan, R 2015, Dan Murphy’s (and Woolworths) blitzing the Aussie liquor market, Roy Morgan Research, retrieved 1 May 2016, <http://www.roymorgan.com/findings/6552-dan-murphys-woolworths-blitzing-aussie-liquor-market-201511152333>
Note: Extra reading- My report of Dan Murphy’s Business Strategy and my suggestion for improvement can be viewed here. Disclaimer: Report done for Deakin University assessment purposes.
REFERENCES
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T1 2016 MPK732 Marketing Management (Cluster B) 