Distribution Channels: Understanding and Managing Channels to Market

Citation

Keating, B. (2010), "Distribution Channels: Understanding and Managing Channels to Market", Journal of Product & Brand Management, Vol. 19 No. 4, pp. 312-313. https://doi.org/10.1108/10610421011059630

Distribution Channels: Understanding and Managing Channels to Market is a book that promises a lot, and it delivers on the promise. The author, Julian Dent, is a specialist marketing channels consultant with over 25 years' experience serving a wide range of multinational clients. Dent draws on this experience to present a practical tomb that is full of valuable real‐world examples to guide the development of profitable route‐to‐market strategies. To this end, the author boldly asserts that the book is suitable for anyone whose role touches marketing, sales, distribution, and service channels. And although I would ordinarily challenge this assertion based solely on breadth, this book actually provides substantial value to all these areas and many others.

In particular, the book addresses the complexity of cross‐functional coordination through identifying a number of well‐conceived and aptly demonstrated business models. The use of business models as the basis for introducing and discussing the challenges of managing route‐to‐market strategies is the strength of this book. In this regard, Dent does well to distinguish his work from the myriad of offerings in the channels literature. While prior books have treated channels of distribution as a subset of accounting, sales, and marketing, these uni‐dimensional views of distribution channels tend to be myopic and treat the topic as ancillary. This book is unique in that it unapologetically takes the perspective of the channel manager, thrusting distribution channels prominently into the spotlight.

Distribution Channels is divided into four parts and consists of twenty‐one chapters. Part One comprises two chapters. Chapter One introduces the book and Chapter Two discusses the importance of business models. The author has done well to position his contribution early. In particular, Dent lays the foundation for the remainder of the book by enunciating the importance of business models to supporting the three core channel stakeholder groups:

1. 1.

   distributors and wholesalers;

2. 2.

   final‐tier trade channel players; and

3. 3.

   retailers.

This discussion pays particular attention to how business models contribute to the different value propositions of these different stakeholder groups.

To achieve this objective, Dent adopts a simple, easy‐to‐use framework to discuss how distribution channels impact the different stakeholder groups. The framework begins with the “role of the player.” In an effort to reduce confusion between what is meant by the labels used to describe the various stakeholder groups, the author starts each section by defining the particular group and elaborating on its key roles and responsibilities. Second, Dent provides insight into how the particular “business models” work for each group. Informed by the roles of the different stakeholders, the business models highlight the key priorities of these players and the drivers of business performance. Third, the author then concentrates on “measures that matter.” The book provides a valuable summary of the key ratios and margins that can be used to evaluate the business models of relevance to the particular stakeholder groups. Last, the author discusses strategies relating to the servicing of the stakeholders, and in particular, “how to sell” to these stakeholders. Dent provides some great insights into how firms can use their newly acquired understanding of the various stakeholder groups to enhance strategic alliances and create sustainable advantage.

Part Two deals with channels from the perspective of distributors and wholesalers. It comprises eight chapters in total. The first chapter in Part Two is Chapter 3, which discusses the role of distributors and wholesalers. This chapter gives particular attention to differentiating between the responsibilities and functions of customers vis‐à‐vis suppliers. Chapter 4 provides a detailed overview of the business models that are applicable to this stakeholder group. This chapter highlights the importance of managing working capital and the associated challenge of remaining viable in a business driven by small margins and high costs to service. Chapters 5 through 9 then build on this foundation by elaborating on the key margins that must be measured and monitored in order to ensure profitability, productivity, and sustainability. Chapter 10 concludes Part Two with a detailed discussion of the processes required to service this group. This includes a consideration of the sales process and the drivers of key account management, as well as the importance of identifying and managing the key account relationships.

Part Three investigates channels from the viewpoint of final‐tier trade channel partners. In discussing the roles of this stakeholder group, in Chapter 11 Dent advocates that the different intermediary roles provide opportunities and risks that must be considered. In particular, he suggests that consideration should be given to different compensation models, as well as the importance of a strategic alliance to a firm's competitive position within an industry sector or channel. One especially valuable aspect of Chapter 12 is the author's identification of service‐oriented business models to support key channel relationships. Of particular note is Dent's highlighting of the role of people and supporting technologies such as the Web. Chapters 13 through 16 introduce a variety of measurement tools that can assist final‐tier channel players to maximise sales and utilization, gross margins and recoverability of assets, as well as create value and profit via useful cash‐flow management and value creation tools. The final chapter of this part, Chapter 17, provides some very valuable tips on how best to interact with this group of stakeholders. I am particularly impressed with Dent's “rules of thumb for making compelling business cases” (pp. 221‐224). These practical guidelines will assist both existing and new market entrants to ensure that they are well positioned to leverage benefit from final‐tier trade channel partners.

The final part of the book, Part Four, considers the importance of channels for retailers. It has four constituent chapters. Consistent with the ensuing discussion, the first two chapters in this section of the book, Chapters 18 and 19, provide an overview of the stakeholder roles and applicable business models. In addition to traditional “brick and mortar”‐type retailers, the author highlights the importance of catalogue and online retailing. Dent also emphasizes that this final stage in the channel to market process is dominated by what he refers to as “earn and turn” priorities – that is, the need to maximise margins and turnover stock. Critical to this particular business model are issues of layout and merchandising, or as Dent suggests “planogramming” and “ranging.” Chapter 20 then emphasizes the measures that matter to retailers, and provides some useful tools for managing these indicators such as “direct product cost” and “direct product profitability.” Just as not all men are not created equal, these important ratio measures reflect the reality that “two products with the same gross margin do not deliver the same contribution to net profit” (p. 260).

While Dent draws on his vast experience to provide many practical examples of how the tactics advocated in this book can be applied to achieve advantage, another real strength of the book is the author's professional use of figures to emphasize the key (and at times complex) concepts. The book also provides a very valuable appendix, in which a summary table of all the key measures introduced in the various chapters is presented, along with a glossary of terms. This table provides a valuable quick‐reference tool that will assist marketing channel practitioners to leverage benefit from this book. In summary, this book highlights the importance of understanding and managing channels to market. While the book is unashamedly oriented toward a practitioner audience, the book is well written and should contain enough substance to appeal to most academic readers. This work is de worth a read.