Distribution gets interesting

Jan 21, 2010

For years, one area of marketing that’s been deemed comparatively uninteresting — by my students and in my personal opinion — is distribution. Typical marketing textbook issues within the distribution topic included things like channels of distribution, push/pull strategies and channel power: all very important topics, particularly with regard to consumer products and packaged goods, but not the most exciting to teach and certainly not the most exciting to learn.

This changed with the emergence of the Internet, which spiced up distribution quite a bit by presenting not only new channels through which to make products available to consumers, but also entirely new business models.

Beyond its effect on consumer goods like computers (Dell), travel (Orbitz), and anything else on earth (eBay), the Internet particularly has transformed the entertainment industry. The Internet isn’t merely the vehicle for bringing us product; it’s become part of the product experience.

One of the examples I use in my Branding & Integrated Marketing course to illustrate the early shift in the marketplace is Netflix, which changed how we rented DVDs and now is moving us from DVDs to downloads.

Recently I was buying a new flat-screen television set for our guest room and debated with my husband about which to get: a 28-inch set with a built-in DVD player or a 32-inch set without one. I realize that bigger is always better when it comes to flat-screens, but I thought the convenience of a DVD player made up for the shortcoming. My husband’s argument: “Who watches DVDs anymore?”

Television, too, is finding its way in the new online world of distribution, with networks and advertisers scrambling to maximize (or at least not lose out) on online programming like Hulu.

Such sites give the network sites a run for their money, as many viewers prefer the convenience of watching their favorite shows online rather than on the networks’ schedules or via DVR. I am always amazed at how many of my students watch the majority of their television online… and the lengths they will go to avoid the mandatory commercials. This is when they Twitter, Skype, text and talk to friends, rather than feel that commercial viewing is “mandatory.”

The music industry is perhaps the hardest hit by the digital age. On a professor’s salary I have a tough time feeling truly sorry for music industry executives and artists, but the hit that the music industry is taking — in terms of trying to maintain profits and protect content amidst file sharing and downloading both legal and illegal — seems like a pretty big quandary for the industry.

Additionally, retailers no longer are just the row of cashiers stocking and selling CDs. They are industry players now, too, with exclusive distribution deals. Examples here include Victoria’s Secret’s exclusive distribution deal with Bob Dylan and Prince’s 3-CD set LOtUSFLOW3R/MPLSoUND/Elixer, sold exclusively at Target (in addition to free copies of the album sent to anyone who signed up for his LOtUSFLOW3R website).

So. How does each side maximize the new challenges/opportunities that exist with new channels of distribution? How does this change the existing model of profits and profit sharing among stronger retailers, stronger artists, and the existing label structure?

It’s clear that distribution no longer can be taken for granted or cursorily ignored in a marketing textbook. Exciting stuff is happening here, posing profound opportunities and challenges to the entertainment industry and its artists.





Marlene Morris Towns is an Assistant Professor of Clinical Marketing at USC Marshall. She has published papers in journals including the Journal of Consumer Affairs, Journal of Marketing, and Marketing News. She serves as a reviewer for the Journal of Consumer Research, the Society for Consumer Psychology, and the Association for Consumer Research, among other, and has consulted for organizations including AT&T, PepsiCola, Exxon Corporation, the New York State Attorney General’s Office, and the U.S. State Department. Marlene holds a Ph.D. in Marketing from Duke University.

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