Multichannel Distribution Marketing System - Explained

Summary

The video script delves into multichannel distribution management, a strategy where companies use various sales channels to reach customers. It contrasts this with single-channel marketing and highlights the digital revolution's role in its emergence. The script outlines the benefits, such as increased flexibility and customer satisfaction, and the challenges, including complex logistics and potential cannibalization. It also differentiates multichannel from cross-channel and omnichannel marketing, providing examples like JCPenney's Facebook sales strategy.

Takeaways

• 🚀 Multichannel Distribution Management System refers to a business strategy that uses multiple channels to reach customers, including physical stores, mobile outlets, and online platforms.
• 📈 The digital revolution has led to the emergence of new sales channels like e-commerce and mobile shopping, transforming the way companies market their products.
• 🛒 Consumers now expect a variety of sales channels and prefer personalized shopping experiences, which has made multichannel marketing essential for businesses.
• 🌐 Multichannel marketing allows potential customers to be reached on several channels, improving accessibility and customer service.
• 📊 The multichannel approach is beneficial as it provides a wider selection of products and services, enhancing customer knowledge and purchase ease.
• 📦 A multichannel strategy involves separate sales channels tailored to the needs of different target groups, aiming to maximize performance.
• 📈 Advantages of multichannel marketing include increased flexibility, improved customer satisfaction, and the potential for higher sales.
• 📉 Disadvantages include the need for complex logistics, potential confusion due to inconsistent branding across channels, and the risk of cannibalization where one channel's sales suffer due to another.
• 🔗 Multichannel marketing often involves integrating online and offline measures, such as offering a wider product range online and using email newsletters to inform about in-store sales.
• 🏬 Examples of multichannel marketing include JCPenney, which sells merchandise on Facebook, allowing customers to purchase without leaving the platform.
• 🔄 The terms 'multichannel,' 'crosschannel,' and 'omnichannel' marketing differ in how they approach customer interaction, with omnichannel aiming for seamless integration across all channels.

Q & A

What is a multichannel distribution management system?

A multichannel distribution management system is a strategic way of distributing and selling products across multiple channels, allowing customers to buy goods and services from various sources such as online stores, physical stores, mobile outlets, and more. Each channel operates separately, targeting specific consumer preferences.

How did the digital revolution affect the traditional single-channel sales approach?

The digital revolution introduced new sales channels such as e-commerce and mobile shopping, which changed consumer behavior. Customers began demanding a wider selection of channels to purchase products, making it necessary for businesses to adopt a multichannel strategy to stay competitive.

What are some common channels used in multichannel marketing?

Common channels in multichannel marketing include manufacturer sales branches, stationary trade (stores, malls), ambulant trade (street vendors, mobile outlets), catalog/mail-order business, teleshopping, internet/online shopping, and mobile shopping.

What is the main goal of a multichannel strategy?

The main goal of a multichannel strategy is to maximize the performance of each individual channel by tailoring it to the specific needs of the target group, ensuring that customers can access products and services in the way that best suits them.

What are some advantages of adopting a multichannel strategy?

Advantages of a multichannel strategy include increased flexibility, improved customer satisfaction, strengthened customer loyalty, and the ability to reach new target groups. It also allows businesses to develop new business fields and boost overall sales.

What are the disadvantages of a multichannel strategy?

Disadvantages include the complexity of managing multiple channels, higher logistics and control efforts, the risk of confusing customers with inconsistent branding, and potential cannibalization of sales between channels.

What is cannibalization in the context of multichannel marketing?

Cannibalization refers to the shift of sales from one channel to another, where one channel takes business away from another within the same company. For example, a customer might research a product in a physical store but then complete the purchase online.

How do crosschannel and omnichannel marketing differ from multichannel marketing?

In crosschannel marketing, channels are interconnected, allowing customers to switch between them during a transaction (e.g., order online and pick up in-store). In omnichannel marketing, all channels are fully integrated, providing a seamless experience where customers can use multiple channels simultaneously.

What is an example of a company using a multichannel strategy?

JCPenney is an example of a company using a multichannel strategy. It was the first department store to sell products online and made its entire inventory available for purchase on Facebook, allowing customers to buy without leaving the platform.

What is 'ROPO' in the context of consumer behavior?

'ROPO' stands for 'Research Online, Purchase Offline,' a trend where customers research products online before making the actual purchase in a physical store. This reflects the modern consumer's use of multiple channels in their shopping journey.

Outlines

00:00

🚗 What is a Multichannel Distribution Management System?

The paragraph introduces the concept of multichannel distribution by comparing traditional single-channel sales with modern, multi-channel systems. It highlights how the rise of digital technologies like e-commerce and mobile shopping has transformed consumer behavior, leading to the demand for multiple sales channels. Companies have had to adapt by using multichannel marketing strategies to stay competitive, as customers prefer having a choice of where and how they purchase goods.

05:02

📊 What is Multichannel Marketing?

This section defines multichannel marketing as a strategic approach that allows businesses to reach potential customers through various sales channels. It benefits both companies and customers by making communication easier and providing a wider variety of purchasing methods. A list of distribution channels, such as manufacturer branches, online shopping, and mobile shopping, is provided, showing the diverse options available. The paragraph emphasizes that each channel in a multichannel strategy is tailored to specific target groups.

🔄 Advantages of a Multichannel Strategy

The advantages of multichannel marketing are outlined here, focusing on how the strategy allows companies to meet customer demand more flexibly. By providing multiple sales channels, businesses can improve customer satisfaction, reach new target groups, and even explore new business fields. It emphasizes the potential for increasing sales in the long term and mentions that having multiple channels prevents customers from turning to competitors.

⚠️ Disadvantages of a Multichannel Strategy

This paragraph discusses the drawbacks of multichannel strategies. The complexity of managing communication, logistics, and sales across multiple channels is noted. Inconsistent branding across channels can confuse customers, and the channels may not be technologically or organizationally linked, which may hinder seamless customer experiences. The 'cannibalization effect' is also discussed, where sales from one channel may negatively affect another.

🛒 Research Online, Purchase Offline (ROPO) Phenomenon

The section highlights a study by GE Capital Retail Bank, showing that 81% of shoppers research products online before purchasing in-store, a behavior known as ROPO. This example emphasizes the shift in consumer behavior toward using multiple channels during the buying process and serves as an example of how multichannel marketing plays a crucial role in modern retail strategies.

🛍️ Multichannel Marketing in Retail and B2C

This part focuses on how multichannel marketing strategies are predominantly used in the retail and B2C sectors. It highlights the relationship between online and offline channels, explaining that online stores typically offer a broader product range than physical ones. The paragraph also suggests using consistent pricing across channels while offering special online promotions to enhance customer experience and foster synergy between marketing channels.

🏬 Case Study: JCPenney’s Multichannel Strategy

This paragraph uses JCPenney as an example of a successful multichannel strategy. JCPenney was the first department store to sell products on Facebook, allowing customers to shop directly from the platform. With over 5 million likes, JCPenney demonstrates how retailers can use social media to engage with customers and integrate different sales channels effectively.

🔄 Crossmarketing and Omnichannel Marketing

The paragraph differentiates between multichannel, crosschannel, and omnichannel marketing strategies. Multichannel refers to separate, unlinked channels, while crosschannel marketing connects these channels, offering a seamless customer experience. Omnichannel marketing takes it further by linking all channels in a way that allows customers to switch freely between them during a single transaction. It combines the strengths of both multichannel and crosschannel approaches.

Keywords

💡Multichannel Distribution Management System

A system that manages sales and distribution across multiple independent channels. The video highlights how companies have moved from a single-channel approach to offering various purchasing options, such as in-store, online, or mobile shopping, to reach different customer segments.

💡Single-channel

A traditional distribution method where companies sell products or services through one specific channel. In the video, this is described as the previous standard before the digital revolution, where the supplier dictated how and where the customer could buy.

💡E-commerce

The buying and selling of goods and services over the internet. The video explains that with the rise of e-commerce, companies began to add new digital sales channels, transforming the traditional single-channel model.

💡Mobile shopping

A form of online shopping conducted through smartphones or other mobile devices. In the video, mobile shopping is identified as a major driver of multichannel marketing due to its convenience and accessibility.

💡Multichannel marketing

A strategy where companies use multiple channels to market and sell products. The video emphasizes that this approach allows businesses to reach customers through various means, such as online, in-store, and through catalogues, offering flexibility and enhancing customer satisfaction.

💡Cannibalization effect

When sales from one channel detract from or replace sales in another channel within the same company. The video uses the example of customers receiving advice in-store but completing the purchase online, causing potential sales losses for the physical branch.

💡Cross-channel marketing

A strategy where different sales channels are interconnected, allowing customers to switch between them during a transaction. In the video, this is described as an evolved form of multichannel marketing, where customers can, for example, research online and pick up products in-store.

💡Omnichannel marketing

A comprehensive strategy where all sales channels are integrated, providing customers with a seamless experience across all platforms. In the video, omnichannel is presented as the most advanced form of multichannel marketing, where customers can move freely between channels, such as online and offline.

💡Customer loyalty

The likelihood of customers repeatedly purchasing from a company. The video explains that a multichannel strategy helps build customer loyalty by offering flexibility and convenience, which strengthens the relationship between the company and its customers.

💡Research Online, Purchase Offline (ROPO)

A buying behavior where customers research products online but complete their purchase in a physical store. The video mentions that this is a common practice, highlighting the importance of a cohesive multichannel strategy to cater to this behavior.

Highlights

Multichannel marketing arose from the need for businesses to meet consumer demands across multiple sales channels.

The shift from single-channel distribution to multichannel marketing was driven by the digital revolution, including the rise of e-commerce and mobile shopping.

Multichannel marketing allows companies to connect with customers across various platforms, offering flexibility and improving customer satisfaction.

A multichannel strategy involves tailoring each distribution channel to meet the specific needs of different target groups.

Key distribution channels in multichannel marketing include physical stores, online shopping, mobile shopping, teleshopping, and catalog businesses.

Multichannel strategies aim to maximize the performance of individual channels and improve the overall customer experience.

The advantages of multichannel strategies include increased flexibility, broader reach, improved customer satisfaction, and the opportunity to tap into new markets.

Potential disadvantages of multichannel strategies include logistical complexities, the risk of brand inconsistency, and the challenge of managing channel cannibalization.

The concept of 'cannibalization' occurs when sales from one channel negatively affect the performance of another, such as online sales impacting in-store purchases.

A common consumer behavior pattern known as 'ROPO' (Research Online, Purchase Offline) highlights the importance of integrating digital and physical sales channels.

JCPenney was one of the first major retailers to adopt a multichannel strategy by selling products directly through social media on Facebook.

Multichannel marketing is the precursor to cross-channel and omnichannel strategies, both of which aim to integrate different sales channels more closely.

Cross-channel marketing allows customers to switch seamlessly between sales channels within a single transaction, such as ordering online and picking up in-store.

Omnichannel marketing integrates all available channels to create a unified customer experience, allowing consumers to use multiple platforms simultaneously.

Multichannel marketing has become a standard practice for many businesses, including small and medium-sized enterprises that now operate online stores in addition to physical outlets.

Transcripts

What is a Multichannel  Distribution Management System?  

You buy a used car from a dealer in the city  center, bread from the bakery, kitchen gadgets  

from a shopping channel when you phone in to place  an order – companies used to concentrate on a  

single distribution channel when selling their  goods or offering their services, an approach  

that today is called “single channel.” The  supplier, not the customer, decides where, when,  

and how products and services can be purchased.  Then came the digital revolution: existing  

channels changed and new ones were invented  – first e-commerce, then mobile shopping.  

Consumer behavior also continued to change  and develop along with new information and  

communication technologies. In addition to a  wide range of products and 24-hour service,  

buyers demanded a wide selection of sales channels  so they could choose their personal favorites. To  

stay competitive, companies and dealers could soon  no longer afford to market their goods with just  

one channel. This led to the birth of multichannel  marketing, but what exactly does this term mean?  

What is multichannel marketing? Multichannel marketing is a strategic  

way of communicating and selling products,  since potential customers can be reached on  

several channels. It’s also beneficial from the  customer’s point of view, as the multichannel  

approach enables companies to be contacted in  various ways. On top of this, the customer is  

better informed about the products and services  offered, and can acquire them more easily  

Here is a rough list of the  various distribution channels:  

* Manufacturer sales branches * Stationary trade (stores, malls)  

* Ambulant trade (mobile outlets,  street vendors, sales representatives)  

* Catalog/mail-order business * Teleshopping  

* Internet/online shopping * Mobile shopping (has become the driving  

force behind multichannel marketing) .  

In a multichannel strategy, all  sales channels are separated  

from each other and precisely tailored to the  requirements of the respective target group.  

Having a multi-track sales approach means  that your company is responding to consumer  

demand by allowing them to choose certain  channels depending on what suits them best.  

The main aim of multichannel is then to maximize  the performance of each individual channel  

offered, that is to tailor it specifically  to the needs of the respective target group.  

When a customer goes to a brick and mortar  store, they would expect personal advice from  

a specialist, whereas online shopping focuses  on time efficiency and attractive prices.  

Advantages of a multichannel strategy The multichannel approach means that the company  

is flexible, improves customer satisfaction,  and consequently strengthens customer loyalty.  

Additional sales channels make it  possible to reach target groups that  

couldn’t previously be reached  by a single-channel strategy.  

At the same time, this allows the development  of completely new business fields,  

with which a company can offer new products and  services and reposition itself on the market.  

In the long term, a multichannel strategy  should increase a company’s sales.  

Multi-track sales approaches of this kind have  become standard in the economy. Even small and  

medium-sized businesses usually have at least  one webstore in addition to their brick and  

mortar business. After all, being present on as  many channels as possible can prevent potential  

customers from migrating to the competition if  you aren’t present on their preferred channel.  

Disadvantages of a multichannel strategy  

Communication, advertising, distribution, and  sales over several channels instead of just one  

requires more complex logistics and a greater  control effort. If the different channels are  

not presented in a homogeneous corporate image,  this could confuse potential customers and they  

may not realize that the product and/or  service belongs to the same company.  

Another disadvantage of a multichannel strategy  is that the individual sales channels merely exist  

side by side, but are not connected in terms of  organization and technology. The lack of ability  

to switch back and forth between favorite  channels within the same transaction at will  

(for example with practical click and collect)  isn’t so inviting for some consumers and it may  

cause them to switch to a competitor that  offers a more holistic buying experience.  

Then there is the issue of “cannibalization.”  For example, a customer signs a Verizon contract  

either by telephone, online, or in one of the  provider’s branches. In a multichannel strategy,  

each of these channels operates on its own. In  other words, the advisor won’t directly benefit  

if a potential customer is advised in a store and  then signs the contract via the company’s website.  

This is what’s known as the cannibalization  effect: the partial or complete sales  

shift from one channel to another. Many store  owners, for example, worry that customers will  

move from offline to online shopping. However,  this can only be calculated to a limited extent.  

A study by GE Capital Retail Bank revealed  that 81% of shoppers research online before  

making a purchase which is known as “R O  P O” (research online, purchase offline).  

Multichannel marketing – examples of strategies Multichannel strategies are mostly, but not  

exclusively, found in retail or in the B2C area.  In this context, the focus is usually on the  

link between online and offline measures. Many  retailers set up a webstore in addition to their  

physical points of sale, which usually offer a  larger, even more complete product selection,  

which would not be logistically possible  in stationary retail. This means that  

even goods that are rarely in demand can be  offered for sale anywhere and at any time.  

Both channels have their own cost structure and  prices due to their inherent characteristics.  

This could be inconvenient for the customer,  since they want the shopping experience to be  

as homogenous as possible. One solution is  to offer the same prices on all channels,  

but to advertise online with special promotions.  Synergistic effects should also be used: email  

newsletters can, for example, be used to inform  customers of any sales in stationary retail,  

and store operators can display flyers  containing information about the online store.  

The department store, JCPenney, is a good example  of a business that uses a multichannel strategy.  

It was the first department store to  sell merchandise online by making its  

entire product inventory available to  buy on Facebook. Customers can make  

their purchase without having to leave  Facebook. With over 5 million likes,  

the store uses the social media platform as a  necessary tool to interact with its customers.  

Multichannel marketing – differentiating between  crossmarketing and omnichannel marketing  

There are different terms for sales that take  place over several distribution channels.  

“Multichannel '' is certainly the traditional  channel since it is the most widely used and has  

been around the longest. In addition to the terms:  “no-line commerce” and “everywhere commerce,”  

“crosschannel” and “omnichannel” were  also established, which differ from  

multichannel. Basically, the multichannel  strategy is the evolutionary predecessor of  

the cross channel and omnichannel concepts –  and is therefore gradually seen as outdated.  

Difference to cross channel marketing While multichannel refers to several channels  

operating separately, the cross channel approach  refers to channels that are closely linked,  

enabling a cross channel shopping experience.  For example, the customer might find out about  

a product in the brick and mortar store, order  it in the webstore, and then pick it up from  

the actual store via click and collect or  in-store pickup. The same range of goods  

or at least part of them can be found in all  available distribution channels. A requirement  

for this integrative aspect of cross channel  marketing is a consistent, centrally managed,  

and always accessible database consisting of  information about the customer and the inventory.  

Difference to omnichannel marketing A multichannel strategy should cover  

as many distribution channels as possible in  order to reach all relevant target groups.  

The omnichannel approach, in turn, claims to be  present on all existing channels with marketing  

measures at least according to its name,  (“omni” means “everything” or “everywhere”).  

At the same time, the channels should be  closely interlinked so that the customer can  

use them in parallel and at will. Omnichannel  combines the advantages of multichannel and  

crosschannel marketing in a single concept. Let me know what you think about the video in  

the comments, it will help me to make more  videos for you and thank you for watching