Which came first, the chicken, the egg, or the guy who wants to sell you chickens and eggs?
The question of how demand for a product is generated is an interesting one. Does the consumer really generate the demand? Or are the guys who control the sales channels (the buyers for Wal-Mart, Target, and Kroger for example) the ones who really decide what products the consumer has to choose from?
I recently heard the statistic that Wal-Mart is responsible for one-third of the sales of Tide detergent. I’m not sure how accurate this figure is, but I assume it’s got to be close. Whatever the specifics, there are two interesting lessons here.
Brand Control
The first lesson is about the control of the brand. If a single sales channel has such a significant influence on the sales of a product, the manufacturer looses some control over the brand. If Wal-Mart woke up tomorrow and decided that they wanted the packaging of Tide to be Wal-Mart -blue instead of Tide-orange, how much power do you think Proctor and Gamble have to say no? In essence, the brand of Tide would be controlled more by Wal-Mart than by P&G.
This is the classic “too many eggs in one basket” problem. And you have to remember that when there is a single, large sales channel involved in your supply chain, its not just your revenues or your product that are somewhat at risk. Your branding is somewhat beholden to that channel as well.
Sales Channel Ready
So, is it really a bad thing to have such a large percentage of your sales through one channel? Not necessarily. If a product is commoditized, then your goal should be to produce it as inexpensively as possible. Placing the product in the hands of a large sales channel who will market it for you allows you spend your money on production and not marketing. If there is less value in the brand, you don’t need to spend money promoting it.
If you are in that type of business, making your product sales-channel ready can be a great move. Don’t waste your money on marketing something that can’t be differentiated. Focus on the bottom line and find good sales channels.
The Future
The most interesting question here is what will happen to brands that have been traditionally mass-marketed in the future? IS there a future for the mass-market? Or will all marketing be more individualized in the future? How will this affect your business?
I’d love to know your thoughts on this subject.
photo credit, ANDI2…too sad to
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Great article. You touched base real close to our home. We were in the past a company that put many of our egs in one basket and allowed them to market not promoting our brand. That worked for a while however when they became stagnent and we needed growth our comapny name NOT branded hindered our ability to grow. Therefore I beleive branding is most importand even if you do not rely on it now you may need to in the future. For me as a consumer, there are some brands I will always buy over the generic, even trying to save a penny. I will choose to save my pennys elsewere.
Thansk for the great article.
Tammy