Distribution models for blogsPresentation Transcript
Business Model BibleCreating Value through Innovation The art and science of innovation
Part 4: Distribution models The art and science of innovation
Our philosophy has been to be fiscally conservative, so we can be operationally aggressive… We're looking for something where we can make something happen: an industry where the competition is asleep, hasn't taken advantage. Wayne Huizenga, Founder of Blockbuster Video
Delivering to demand
HBO On Demand
Sell in, sell out
Wall’s Ice Cream
Innovation is the blood of an enterprise. The question is: do we have enough red blood corpuscles? Peter Brabeck-Letmathe, President and CEO, Nestlé SA
Delivering to demand
This model involves products and services being brought directly to the people who require them, exactly when and where they are needed.
Delivering to demand Food and beverages Transport Delivers chef prepared, healthy & calorie-controlled meals to people who want to lose weight for a subscription fee across the UK London’s leading minicab company providing 10m trips a year using its fleet of 2000 vehicles to consumers and businesses. Various payment options, from cash on arrival to various account options Business services Media Provides on-demand computing and communication services (e.g. business hosting and content management solutions) to UK businesses HBO On Demand offers feature films, sporting events and entertainment programs to viewers on a pay-per-view basis
Businesses can lessen dependence on intermediaries, discounters or traditional channels and serve directly to their customers.
Internet has significantly enhanced the possibility of this business model, often as a result of high market transparency.
Disintermediation Consumer electronics Consumer goods Introduced a direct-to-consumer sales model in 1992 and was able to leapfrog rival Compaq to become the largest seller of personal computers in the USA within 7 years World’s leading direct seller of beauty and related products, sells through 5 million ‘Avon ladies’ worldwide and, more recently, through its website Supermarket Insurance In 2008 Waitrose Deliver was launched, cutting out (and directly competing with) its previous delivery partner Ocado in parts of the UK where Waitrose stores are present Offers various types of insurance policies straight to end buyers with such deals not available on cost comparison websites
An extension of the disintermediation model, expert disaggregation identifies and specialises in a particular part of a service, which is generally bundled as part of a bigger overall offering, and instead sells this separately.
Expert disaggregation Business services Financial services Provides alternative airport lounges throughout the UK and Continental Europe independent to tied airline lounges Independent ATM supplier with over 1,000 machines in operation throughout the UK and full ATM service support programme Automotive Financial services Produces highly profitable automobile components taking margin from the traditional auto industry value chain A financial services disaggregation separating the debit card from the chequing account and offer as a unique service
Same product or product class sold through with different distribution channels to different segments of the socio-demographic market, generally using differentiated pricing bands.
Exploits the benefits of distribution channels and adds value for consumers. There is a risk of cannibalisation and lower margins.
Multi channel Food and beverages Retail Employs different sales channels, e.g. vending machines, supermarkets, pubs. Each sales channel has a different price mechanism due to variations in demand Retailer and home delivery wine merchant selling premium wines from small production winemakers. Also uses wine tasting and dinner events and markets through corporate wine clubs Clothing and apparel Leisure Multi-channel retailer of lingerie and adult entertainments targeted at women. Uses mainstream and high street retail locations, markets products online and via catalogues and home parties Offers flights direct to end customers, as package holidays and through travel agents
Sell in, sell out
Enhancing competitive positioning through a dual strategy – sell in: establish product dominance in wholesale and retail distribution, then sell out: incentivise retailers to push the product in the market.
Sell-in, sell-out Consumer goods Food and beverages Used by 1 in 3 households in the US, Unilever built a dominant position for the Dove range and then used consumer loyalty and retailers to push the product UK market leader in impulse purchase "hand-held" products. Best-selling ice cream that used its popularity to establish a network of independent vendors to promote and sell the product range Food and beverages Automotive Mineral water that established a strong market position selling in to key markets and then using restaurants to sell out as a premium dining product Used sell-in/sell-out to drive their market entry to the European retail tyre market
New generation of the insourcing/ outsourcing model. A supplier packages an existing product or produces new products for another company which then brands and sells as their own.
White label Supermarket Electronics retailers Sainsbury’s was among the original adopters of white label models using suppliers to deliver own-name products and build loyalty while managing cost Maintain a sub-brand for mass-produced generic electronics (DVD, TVs) produced under white labelling production arrangements (e.g. Matsui and Saisho) Booksellers Software developers Used Amazon's website under a white labelling arrangement to enable a successful brand to offer a service without having to invest in creating the technology and infrastructure itself Offers fully managed white label gaming services for blue-chip media brands and integrated gaming solutions for European sports books including Virgin and Yahoo