The marketing manager at Morrison Fine Chocolate Limited had known for some time that the decisions related to the distribution of the company's new product were going to require some careful thinking. He had been postponing this work because he knew it was going to be complex and time-consuming and, although he had tossed around many notions in his head over the past several weeks, he had yet to develop a concrete plan. However, the time was flying by, and he was close to finalizing most of the other elements of the marketing mix. The distribution decisions could wait no longer. So now, Monday morning, he entered his office with the objective of hammering out the key elements of his distribution strategy by the end of the day.
Jason Burka had been the marketing manager for Morrison for the past seven years. It was a great job!
Morrison was a small company, and Jason was the person in charge of marketing all the firm's products.
Actually Jason was the marketing department. It was this that appealed to Jason the most: he enjoyed "running his own show" and making all the decisions. Since most of his decisions had yielded profitable results for the company, the president, to whom he reported, was happy to continue with this arrangement.
Of course, this did place a certain pressure on Jason. He was well aware that a continuation of his relative autonomy in the company depended on his continued delivery of strong performance. This reality weighed on him, never more so than when he faced a particularly difficult task, such as he was facing now.
Morrison Fine Chocolate was a niche player in the Canadian confection market. The company manufactured and marketed a variety of boxed chocolate candy, a cut above the mass marketed chocolate bars but well below the upscale luxury boxed brands. When Jason started at Morrison, the firm's products could be found in several different kinds of retail outlets, from convenience stores through to mid-market department stores and even to a few specialty shops.
One of the first projects that Jason tackled after his arrival was the rationalization of the distribution for Morrison chocolates. He had two main reasons for doing this. First, he believed that the brand's appearance in convenience stores had a negative impact on consumer perceptions. That is, if a customer saw the brand in those stores, s/he automatically concluded that it was low quality. Since he wanted consumers to perceive Morrison as mid-quality, the brand's presence in convenience stores was not a good idea. Second, Jason suspected that distributing to so many different kinds of outlets was dissipating the firm's resources, and his calculations confirmed this: they were spending a great deal of money on distribution and not profiting nearly as much as Jason thought they should be. He ceased distribution to the lower end retail outlets.
Although sales softened initially, they returned to their previous levels within a few months. Jason guessed that, once his customers adjusted to the brand's absence in convenience stores, they began to look for and find the products in other outlets. Importantly, Morrison profits improved. Given such results, the president continued happy to leave Jason alone, confident of his sound marketing judgment.
To date, new product introductions under Jason's tenure had consisted entirely of product line extensions.
Jason introduced new flavours, new packaging sizes, and so on. He also marketed specialty seasonal products well beyond what the company had offered prior to his joining the firm. For example, he introduced a Christmas product that consisted of a box of chocolates with red centres only. The product proved very popular.
1Six months ago Jason decided to examine broader opportunities in the chocolate market. Morrison's sales had flattened, and he was urgently in need of a means of revitalizing them. He researched several different segments and finally settled on the chocolate bar segment as a viable opportunity. Although it was a largely mature market, he identified a gap in the market, a gap that he believed Morrison was well qualified to fill.
There was an overabundance in the market of what Jason called mainstream chocolate bars; that is, the ones that filled the shelves at the retail checkout counters, the ones, as mentioned earlier, that Jason viewed as lower-end products. However, very few brands existed in the mid-market range; that is, chocolate bars of a somewhat higher quality with more exotic flavours, selling at a premium price to the mainstream brands.
His analysis suggested that consumer needs were not being filled well in this segment and that, at a minimum, there was room for a niche player such as Morrison.
Jason moved quickly to obtain approval from the president to launch the new product line, and product development began soon afterward. Jason had solid research behind him, and he felt confident about the prospects for Morrison chocolate bars. He knew, however, that success depended on a good marketing strategy that was well executed. The distribution strategy had concerned him from the beginning, and, as already noted, although he played with several ideas, he had not yet carefully worked through all the considerations through to a definitive decision.
Jason had settled on four flavours of chocolate bars, given his belief that a store shelf presence was important to the success of his new product line. (No one would see one lone Morrison chocolate bar on a shelf.) He developed packaging to reflect the mid-market appeal he was trying to achieve, and, with the help of an advertising agency, he had a low-budget promotion campaign almost ready. In fact, the agency had been urging Jason to finalize the distribution strategy and had even made some suggestions in this regard since some aspects of the promotion plan depended on the distribution strategy chosen. His price strategy was to place Morrison at a level comparable to other mid-market chocolate bar brands and well above the mainstream brands.
What should Jason do? His most immediate competitors were other mid-market chocolate bars, but there was only one other significant brand in the market. So, realistically he needed to take sales from the mainstream brands if he were going to have any chance of a successful launch. Yet, if he distributed the chocolate bars in convenience stores and the like, he risked a negative consumer perception. This was the very reason he had withdrawn distribution from these same stores seven years ago. However, that was for the boxed chocolate product line. Did the same reasoning hold for the new Morrison chocolate bar line? He was not sure.
Aside from the decision about whether or not to obtain distribution in the same retail outlets as mainstream chocolate bars, he was also concerned about overall coverage. Did success depend on intensive distribution?
Purchasing the services of several different intermediaries would erode his profit picture. As he knew from his experience with the boxed chocolates, the intermediaries who filled orders for convenience stores were not the same ones who covered specialty shops - and this had been a key source of the high distribution costs he discovered seven years ago. As he reviewed all the facts, Jason realized that he ought to have tackled this issue much sooner.
 

 Questions

1. Using Influences on Channel Strategy, which influences are relevant to the marketing manager's decision-making in this case study?
2. Using the case study situation, illustrate how distribution channel strategy decisions are interdependent and intertwined with decisions around the other three Ps in the marketing mix.
3. The section on Planning Channel Strategy, discussed in Distribution and Channel Strategy contains information that directly responds to Jason's concerns. Review and explain how this applies in this case study.
4. What would be a recommended course of actions for Jason as he tackles the complexity of product distribution?

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1Relevant influences on the marketing managers decisionmaking include market factors identifying a g... View the full answer