Flying off the shelves

Marketing is a problem area for students. The major issue is that many students believe that they already have a good grasp of marketing, because it is all around them and they can tell you about the latest viral promotion or television advert. Unfortunately, students often mistake marketing for advertising or promotion and vice versa. The marketing mix consists of 4 elements, if it is a product, and up to 7 and 8 elements if it is a service.

Of all of these, the area that students tend to ignore is distribution, and when it is discussed it is normally limited to location rather than the distribution channel. Ironically, the distribution channel is one of the few areas where firms can still cut costs and distinguish their offering from that of their competition. For example, managing the supply chain effectively can have positive effects on consumer relationships. Firms that can efficiently ensure that production is led by consumer demand are far less likely to suffer from stock selling out, but also avoid holding too much stock. The focus on just-in-time manufacture and demand pull techniques, have cut wastage.  Most large firms have outsourced all, or parts, of their distribution to logistics firms and automated as much of the process as possible.

However, creating a USP is being taken to a potential new level by Amazon. Amazon CEO Jeff Bezos revealed on CBS’ ’60 Minutes’ that the company aims to offer drone delivery in the next four to five years that could allow customers to receive packages within 30 minutes of placing an order.

“We’re excited to share Prime Air — something the team has been working on in our next generation R&D lab.”

Bezos said the drones can carry packages that weigh up to five pounds, which covers about 86 per cent of the items Amazon delivers. The drones the company is testing have a range of about 10 miles, which Bezos said could cover a significant portion of the population in urban areas.

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The U.S. lags other countries in having regulations in place to allow for commercial operation of drones, or unmanned aerial vehicles (UAVs), so it is likely that the service would be rolled out in Europe, where drone regulation is more advanced.  However, the announcement has been met with scepticism among industry commentators, and some humour online.

Mary Cummings, an associate professor of aeronautics and astronautics at the Massachusetts Institute of Technology.

“Drone experts are not optimistic for a 2015 deadline. It is just a little over a year away and the Federal Aviation Administration doesn’t even have test sites named, much less the framework laid out.”

The U.K., which is more congested than the U.S., has been quicker to embrace commercial drones in industries ranging from real estate to surveillance, so Amazon could decide to launch its new service there first. Zookal, an Australian textbook rental start-up and competitor to Amazon announced earlier this year that it would use delivery drones beginning in 2014, so Australia may also be a natural choice for its Prime Air service.

Drones are gaining in popularity in agriculture for monitoring and dusting crops and assist emergency responders, such as firefighters. The entry of Amazon into the market may help further innovation and provide greater acceptability to innovative distribution solutions.

Teaching Ideas

• A good starting point for identifying the key concepts is Tutor2U: Distribution Channels
• The ideas are outlined in more details on MarketingTeacher.com with a supporting video:

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• Having covered the basics, ask your students to find case study examples of each of the channels.
• Develop ideas further by examining the links between distribution and the other elements of the marketing mix. For example, how does Amazon’s drone idea reflect and enhance its branding, pricing and promotion?