In marketing terms, the concept of PLACE (Distribution) is the availability of a product that is correctly dispersed in a convenient location at the appropriate time.
“We will make sure that you receive whatever you need promptly; else, customers might choose to do business elsewhere. Because of this, it is crucial to make the product available at the appropriate time and “Place” (Barcik and Jakubiec 2013).
As a result, place strategyalso known as distribution strategyplays a crucial part in the marketing mix of a good or service. It describes how to position goods and services to attract customers and increase sales. The goods and services may be purchased from the stores in person, online, or through any other channel that allows the businesses to reach the target market.
The business analyzes consumer needs to identify the optimal distribution plan, then chooses the channel that will allow it to reach the greatest number of potential customers (Segetlija, Mosaics and Dujak n.d.).
Toyota is one of the successful automakers that has utilized its routes of distribution well. Toyota mostly sells its products through its dealership. A Toyota dealer relies on the parent company to develop automobile designs that address consumer wants. Toyota thus depends on the dealer to entice customers, persuade them to buy Toyota cars, and maintain the cars once the transaction has been made. The company also depends on many dealers to provide excellent sales and services that uphold the reputation of Toyota and its dealer body. Indeed, the success of each Toyota dealer depends on how well the Toyota distribution network competes with the networks of other automakers (Toyota 2015).
Does a company like Toyota use many channel structures or simply one distribution strategy to make sure that its products reach the market?
With the Lexus brand, Toyota has established itself as a manufacturer of luxury vehicles in addition to producing economical automobiles.
These vehicles are distributed in ‘rich’ neighborhoods and compete with other luxury automotive segment companies like BMW, Audi, and Mercedes-Benz. Toyota also avoids using its brand name or logo so as to preserve the prestige that the Lexus brand has acquired.
Let’s examine how Toyota does business in its native Japan. Toyota sells through four different channels: Toyota, Toyopet, Corolla, and Netz. In order to expand its presence and competitiveness in the luxury car class in Japan, Lexus was introduced to the Japanese market in 2005. The company has the biggest sales distribution network in Japan (Wikinvest 2009).
Looking at the global auto market, Toyota has established a reputation as the largest carmaker globally, both in terms of its brand and the volume of vehicles it sells (Forbes 2015). Dealerships are where Toyota products are mostly distributed, as was previously stated. Customers can access Toyota products at these locations. Distribution options are constrained for a major player in the automotive sector like Toyota. The business depends on the retailers or the dealerships. The majority of sales, whether for automobiles, spare parts, accessories, or servicing, take place at dealerships. The success of Toyota depends on how successfully it manages its distribution system in conjunction with marketing channels.
In This Article...
How does the business distribute its goods?
A distribution channel is a network of firms or middlemen that a commodity or service travels through before reaching the final consumer or buyer. Wholesalers, merchants, distributors, and even the internet are examples of distribution channels.
The downstream process, which addresses the issue of “How do we get our product to the consumer,” includes distribution networks. As opposed to this, the upstream procedure, also referred to as the supply chain, provides an answer to the query “Who are our suppliers?”
Key Takeaways
- A distribution channel is a network of businesses or middlemen where the final consumer buys a product or service.
- Wholesalers, retailers, distributors, and the Internet are examples of distribution channels.
- The manufacturer sells directly to the customer through a direct distribution channel. Before the product reaches the customer, indirect routes use a number of middlemen.
How does Toyota market its goods?
The strategy a business use to market its goods is known as the marketing mix. It is broken down into the four categories of pricing, product, promotion, and place.
Toyota communicates with its target audience by using its marketing mix. In terms of consumer preferences, regional and local market situations, it can target a wide range of markets. Due to the market’s varied customer preferences, it has modified its marketing mix.
Its ongoing success demonstrates how well the business has used its marketing mix.
Let’s begin with its marketing mix by first taking a look at Toyota’s product strategy.
Toyota’s Products Strategy (Product Mix)
Toyota offers a wide range of products to cater to all different types of clients due to the market’s diversified desire for distinct tastes. The company sells the following items, among others:
- Toyota vehicles
- Lexus vehicles
- Welcab line
- maritime goods
- Accessories and spare components
- Engines
There are distinct products for different people, for as Lexus luxury cars vs the Welcab series of cars designed specifically for the elderly and those with impairments. Additionally, it produces boats, engines, auto accessories, replacement parts, and marine goods.
Toyota’s Place/Distribution Strategy (Place Mix)
The location where the products are made available for clients to access determines the product mix. A business’s ability to supply clients with goods is crucial. Toyota employs two primary distribution methods:
- Dealerships
- Retailers
With its dealerships, it conducts the majority of its business. But there are other shops that sell its products, including spare parts and accessories, like auto supply stocked. On the basis of these facts, it is clear that the corporation relies more on dealerships to market its goods.
Toyota’s Promotion Strategy(Promotional Mix)
Toyota’s marketing plan includes all possible promotional strategies. They advertise their products online, in newspapers, on television, in billboards, and on social media sites like Twitter, Instagram, and YouTube.
Toyota uses the following promotional techniques:
- Selling on the side
- Advertising
- Public affairs
- promotion of sales
- Direct sales
They advertise their goods through interpersonal connections, such as the Green Program for environmental activities, a program to lower greenhouse gas emissions, etc.
Toyota employs memorable slogans and celebrity brand ambassadors to increase brand recognition among consumers. Ayushmann Khurrana is the company’s current brand ambassador.
Sales representatives utilize personal selling to directly market their items to prospective customers.
Toyota’s Price Strategy (Price Mix)
Toyota has always offered its consumers vehicles at reasonable prices. To increase their profits, they grant low-interest financing to its consumers.
Its pricing approach is influenced by the market, region, competition, and demand. They employ a flexible pricing strategy that takes into account shifting market conditions and rivals.
They employ the following two pricing strategies:
- Competitive pricing
- Pricing based on value
The company also makes use of value-based pricing, which bases rates on the real and perceived worth of the product. For high-end or more expensive items, like the Prius and Lexus vehicles, the corporation uses value-based pricing.
What is the distribution method for products?
Let’s examine the distribution concept. How does product distribution work? It is the process of selling goods and services to customers while also delivering them from a producer. As the business expands, it becomes more crucial to optimize distribution in order to satisfy everyone involved in the product distribution channels. By disseminating the goods throughout the market, it makes it accessible for purchase. The process of packaging, moving, and delivering products is part of the product distribution system. Depending on the technique used, a large number of people are involved in the distribution network.
What method of dissemination do autos employ?
The intricacy of the automotive sales process is depicted in Figure 1. In addition to the new car purchase, there are other factors to consider. These include financial services, trade-ins for secondhand cars, and servicing and repair. These factors are becoming more and more crucial in the purchasing process for clients (Diez 2006). Even if the paper’s main focus is on new cars, it is necessary to take these components into consideration by analyzing channel preferences.
Distribution channels are systems that are interconnected to one another. The system also includes distributors and/or retailers in addition to the manufacturer intermediaries. This leads to the differentiation of various channel levels. When a manufacturer sells to the end user directly, that is a direct channel. One (or more) intermediaries, such retailers, are part of an indirect channel distribution (Kotler & Keller 2006, p 474). According to Kotler & Keller (2006, p. 504), “Retailing comprises all the operations involved in selling goods or services directly to ultimate consumers for personal, non-commercial use. These clients could be fleet clients (like the police, the post office, or chauffeur services), small business clients (such employees using corporate cars), or individual clients. The basic distribution structure in the automotive sector is shown in the following figure (Diez 2006):
There are two primary conceptual frameworks to which the research on the design of the automotive distribution system may be related. On the one hand, there are these studies that were developed within the framework of a vertical marketing system based on cooperation and contracts. On the other side, there are those who approach vehicle distribution through a variety of channels.
Vertical marketing system
Manufacturers, wholesalers, and retailers work together to create a vertical marketing system (VMS), which functions as a single integrated system. The goal is to develop a system that enables the manufacturer and the distribution trade to fulfill their marketing goals in an efficient and effective manner. The others are either owned by the channel captain, franchised by him, or under his control and work together. Strong channel members’ attempts to regulate channel behavior led to the evolution of the VMS. In addition, it makes it possible to avoid conflicts as compared to the case where each member pursues their own goals. Differentiation is made between a cooperative, an administrative, and a contractual VMS (Kotler & Keller 2006).
According to Florenz (1992), the use of franchised dealerships in automotive distribution can be characterized as a contractually based VMS with a cooperative orientation. The main goal is to centrally coordinate behavior from the point of manufacturing to the point of sale (Florenz 1992, p 328).
However, the VMS strategy is constrained when a business begins to target clients through many marketing channels. The VMS method mainly concentrates on one channel. Relationships, disagreements, and problems with coordination between several channels are not taken into account. This strategy is also problematic because it is predicated on the idea that a channel captain exists and has significant control over the entire chain. But predictions for the future indicate that the manufacturer’s influence on wholesale and retail levels will decline with time (Fritz & Graf 2007, compare chapter 1.1.4). A growing number of independent intermediaries exist who are not members of a VMS. How should they be considered? Now, entire systems of networks are in competition with one another rather than specific business units (Kotler & Keller 2006). In response to these criticisms, a multi-channel strategy is described in the next section that takes these restrictions into consideration.
Multi channel system
The idea of a multi channel system is first examined and briefly described. The second section switches to the particular market for autos.
Four stages of development for the contemporary multichannel research methodologies could be distinguished by their various primary goals.
1. Research into the meaning and growing importance of multichannel systems. Essentially, Mallen (1970) and Weigand outline them (1977).
2. Using several case studies, researchers Cespedes and Corey (1990) and Rangan (1994) analyze the management of channel conflicts, channel integration, and the division of functions.
3. The examination of internet channels is the major topic. The research focuses on how conventional and new channels are integrated effectively and efficiently, as well as how those channels’ key performance indicators (e.g. Otto & Chung 2000; Vishwanath & Mulvin 2001).
A consolidation of the diverse methods may be seen at this point (e.g. Adolphs 2004; Bauer & Smend 2005). The empirical confirmation of an integrative multi-channel approach as a key performance indicator highlights the need for additional research into the development and market-specific adoption of multi-channel systems.
The indirect channel forms dominate the automobile distribution; the same franchised independent dealer sells and services cars. However, “(…) all significant players have been unhappy with the current distribution structure for decades, including consumers, producers, and even the dealers themselves” (Jullens & Smend 2003, p 95). As a result, there is a pressure for change, and technological and legislative advancements demonstrate that this homogeneity has already begun to shift.
Several studies have recently taken the car industry’s multichannel environment into account. One area is concerned with the creation and application of new channels, particularly in light of the internet (e.g. Urban & Hoffer 1999; Jensen & Toepfer 2001). These studies are varied in their assessments of this channel’s potential for the automobile distribution, despite the fact that they emphasize the impact on the purchasing process. There are also only a few consequences for the design of a multi-channel system.
Studies by Geisler (2002) and Diez (2006), for instance, compare various channels based on transaction costs and describe ways to strengthen the value chain in distribution. However, new inventive distribution options are specifically simply mentioned without being further examined. The use of multiple channels simultaneously is not taken into account.
For the coordination and setup of multichannel systems in the automobile distribution, Schoegel & Sauer (2002), Smend (2004), and Markmann & Benze (2004) identified strategic implications and requirements. The Smend (2004) study is significant because it demonstrates the following success characteristics for the creation and administration of a multichannel system:
– central, organized organization and management that is cooperative.
According to the findings of the expert study, Bauer & Smend (2005) advise using cutting-edge, affordable channels for new brands (e.g. Hyundai or Kia). Value brands (such as Volkswagen or Volvo) should be cautiously marketed across new channels without undermining the manufacturer’s system leadership through an exclusive brand presentation at the time of sale. For premium brands (like Jaguar or Mercedes), all customer interactions must be exclusively brand-related at all times. The recommendation is for a strategic forward integration.
However, they view this industry from the supplier’s point of view. Instead of requesting information, consider the consumer meanings, trends, and requirements for the channels and distribution formats.
Several distribution formats are available today as a result of modern technology and regulatory developments (see chapter 1.1). Particularly the internet provides customers with a variety of new prospects for vehicle retailing and channel options.
Retailing formats
The primary diverse business models underlying these channels are briefly defined and analyzed in order to determine channel selection parameters for the online and offline retailing of new cars. This covers the conventional franchised dealer, the manufacturer’s own retail (flagship stores), agents/mediators, as well as the manufacturer, dealer, and online cybermediaries/internet middlemen’s internet distribution (Specht & Fritz 2005). 10
Direct retailing by the manufacturer
Own retail or flagship stores carry out the manufacturer’s direct retailing. These distribution forms are significant and frequently employed, particularly for premium brands like Mercedes, Audi, and Jaguar. By having a direct line of communication with the consumer, this business model enables them to have more control over the design and service at the point of sale. The brand’s retail image is sufficient, dealer margins are not required, and it is certain that the brand will be present in pricey but strategically significant locations. However, from a manufacturer’s standpoint, the key drawbacks are the large capital investment, increased sales risk, and lesser employee motivation in comparison to the independent owned franchised dealer (Diez 2006). Therefore, as opposed to volume companies that use indirect distribution channels to provide a wider market coverage, luxury brands primarily focus on these retailing formats. An independent retail system is not a likely future scenario for volume brands. The investment and capital required would be excessive. These flagship stores and brand lands11 are only one branded from the consumer’s perspective by a high brand experience and service delivery. For this particular brand, knowledge of experts is expected (Diez 2006).
Additionally, central sales departments primarily target fleet and business customers directly from the manufacturer. This distribution method is not crucial for the research study that is being provided in terms of the targeted set of end customers (Diez 2006).
Indirect retailing by dealers
Franchised dealership distribution is far more significant than own retail distribution. Even though sales of new cars through franchised dealerships fell by 2 percentage points in 2006, they still rank first among all sources of car purchases as of 201213.
The producer, distributor, or importer have a contract with the dealer, who is independent but bound by it. The products become the dealer’s property. As a result, they accept market risk. Risk and expenses are anticipated to be covered by a larger margin percentage (Doole & Lowe 2004).
The car industry’s dealer-based distribution system is contrasted with a selective universal distribution system. Manufacturers are free to choose their dealers based on qualitative or quantitative factors, such as dealer qualifications, service standards, and product presentation (e.g., how many dealers are in a given geographic market area). It demonstrates that these problems, such as the choice of intermediaries, hinder competition and are incompatible with EU rules promoting a free market. Consequently, the block exemption regulation is in place. Current regulatory changes mostly affect how franchised dealers distribute (Schoegel & Sauer 2002).
Particularly in the UK market, polarization and consolidation are prevalent. The market is dominated by major dealer groups. However, there is undoubtedly room for more consolidation as compared to other retail sectors (such food groceries). 13
Another significant development in indirect distribution channels is the rise of multi-franchise dealers, which promotes greater manufacturer freedom (Fritz & Graf 2007).
From the standpoint of a manufacturer, the key benefits of a franchised dealer system over own retail are lower investment and risk for the manufacturer and better motivation on the part of the independent dealer. A multi-franchise dealer gives customers a greater selection of brands to evaluate in one location.
But from the manufacturer’s perspective, the key drawbacks are that the supplier needs a strong brand to organize and sway the entire supply chain in the direction of their goals. When compared to own retail, there are fewer opportunities for control and management. Additionally, there is a considerably greater requirement for coordination. The recent increase in store insolvencies is dangerous in terms of “open junctions within the distribution system. As technology becomes more complicated and there are more brands, models, and types of cars available, consumers may have less expert knowledge of certain brands. Additionally, compared to a flag store or a brand land, the dealer that is typically located outside of the city center is more time-consuming and offers fewer brand experiences and events.
In the car market, it is the primary distribution format, nevertheless. Numerous expert assessments, particularly for volume brands (such Peugeot, Volkswagen, and Fiat), predict the same relevance for the future (compare Fritz & Graf 2007; Smend 2004). From the standpoint of a manufacturer, they are crucial to the entire value chain. They are in close contact with the final customer. They interact with the brands and goods of the producer and largely influence how well they work. Control and impact on franchised dealers are even higher than contractual requirements and the significant brand power of manufacturers in the distribution chain (Fritz & Graf 2007). Dealers, however, are autonomous businesses with their own goals and tactics for doing business. As was previously said, the new competition demands a more networked strategy. networks of cooperation in the form of “Partner relationships are becoming increasingly crucial for sustaining success in the market through distribution-based competitive advantage (compare chapter 1.1.1).
Indirect retailing by agents/ intermediaries/ leasing companies
Although they do not own, agents have a contractual relationship with the manufacturers. Consequently, they face lower market risk (Doole & Lowe 2004). The agent has price maintenance agreements, no inventory, and doesn’t close a contract with the final customer, which are the key differences between them and the dealer. They are dangerous from the supplier’s point of view because they don’t own yet receive lower margins. In the auto sector, agents are unpopular. Only Mercedes uses agents for distribution in Germany. Consequently, this business model is not described in greater detail.
In the market, middlemen and intermediates are increasingly being used as a second source of purchasing. They are described as individuals or businesses who purchase a vehicle on behalf of a consumer but are not participants in the distribution chain (European Commission 2002; Diez 2006). Because they operate on orders from the customer, the dealer or manufacturer must provide them. Over the past few years, their sales participation in the market, namely through cross-border trade (EU importers), rose. This is mostly driven by the modification to BER 1400/2002. (compare chapter 1.1.1). Customers who are looking for a unique model that is not offered in the UK still have that option (Mintel 2006a). Due to the fact that these intermediaries do not have a contract with the manufacturer, it is very impossible to estimate their overall sales volume and market coverage (London Economics 2006).
For many years, used vehicle sellers, fleet operators, and other major automobile users have employed car auction firms as a means of car disposal and acquisition. However, contemporary developments in technology (such as eBay Motors) and the law encourage the expansion of this source of purchases, even among consumers. The two largest businesses in Britain are Manheim and British Car Auctions14. They currently provide online access to their auctions as well. Additionally, there are a number of auctions that focus on certain markets or product categories, such as Japanese imports or old cars (Mintel 2006a). Leasing companies are also impacted by this new “supply obligation” (BER 1400/ 2002). They are now required to be listed as a sales channel as well. They must be supplied by the manufacturer even if they do not have a definite end user since they need to give a quick delivery process. As a result, they now directly compete with franchised dealers or flagship stores.
The impact on the future distribution structure is ultimately determined by how customers adopt these new retailing formats. These cybermediaries play a crucial role in the online environment, especially in the kind of new automobile market for buyers (compare chapter 2.3). These business forms have several market prospects because to the medium of the internet.