Velocity Graphs and Managing Distribution

My first blog as a University of Georgia professor and it features an excellent new book on multi-channel distribution by my professor when I was at Darden, Paul Farris, and Kusum Ailawadi, another star academic (she is at Tuck).

The authors tackle multi-channel distribution and the book gives an excellent idea of how it is important to have a well thought out strategy. (Not least to make sure if you are working with Amazon you gain at least some of the benefits from the partnership). There are a large amount of fascinating insights, cases studies, and practically useful frameworks in the book. The authors outline a distinction between communication and distribution channels; both can be key but the differences need to be considered when developing a marketing strategy.

Many business people could benefit from understanding, as the authors note, that consumer search loyalty is the ultimate source of power in a channel. If a consumer will settle for an alternative the supplier of that product has little power when negotiating with a retailer for shelf space. If the consumer won’t buy anything else the supplier has a lot of power. If consumers will travel specifically to buy your product you have (almost) made it as a marketer.

Perhaps the thing that resonated most with me was the clear explanation of velocity graphs and how incredibly useful such a simple representation can be in managing a distribution strategy. “Velocity Graphs simply plot the market share of various brands in the market against their distribution coverage” (Ailawadi and Farris, 2020).

Why bother doing this? “A velocity graph can validate the reasonableness of assumptions regarding the distribution a new product is expected to achieve” (Ailawadi and Farris, 2020). The idea is that you can tell what products are under- or over-distributed. If you have massive distribution and a small share you have done a great job of pushing the products into channels. This can work for a short period but it typically isn’t sustainable. Conversely you can find a lot about a product that has limited placement in stores but excellent market share. A velocity graph alone can help tell a lot about distribution and give some clear insights for action.

Kusum and Paul’s book is a wealth of information about modern distribution; give it a read.

Read: Kusum Ailawadi and Paul Farris (2020) Getting Multi-Channel Distribution Right, Wiley.