Marketing.

Route to Market

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The question

Of all the jobs that sit between your product being finished and a customer having it in hand — holding the stock, explaining it, taking the order, carrying the credit, chasing the payment, handling returns, carrying the risk that none of it sells — which ones does somebody else currently do for you, and what precisely are you paying them for? If you have never listed them out, here's the likely answer: you're doing most of them yourself and charging nobody, while paying a partner a margin for two and assuming they cover five.

The idea

Distribution is the part of a marketing plan that gets filed as logistics — trucks and contracts, settled somewhere below the level where strategy is discussed. It stopped being that in 1977, when Louis Stern, a professor at Northwestern University's Kellogg School, and Adel El-Ansary published Marketing Channels. Their move was to stop describing a channel as a chain of companies and start describing it as a set of flows that have to happen whoever performs them: physical possession, ownership, promotion, negotiation, financing, risk-taking, ordering and payment. Some run forward towards the customer, some run back towards you, some run both ways — physical possession runs out to the buyer and back again on a return. Ownership and negotiation tend to ride along with the others, while possession has to be costed in each direction, which leaves the seven lines you can actually put a cost against. Once you see a channel that way the arithmetic changes: you can remove an intermediary, but the flows do not go anywhere — you only reassign them, to yourself, to the customer, or to somebody new. The trap is reading a distributor's margin as rent for shelf space. It is payment for a bundle of jobs, and the moment you claw that margin back you have also taken on the stockholding, the credit, the collections, the local explaining and the returns. So every channel decision is really two decisions taken at once: which functions you shift, and what conflict you have just bought between the parties now standing in front of the same buyer.

The framework

01
The functions come before the partners.
Start with the work, not the org chart. Write out every function that has to happen between a finished product and a satisfied customer: holding the stock, explaining the thing to someone who's never seen it, taking the order, carrying the credit until the invoice clears, chasing the payment when it doesn't arrive, handling returns and service afterwards, and carrying the risk that none of it sells. Seven lines. Then mark who does each one today — you, a partner, or the customer. Most route-to-market arguments are really arguments about two or three of these, conducted as though they were about loyalty, which is why they never resolve.
02
Break the margin into the jobs it buys.
Day 83 drew the boundary of a business one activity at a time: build what makes you win, buy what merely keeps you running. In a channel the unit is a flow rather than a whole activity, so that same boundary gets drawn seven times instead of once. When you look at thirty points of channel margin and see a tax, you're pricing the relationship instead of the work. Split the margin across those seven lines and cost each one: stockholding against working capital, local support in headcount, your own collections in days and in temperament, bad debt if you carry it. Sometimes the partner is genuinely expensive and functions should come back. Just as often the margin is cheaper than doing it yourself, and the honest response is to stop resenting it and start managing it. And every line you redraw in your favour changes who stands in front of the buyer — the second of those two decisions, and the one that comes next.
03
What conflict have you just bought?
Adding a route almost always creates conflict, and the useful question is not whether but where. Sell direct alongside a reseller and you've put two parties in front of one buyer with different prices and opposite incentives — the reseller does the explaining, you take the order, and they will notice. Decide the boundary before you need it and write it down: by segment, by geography, by deal size, by product line. Conflict managed by an agreed rule is a cost of doing business. Conflict left to be discovered is how a partner quietly stops selling you.
04
The channel review nobody schedules.
Channels are the slowest-moving part of a marketing plan and the least often reviewed, which is how a business ends up running a route designed for a product it no longer sells. Put it on the calendar once a year: what each route costs per unit, what share of volume it carries, which of the seven functions it performs, and whether the buyer's behaviour has moved somewhere it isn't. Adding a route is easy and removing one takes a year and a lawyer, so the review earns its keep mostly by stopping you adding routes you'll want back.

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