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Philips’ Distribution Balancing Act

In the past, Philips had been known for selling heavily to mass merchants, some said to the detriment of sales to independent retailers and buying groups. TWICE asked Larry Blanford about how Philips is balancing its sales to mass merchants while selling more independents.

How have you been able to juggle the needs of your new up-market dealers, along with those of major discount chains such as Wal-Mart?

We put together a well-thought-out channel roadmap, which basically is a matrix. Along the horizontal axis are various product lines and sub-brands that we have. For example, there is MatchLine, Epic, HD, Designer and Magnavox.

Along the Y-axis are all of the various types of distribution, starting at the high-end with the various specialty retail selling floors, followed by somewhat less specialized selling floors, followed by sales assisted floors, followed by mass merchants and the clubs.

We set up different criteria for these product families that are designed to ensure success for each of them. Then it is simply a matter of seeing how the retailers match up.

In MatchLine, for example, the criteria suggests that the product has to be displayed at retail in an operational way, sold by trained professional sales people, and so forth. As long as the dealers step up and meet the criteria, we will certainly consider them for MatchLine distributorships.

Of course, not all dealers are going to be able to step up to that level of support. So basically, what you have, are dealers self selecting, [their level of participation based on the distribution matrix]. Not every dealer agrees with our criteria, but at least they understand how we are going to market. That overwhelmingly is the most important thing.

Historically, dealers could not count on Philips because it was very opportunistic in the marketplace, and dealers didn’t know what to expect from us. Now, they absolutely know what to expect from us. With that understanding, they can now determine how we fit in their programs against other brands.

From a brand perspective, we have positioned Philips as a premium brand that is broadly, but smartly distributed. Premium means we want to earn a few extra dollars from the consumer by doing a better job delivering against real consumer insights, marrying up great technology, an understanding of the consumer and great design.

We understand our ability to get a premium will take time, because it is a new area for Philips in North America.