Glaxosmithkline – Direct Distribution

Glaxosmithkline (GSK), the world’s second largest healthcare and pharmaceutical firm, has become the first U.K firm in its market sector to launch an e-commerce site: http://www.gskdirect.co.uk. The website allows users to register and order any of the company’s products from a selection of a variety of brands – which includes Aquafresh, Beechams and NiQuitin. Therefore, as delivery is also offered – free next day delivery if a customer orders before 1pm – GSK have altered the ‘Place’ Element of their marketing mix to sell direct to the end-user, without any of the intermediaries associated with traditional distribution channels. But why the need for such unorthodox distribution in a slow-growth market?

A given benefit of any form of direct distribution is that it offers the manufacturer a chance to either maximise profit margins, as the proportion that can be retained increases relative to the decrease in wholesalers and retailers, or use this competitive advantage to lower prices while retaining current profit margins. As well as this, I can see a real PR use for the site. Many consumers recognise the variety of brands that GSK produce, without knowing the company, the ‘unsung hero’ if-you-like, that is responsible for years of research and development to produce innovative products; the site, in-effect, allows the company to exploit the strength of its products’ reputations.

More importantly, according to GSK, the core purpose is to collect market research data. This is another advantage of direct distribution: contact with the end consumer provides primary, raw facts and figures; moreover, the use of e-commerce naturally makes their findings easier to process by using management information systems. A typical finding may be to identify who is buying what products – a smoker, who purchases NiQuitin nicorette patches to try to give up, may also purchase above average amounts of Mcleans mouthwash to get rid of the bad, tabacco smell from their breath.

However, there are several issues that springs to mind with the website. Although to make a serious profit from this is not one of GSK’s aims, one has to ask why anyone would take the effort to purchase fast-moving-consumer-goods from the manufacturer? Yes online shopping is huge, but that’s the problem. Buying goods online is already popular; all the innovators, the customers to initially try the service, use their supermarkets’ e-commerce service to buy these products: there is no reason for them to purchase from GSK instead. Albeit the firm treats this as a marketing exercise rather than a strategy, this may distort their market research. The type of customers to buy directly from their website are not going to be your traditional customer – therefore the firm needs to make sure to take any findings with a pinch of salt.

Having said that, I do believe this is a well-thought out marketing move from GSK: it’s long-term, innovative and just plain quirky. It’s the very fact that their customers will be unconventional that makes this appealing to me – there is no telling what the company will find out. And surely that’s the point of market research?

© Joshua Blatchford author of Manifested Marketing 16/09/2010

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3 Comments

  1. Olivia Farrell

     /  January 29, 2013

    At the start on the very first paragraph in the marketing section you spelt Glaxosmithkline wrong

    Reply
  1. GSK – Market Research « Manifested Marketing

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