All these changes require companies to dynamically `deliver' their product to consumers at locations and in forms that consumers require them.

If a college kid wants to hang out at a Barista to drink coffee, rather than buy a jar and brew it at home, then the company had better cater to that whim, rather than be rendered obsolete. Similarly, if Administration or Finance heads at companies would much rather buy managed fleet-services rather than invest in cars, automobile companies can do nothing but heed these signals.

Such changes are but pointers to the growing need and relevance of `alternative channels'.

Coffee pubs like Barista

What exactly are they and what makes them relevant?

Alternative channels are non-traditional ways of delivering a product to the end-customer, which lead to substantial revenues for the company.

Traditionally, companies have used a standard `physical distribution' model involving distributor(s) and one or more levels of dealers. However, in recent years, we have seen a large number of non-traditional ways in which companies have `delivered' their product to their end-customers or consumers.

Whether it is the ubiquitous coffee vending machines at offices, the Tupperware `party method', buying books on Amazon, Lakme beauty salons, or Domino's `Dial-a-pizza', they all represent newer, non-traditional ways of getting the product across to the end-consumer.

These non-traditional ways of delivering a product to the end-customer represent alternative channels for a company.

When should companies consider using them?

Since the very definition of alternative channels suggests that they deliver significantly additional revenues, it would possibly imply that every CEO should get his managers cracking on using multiple channels, traditional and non-traditional. But the fact is that every new channel you deploy entails a medium-to-long term commitment for the company in terms of time, effort and resources.

Hence, it would be useful to consider a conceptual framework for evaluating relevance and the need for alternative channels. Under what situations or at what stage of business should a company look at alternative channels?

To overcome commoditisation

Amazon used the internet, and not retail outlets to sell books.

How: By transforming `products' into a service: HP Photoshop, beauty salons and coffee parlours, for instance.

It is a marketing reality that brands need to deliver a differentiated experience in order to deliver the greatest value to consumers. For a while, this differentiation can be achieved through product improvements and superficial changes. However, there comes a stage where it is simply impossible to deliver further value through changes or improvements in the product itself.

At this stage, it becomes almost imperative to transform the product into a service. This can help further market expansion through sales growth, or else help improve margins by overcoming commoditisation.

Two examples will suffice to explain these twin objectives.

Hewlett-Packard seeks to grow beyond the traditional business segment to achieve larger growths from the large consumer market or home segment by creating a chain of HP Photo Shops that offer consumers a slew of digital imaging services.

While conventional thinking may have restricted the use of HP's products to a limited number of households, through HP Photo Shops the reach gets extended to a large number of consumers who can now get instant photographs, T-shirt transfers, or even restore old family portraits. This radical experiment has the potential to fuel dramatic market expansion for HP.

On the other hand, consider the market for birthday cakes in the US. Way back in the 1950s, these were baked at home with commodities that cost less than $2. In the '60s and '70s, packaged cake mixes were available at twice the cost.

In the Eighties, cakes were bought from stores at $20-40. Today, Club Disney and others charge $100-200 to stage a birthday experience for friends and family. Quite simply a case of using differentiated service experience to deliver greatest value to consumers.

It is for both the above reasons that detergent companies in India will contemplate setting up a laundry chain. Other examples are cosmetics companies such as Lakme and L'Oreal setting up beauty parlours; Café Nescafes; Tata Tea's investment in Barista.

Change in consumption `situations'

How: Companies have to create `alternative channels' because of changes in consumer profile and behaviour (for example, breakfast cereals, home delivery, dial-a-product)

The phenomenal growth of the software and call centre industries is now well known. However, what is less known is the kind of impact this has had on consumer food habits. Thousands of young men and women have dinner and breakfast at their place of work instead of at home.

This has spawned a boom for F&B companies who see a new avenue opening up. Whether it is a soft drinks manufacturer or potato chips or breakfast cereals, all of them are beginning to address this new market through a completely new sales channel.

In the past, companies addressed such customers through patchy efforts by their stockists or distributors. Now, there are specific institutional sales teams that contribute sizeable volumes. There is evidence that this channel is delivering up to five per cent additional volumes for some companies.

Similarly, it is for reasons of change in consumption situation and buying habits that companies find it necessary to offer channels like `dial-a-product' or `home delivery'.

Brand re-positioning for a new consumer segment

When a consumer appliances company launches its first brand for the rural market, or a PC manufacturer decides to shift focus from business to consumer markets, they are both faced with a situation where the channel needs to be created.

Their existing distributors or dealers are either physically absent in these new markets, or don't have the mindset to address a completely different set of consumers.

Take PCs for example. Traditional PC dealers operate from `hole-in-the-wall' kind of shops in areas like Nehru Place (Delhi) or Lamington Road (Mumbai), that lack the ambience required for consumer buying. Because they have usually sold to businesses, they also lack the `hand-holding' skills required to sell PCs to a household consumer for whom a Rs 50,000-investment is a serious decision.

Faced with such a situation, most leading MNCs have opted to create an entirely new retail channel. The new retailer is typically to be found in a middle-class neighbourhood, and has the same kind of branding and visibility that a consumer durable outlet has. Companies have also taken the responsibility of providing trained sales and merchandising `reps' who interact with consumers.

High entry barriers for new entrant

A new market player may find traditional channels saturated or blocked, and therefore unviable to make a breakthrough.

Amazon.com is an outstanding example of a company that broke through the highly competitive books' retailing business by using the Internet as its retailing medium.

Closer to home, I would place the recent launch of Georgia Coffee (by Coke) in the same category. The retail market for branded coffee is an extremely tough one, and it would have taken Coke (even with its marketing muscle) a long time to make any headway. Hence, the decision to launch exclusively through `ready-to-drink' vending units in the market place makes great marketing sense.

Using Alternative Channels in India - who will it work for?

What kind of customer segments are worth addressing, today in India, through non-traditional channels? For which product categories in India does it make sense to look at newer channels?

Using the conceptual framework presented above, we can quickly evaluate possible opportunities for deploying alternative channels in India.

Prediction 1: FMCG companies have been plagued by low or negligible volume growths in many categories.

They will try and win back spends from mainstream consumers by addressing them through a `direct channel'.

The much-talked about `Project Sangam' of HLL will only be the first of many such attempts by FMCG majors.

Get ready to see many more experiments and initiatives like `dial-an-order', and the `neighbourhood beauty consultant'.

Prediction 2: Specific attempts will be made to pamper high-value consumers, including those who no longer find it worthwhile to import packaged goods under today's duty regime.

Such pampering could take the shape of tailor-made communication and promotions, as well as exclusive sales channels.

Look at something similar to Privileged Member programmes that hotels and airlines run.

Prediction 3: Don't be surprised to see many more initiatives along the lines of Barista and Lakme Beauty Salons.

Eminently possible are laundry chains by detergent companies, fast food outlets by F&B companies, branded soft drink parlours and health and fitness spas.

Prediction 4: Companies will increasingly focus on reaching consumers at their place of work. Two `drivers' will fuel this trend.

On one hand, as people spend increasingly longer times at work, they will have less time for shopping elsewhere.

On the other hand, many of the new office complexes and campuses aim to be self-sufficient by catering to every need of their employees.

Prediction 5: Textile companies like Raymond or Grasim which have progressed from selling just cloth to readymades in recent years, will see potential in offering custom tailoring services.

With an increasing number of discerning consumers, the companies will see merit in increasing their margins by setting up a chain of custom tailoring boutiques.

And even look at partnerships with well-known fashion designers!

Prediction 6: The telephone will be increasingly used as a medium to make the initial cold calls and lead qualification, especially for high-end business-to-business products or services (technology products, manufacturing, and office automation).

Challenges and rewards

Conceptually it sounds good. But this is where the nightmares begin!

Companies and CEOs either give up before they even start, because they are unable to get their team to take a holistic view of their business and marketing issues. Or else, the team grapples with un-coordinated and non-synergistic execution.

In both cases, it translates into lost opportunities and lost revenues for the company.

To ensure that such new initiatives get the attention they deserve, the CEO must create a senior-level position to drive it, and working closely, if necessary, with a service provider who brings in the necessary expertise and insights.

Funding the investment is the other challenge. The first year will be necessarily be a phase when the concept and strategy will take shape, and some `pilot' projects are run - very clearly an investment phase.

It is the second year that the initial roll-out takes place, with a structured business plan. Revenues, clearly, are important, and companies may target 5-10 per cent additional volumes, and seek to break even after 12-18 months.

This implies that staying power and determination of purpose are crucial. Breakthrough revenues or profitability won't happen overnight.

It's a win-win situation for both consumers and companies.

It's clear that the consumer will be increasingly pampered and inundated with a plethora of choices. They will have companies seeking a `share of wallet' by reaching out through a variety of `channels', which will be alternative and more significantly, personalised. It's up to marketers to wake up to this challenge and take an alternative route to marketing that works.

(The author is Managing Director and Co-founder, SOLUTIONS Integrated Marketing Services Pvt. Ltd, which specialises in strategic leadership and organisational vision. Feedback can be e-mailed to bleditor@thehindu.co.in.)

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