Oil & Gas Distribution Tactics from a Marketing Perspective
Distribution methodologies in the sphere of the oil and gas industry are generally defined by market tendencies and processes. In spite of the fact that the actual importance of these methodologies is defined by the attitude of the managerial team towards the aspects of business performance and the business situation assessment principles, the general frames of distribution are created by the market situation. The aim of this paper is to analyze the strategies and principles which are applied for developing the distribution methodologies within an oil and gas company. The company which will be analyzed is the Marathon Oil Company which was founded in 1887.
First, it should be emphasized that oil and gas are generally regarded as the strategic resources required for the fuel industry. Hence, the particularities of the distribution will be closely associated with the particularities of the product. Nevertheless, the marketing strategies are based on the market processes and principles involved in the business activity. Considering the importance of distribution, it should be emphasized that the general decisions on the matters of oil and gas distribution are included in the following frames:
- Distribution channel
- Marketing situation
- Selected marketing strategy
- Location of the consumers and the target audience in general.
Anyway, the strategy which is applied by the managerial team is based on the principles of providing high-quality fuel. Marathon performs oil production in nearly ten countries, including the UK, the USA, and Angola. The company also owns seven oil plants, with a common capacity of up to 1 million barrels a day, as well as a network of 3900 filling stations. In the light of this statement, it should be emphasized that the end-users are mainly citizens who need to fill their cars with petroleum. Consequently, the distribution strategy is based on the necessity to develop the retail network and deliver the products to the end-users.
The strategy which is applied for the distribution is linked with the importance of maintaining the reputation of the reliable supplier of high-quality fuels. Consequently, the Marathon Oil company needs to think about the reliability of supply channels.
The channel decision is very important. In theory, at least, there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods manufacturers could never justify the cost of selling directly to their consumers.Razavi and Fesharaki
Yet that distribution chain is merely assuming a part of the supplier’s responsibility; and, if they have any aspirations to be market-oriented, their job should really be extended to managing all the processes involved in that chain, until the product or service arrives with the end-user.
Additionally, from the perspective of this statement, an important factor should be evaluated: the solution of the problems associated with finding and adjusting the distribution channels. The possible decisions are generally linked with the following aspects:
- Channel Membership: this involves the participation of other companies in distributing the gas and oil products that are produced by a marathon. As for the involvement of end-users, they are not involved in this process. Nevertheless, they may influence the involvement of some participants in the channel, especially if they are not the part of Marathon group.
- Channel Motivation. Motivation presupposes the increased sales volumes, as the more the channel motivated, the larger volumes of production are distributed through this channel. From the marketing perspective, channel distribution is important for attracting various groups of consumers, especially if various channels are motivated.
- Monitoring and managing channels are required for better control and regulation of the channel. This is required for effective risk management, resource allocation strategy, solving of the possible problems, as well as attracting and controlling new participants of the distribution channel.
In fact, these principles are included in the chain value described by Michael Porter. Hence, the distribution principles are based on the key values of the business structure. The value chain of the Marathon Oil Company is as follows:
This flow involves the allocation of the resources required for extending the distribution network, solving the appearing problems and satisfying the needs of the consumers and end-users. In the light of this statement, it should be emphasized that these methodologies help to add value to the original production from the consumers’ point of view. It is generally explained by the statement that consumers regard companies as reliable suppliers if they have properly developed distribution systems.
Consequently, there is a guarantee that the product will be delivered in time and attained when needed. Considering the aspects of the distribution budgets, it should be emphasized that marketing budgets are generally redirected through financial management teams and retail organizations, if any, are included in the distribution channel.
Financial and retail organizations are taking advantage of distribution extension in order to promote products and services in their branches and stores, and to create richer, more interactive experiences for their customers.Moreno
In fact, the actual importance of the distribution channels is required for the improved customer care strategy. This is explained by the statement that distribution strategy is often based on the consumers’ needs and requirements. Consequently, the target audience defines the marketing realities for creating the distribution channel.
Industrial Development and Distribution
In general, consumers are not interested in the process of industrial development and development of a company. Nevertheless, consumers and end-users are interested in the reliable supply of the required production. Hence, Marathon Oil Company needs to take into consideration this statement in order to develop the distribution strategy effectively. This means that the final aim of the development process is the satisfaction of the end-user.
Consequently, the company needs to explore new oil basins, develop industrial capacities, and improve oil processing technologies. On the one hand, exploration, industrial development and distribution have nothing in common. Nevertheless, these aspects may be regarded as the inevitable part of distribution strategy. As soon as the key aim of the distribution is the satisfaction of the end-user, as they wish to get what they need conveniently and in time. Consequently, companies need to think over the aspects of extending the number of channels and improving the activity of the existing ones.
Finally, it should be emphasized that distribution strategies that are applied by Marathon Oil Company are based on the necessity to offer high-quality production in time in order for the consumers and end-users to stay satisfied with this quality and the level of the services. Hence, it should be emphasized that the actual importance of distribution is explained by the necessity to provide the continuous flow of the products that consumers are ready to purchase.