Why Distribution Strategies Impact Success
Updated: Aug 17
You may not think you need an actual strategy for distributing your product, but taking time to develop a distribution strategy — and including it in your marketing strategy — can enhance customer relationships, increase profits, and decrease problems you may face in getting your goods into customers’ hands. Distribution options abound; making the right choice requires analysis and forethought. A successful distribution strategy is key to a successful business!
Personalize Your Distribution Strategy
The first thing to consider in developing your distribution strategy is the nature of the item you wish to sell. A strategy that works for modular buildings may not be effective in distributing craft supplies. Once you’ve thought about the particulars of your product, consider your target customer. When he wants to buy a gizmo like yours, is he more likely to look online, go to a big box store, or visit a specialty shop? These distinctives inform a well-executed distribution strategy, resulting in lower distribution costs, happier customers, and increased sales.
Technological advances also impact distribution decisions. You may choose to use a distribution software. Such software typically includes tools for managing sales orders, customer relationships (CRM), inventory, and e-commerce. Automation, cloud-based systems, and IoT (Internet of Things) technologies also play a role here. Of course, the basic function of distribution is to get your product into your customer’s hands as efficiently as possible, which is why it’s so important to consider both your ideal customer and the nature of your specific product. Tailor your distribution solution to your specific needs and goals. A well-executed distribution strategy gives you a significant competitive advantage. Conversely, a fragmented or ill-advised distribution strategy is likely to frustrate all involved. Do yourself a favor and plan, plan, plan. Be sure to document both the workflow and costs involved in various alternatives.
Among the things, for you to consider is whether you prefer to sell directly to your customers or use a third party. Your sales strategy may be intensive, exclusive, or selective. Do you need a wholesaler, a retailer, a franchisor, or a distributor? Consider the particulars of what you’re selling as well as warehouse capabilities and logistics.
Determine which distribution channel will best serve you. Direct and indirect are the two primary distribution channels, but they are not your only options.
Direct distribution: This involves selling your product directly to customers. This saves the involvement of third parties, but often requires having a warehouse to store merchandise. You also must determine what means you will use to deliver the product to the customer.
Indirect distribution: Here you hire an intermediary business to help get items into customers’ hands. This is particularly useful for routine products in large quantities and can provide cost-savings for producers/manufacturers.
Wholesale: A wholesale distribution channel allows you to sell your product in bulk to an intermediary distributor who later moves the merchandise to retailers. Wholesalers rarely interact with customers. They store your goods and deliver them to retailers, who in turn put them in customers’ hands. Wholesalers provide a link between manufacturers and retailers.
Retail: Depending on your distribution strategy, retailers may obtain your product from wholesalers or directly from you. They provide your merchandise to consumers. Storefronts are the most common retail sales option, but retailers can also use virtual storefronts, catalog sales, and phone- or mail-order distribution.
Franchisor: Another means of getting your goods or services to consumers is through franchors. These are businesses with whom you contract to represent your brand. They sell directly to consumers; the contract specifies the franchisor's flat fees and royalty amounts. This is a particularly good option for producers with an established brand identity and an existing customer base. It allows the manufacturer additional market reach without the responsibility of managing each location. The three primary types of franchising are product distribution franchising, business format franchising, and social franchising.
Distributor: A distributor obtains your product from you and gets it to your customers, thus saving you the cost and responsibilities of shipping, staffing, and logistics. A distributor may represent multiple brands in overlapping lines, allowing the distributor to provide product groupings that boost sales for more than one manufacturer.
Within the two primary distribution strategies are other options you should consider. These are five primary options:
Exclusive: In exclusive distribution, you choose a few select outlets to carry your brand, enhancing the uniqueness of your product offering.
Intensive: Intensive distribution provides a means for you to get your products to as many retailers as possible. This is an excellent option for routine items like household products.
Selective: This is a combination of exclusive and intensive distribution. You get more locations to sell your goods while retaining selectivity in retail partnerships offering your products. We often see this method in high-end consumer goods available through specific retail outlets that can reach more customers.
Dual: Here you combine direct and selective means to increase your market presence while preserving direct sales to customers.
Reverse: This strategy allows customers to return merchandise to you, typically for refurbishing or recycling; it’s often used in consumer electronics.
Research and Strategize
To ensure you make the best possible choice for your brand, you’ll need an in-depth analysis of your options. Consider whether a particular distribution channel is difficult to enter. Decide how much responsibility and involvement you want in your product sales. How much time and overhead do you want to invest? With a clear understanding of your options and their marketplace functions, you can make the best choice for your particular product. Because your distribution strategy is an integral part of your customer relationships, it’s worthwhile to invest the time and resources necessary to find the solution that best meets your needs while reinforcing your brand identity. For help navigating the sea of distribution options, contact The Profit Link today!