When working on a marketing plan after the launch of a new product or service offering, it's essential for companies to develop a distribution strategy at the same time. This evolves according to the company's needs, the entrepreneur's budget, and consumer trends.
Defining a distribution policy is of paramount importance when running an ecommerce company. The aim is to choose appropriate distribution channels that are consistent with the company's brand image and strategy, provide customer satisfaction and offer an excellent quality/cost ratio.
Definition and characteristics of a distribution strategy
What is a distribution strategy?
The goal of a distribution strategy is to establish the way in which a company sells its products and services to end consumers. It refers to the means put in place to bring products or services to their point of delivery. The idea is to achieve the best possible profitability for the company, while contributing to overall customer satisfaction.
Which distribution strategy should you choose?
When choosing a distribution channel, three main criteria must be taken into account: the nature of the product to be delivered, the target audience, and the potential clientele. The company's production capacity and financial strength are also decisive factors.
Choosing a distribution channel is not a decision to be taken lightly. You need to compare a number of different plans, in order to highlight the advantages and disadvantages of each. There are various questions you should ask to help you make your choice:
- Is the chosen distribution channel in line with the company's brand image? (For example, a luxury product will never be sold in supermarkets).
- Will the selected distribution channel enable you to position yourself in your target market?
- Are you able to bear the costs of this distribution channel?
- Is your distributor well established in the region where your customers are located?
- How long will it take to deliver your products via this distribution channel?
Distribution channels: The key challenge
Several distribution channels can be considered when implementing such a strategy, especially when omnichannel ecommerce is involved. Similarly, several distribution channels can coexist simultaneously.
What is a distribution channel?
A distribution channel is a path or route through which goods or services move from the manufacturer to the end consumer. It involves intermediaries such as wholesalers, retailers, and online platforms that facilitate the efficient flow, marketing, and availability of products to the target market.
How do distribution channels improve product distribution?
Distribution channels play a pivotal role in improving product distribution by facilitating efficient and effective pathways for products to reach the end consumers. These channels optimize the movement of goods, ensuring timely availability, wider geographic coverage, and enhanced accessibility. By partnering with wholesalers, retailers, agents, or online platforms, businesses can tap into established networks and expertise, reaching diverse markets and customer segments.
Distribution channels also reduce logistical complexities, enhance customer convenience, and enable better inventory management. Through collaborative efforts, products can be seamlessly delivered, marketed, and supported, ultimately enhancing customer satisfaction and boosting overall sales and market presence.
What are the types of distribution channels?
- Direct: from producer to buyer
With a direct distribution channel, products or services are sold directly from the producer or manufacturer to the end consumer without intermediaries. This channel is often used by smaller businesses or those with niche products. A direct distribution strategy allows for greater control over branding, pricing strategies, and customer relationships.
Its main advantage is that it eliminates all sales intermediaries, enabling the producer to generate higher profit margins. What's more, a direct distribution strategy gives producers greater autonomy, since they're free to set their own selling prices.
In terms of customer loyalty, it's also an excellent way of creating a more personal customer relationship. In direct contact with customers, producers can better understand them, and more easily identify their disincentives or triggers that encourage them to buy. As a result, they can more easily adapt their offers.
- Indirect: with intermediaries
With an indirect distribution channel, intermediaries or middlemen are involved in the process of getting products from the producer to the consumer. These intermediaries can include wholesalers, retailers, agents, and distributors.
The producer sells products to these intermediaries, who then sell to the end consumers. The use of an indirect distribution strategy is common in industries where products need to reach a wide geographic area or where expertise is required in marketing and selling.
It can expand market reach, provide access to established distribution networks, and allow manufacturers to focus on core competencies. However, implementing an indirect distribution strategy may reduce control over the customer experience and margins due to intermediary involvement.
- Hybrid: a blend of direct and indirect
A hybrid distribution channel combines elements of both direct and indirect channels. This means that a company may use a combination of selling directly to consumers while also using intermediaries. For example, a company might have its own online store (direct) but also sell through retail partners (indirect).
Distribution strategies involving this approach offers businesses the flexibility to diversify their distribution strategy based on factors such as product type, target market, geographic reach, and customer preferences. A hybrid distribution channel can help companies in the management of achieving a balance between maintaining control over their brand and customer relationships (through direct sales) and leveraging the expertise and reach of intermediaries (through indirect sales).
What are the three levels of distribution intensity?
The three levels of distribution intensity refer to the degree of market coverage and availability of a product through different channels of distribution. These levels determine how widely and extensively a product is distributed to reach consumers. The three levels of distribution intensity are as follows:
- Intensive distribution
Intensive distribution involves making a product available in as many outlets as possible. This strategy aims to achieve maximum market coverage and accessibility.
It is commonly used for everyday consumer goods, such as snacks, soft drinks, and newspapers. Manufacturers use intensive distribution when their goal is to make the product available to a large number of consumers in a convenient manner.
- Selective distribution
Selective distribution entails distributing a product through a limited number of carefully chosen intermediaries (retailers or distributors). This approach is often used for products that require special handling, customer support, or branding.
Manufacturers select intermediaries based on their ability to effectively promote and sell the product. Selective distribution strikes a balance between market coverage and control over the product's image and presentation.
- Exclusive distribution
Exclusive distribution restricts the availability of a product to a very limited number of intermediaries or outlets. This strategy is often used for luxury or premium products, high-end electronics, and specialized goods.
Exclusive distribution helps maintain a certain level of exclusivity and enhances the product's perceived value. Manufacturers choose intermediaries based on their ability to provide a unique and premium buying experience.
The choice of distribution intensity depends on several factors, including the nature of the product, target market, branding strategy, and competitive landscape. Manufacturers carefully evaluate these elements to determine the most appropriate distribution strategy that aligns with their overall business goals and market positioning.
What are the different types of distribution systems?
Omnichannel, multichannel, and cross-channel distribution are strategies used by businesses to reach and engage customers through different channels. These strategies aim to enhance customer engagement, provide convenience, and meet customers where they prefer to interact, ultimately driving sales and brand loyalty. In the face of increasing competition, a growing number of retailers are implementing multi-channel distribution.
- Omnichannel: This is a strategy that unifies all distribution channels, so as to offer consumers a good customer experience. In other words, there are no boundaries between different distribution channels.
- Multi-channel: With this option, the product can be purchased via different channels. The customer can, for example, choose to buy it in a local physical store, via a website or from a vending machine. The aim is to increase sales opportunities.
- Cross-channel: several distribution channels are integrated into the customer journey. This is particularly the case when customers place a drive or click-and-collect order. They first visit the internet before going to the store to collect their purchase.
How do you develop an effective distribution strategy?
To define the best distribution strategy for your business, it's essential to weigh up several areas. This includes financial, image, and service considerations.
Define the target customer for your products
To choose the right strategy, you need to understand your customers' expectations. For example, you won't choose the same channels if you're targeting a professional or an individual customer.
Generally speaking, B2B customers don't go into stores. Similarly, using the internet will be much more judicious if you're targeting the millennial generation than if you're targeting senior citizens.
Determine the list of intermediaries and distributors
You'll also need to identify all the partners at your disposal, so that you can make your choice with full awareness of the strengths and drawbacks of each one. So remember to list the following: distributors, wholesalers, and retailers.
Perform competitive intelligence
The distribution strategy of your main competitors is also an important source of information! Competing brands can provide you with helpful data and inspiration for your business model, as well as point you in the direction of current customer trends.
Don't hesitate to draw inspiration from competitors with successful business models! This will ensure that you don't get left behind by the latest innovations. In this way, you'll be better equipped to adapt to changing consumer trends.
Analyze your current sales channels
Like any marketing or sales action, distribution strategy needs to be constantly quantified and analyzed. The idea is to rationalize your channels and determine which means are the most effective. This way, you'll maximize the impact of each of your actions and content and use the best channels for your business, without wasting money on other, totally ineffective channels.
Distribution policy: Establish the best channels for your business
While it's important to observe your competing companies' practices, don't forget that your company is unique. So you're in the best position to know what's best for it, without "copying your neighbors." Establish your own distribution model!
Evaluate different distribution channels such as direct sales, wholesalers, retailers, online marketplaces, and more. Consider factors like customer reach, cost, control, and the nature of your product.
If you're using multiple channels, ensure they work seamlessly together to provide a unified customer experience. Cross-channel consistency is essential to avoid confusion and enhance brand perception.
Adapt your marketing strategy to your new challenges
To retain your existing customers while recruiting new ones, you'll need to constantly adapt and challenge yourself. Your distribution channels will have to adapt to the expectations of your target and the evolution of your products.
To sell on the internet, establishing an effective distribution strategy requires time and attention. To do this properly, you'll need to play detective: don't hesitate to investigate and gather as much information as possible about your customers and competitors.
Create partnerships and bounce back. In today's fast-moving world, resilience and responsiveness are the watchwords, even when it comes to the distribution of your products!
Determining the best distribution method for your business is a pivotal decision that can significantly impact your venture's success. With multiple distribution strategies available for today's companies, it can take a little time to figure out which is right for you. By carefully assessing your product, target audience, competition, and resources, you can identify the most suitable types of distribution channels and intensity levels.
Whether you choose direct, indirect, or hybrid distribution, the key lies in aligning your strategy with your overall business goals and customer preferences. Just like with content marketing strategies, you'll want to regularly monitor and adapt your distribution strategy as market dynamics and data evolve to ensure that your products consistently reach the right customers through the most effective and efficient means.
A well-crafted distribution strategy not only enhances customer satisfaction but also lays the foundation for sustainable growth in a competitive marketplace.