The fourth element of the marketing mix is distribution. In this article, we will look into how the distribution strategy plays a major part in attaining your marketing objectives.
What is distribution?
Distribution is the set of different activities that your business undertakes to make your product or service available to your target consumers or business users.
What is a distribution strategy?
Distribution strategy is your plan of action directed toward achieving your distribution objectives.
What are the factors to consider in crafting a distribution strategy?
In developing your distribution strategy, you have to consider the following major factors:
Some of the common distribution objectives are as follows:
- To reach the greatest number of target consumers/business users;
- To reach the consumers/business users within the shortest or fastest time frame;
- To incur the least cost in reaching consumers/business users;
Types of consumer/business user
Your distribution strategy is basically determined by the type of target market you have.
If your target market consists of consumers in the middle-income segment, your strategy will be different from that for consumers in the high-income elite group.
A strategy for corporate users within a geographical area that is densely populated with businesses which use your product/service will not be the same as that for businesses that are sparsely situated in a wide geographical area.
Category of product/service
Your distribution strategy is also dictated by the category of product/service you offer.
The strategy for basic commodities (fresh produce, groceries) will be different from that for specialty goods (branded clothes, latest electronic gadgets).
Your strategy for logistics services (trucking, warehousing) will not be the same as that for computer systems (software, hardware).
The strategy for a nationally distributed product will be different from that intended for the international market.
Cost and time
If your product is in a cost-sensitive market, your distribution strategy will call for the most cost-effective distribution structure.
Products with low margins for the mass market will be distributed differently from those for specialty goods with high margins.
The strategy for perishable goods, which are very time-sensitive, will be very different from that of durable goods.
The volume of product/service you want to sell influences also your distribution strategy.
If your product (like fast-moving consumer goods) is intended for a broad market, your strategy will consider mass distribution in the most cost-effective manner.
A product that requires added-value at the point of purchase (like new home appliances or gadgets) will need a selective distribution strategy that involves intermediaries which can provide customer servicing.
An institutional product (like specialized medical equipment) will need an exclusive distributor not only to handle marketing and sales but also to provide the highly specialized services required in the installation, commissioning, operation, and maintenance of such product.
Channels and intermediaries
The distribution strategy is implemented through the use of channels and intermediaries.
A channel is a group of intermediaries that handle the movement of the product from the manufacturer to the target consumers/business users.
A typical channel may look like this:
Manufacturer ⇒ Importer/Distributor ⇒ Wholesalers ⇒ Retailers
A manufacturer may use a combination or mix of channels in implementing its distribution strategy. This approach is called multi-channel distribution.
A manufacturer may also do away with intermediaries in its channel by selling directly to its consumers/business users. This practice is known as direct marketing. A typical example of this is a software developer company selling or giving access to its service (SaaS) to clients via the internet.
The choice of channel is determined by what works best for both the manufacturer and its target consumers/users.
An intermediary is an independent company or merchant that moves the product from the manufacturer (or another intermediary) to the consumer (or another intermediary).
The most common intermediaries are the following:
A company that handles the exclusive distribution of a product in a particular geographic market (like a country or region).
They normally maintain an inventory of the product and are required to provide marketing, sales, logistics support, and customer services on behalf of the manufacturer.
They sell to wholesalers or directly to retailers.
A wholesaler typically takes care of a specific sub-segment of a geographic market (like a region).
They are tasked with maintaining an inventory of the product and provide marketing and logistics support in their designated market.
They sell to retailers and also directly to business users or institutional customers.
Retailers deal directly with the product consumers/end-users.
Aside from generating sales, they are expected to conduct in-store marketing activities like sales promotion.
An agent can be a company, merchant, or an individual whose function is to facilitate sales of goods/services from the manufacturer to other intermediaries.
They do not take title to the goods/service but provides only facilitation services for which they earn commission from the manufacturer.
Managing channels of distribution
Of the many diverse activities involved in distribution, managing the channels of distribution is one of the more crucial ones.
This involves selecting, supporting, motivating, and evaluating intermediaries in your channel of distribution.
Selecting the most suitable intermediaries involves determining their capability and track record in handling products/services that are similar or complementary to your product/service. It also includes their financial performance and reputation in the trade.
Supporting your intermediaries includes providing them with an orientation about your company and product/service, marketing and sales training, the needed inventory at the proper time, and other logistical support. Marketing and logistical support are critical to your intermediaries and your entire distribution channel if they are to move your product/service effectively and efficiently.
Motivating the intermediaries in your channel of distribution will ensure that they move your product/service in accordance with your marketing objectives. It usually includes giving a competitive profit margin appropriate to the trade and periodic performance-based incentives.
Evaluating your intermediaries periodically will not only improve their individual performance by strengthening any weak area but also enhance the overall performance of your distribution channel by ensuring that you retain only the most capable intermediaries for your business.
How a distribution strategy creates competitive advantage
A good distribution strategy creates competitive advantage by creating customer value along the channel of distribution.
The current trend in direct marketing (manufacturer to consumer/end-user) creates value through lower prices and speedier delivery.
Another is manufacturer/importer-distributor to retailers where these retailers provide product demonstration, readily available stocks, and immediate deliveries to customers. This is typical for businesses which offer imported products that require some demonstration of features/functions like your imported furniture business.
You have just taken a glimpse of how important distribution strategy is in attaining your marketing objectives.
I welcome your questions, comments, and suggestions. You may also want to know how your other business concerns can be addressed.