Distribution Strategy: Choosing Among the Best Distribution Strategies
Did you know that sales are the key to higher revenues and contented workers? That’s true, and if you want to sell more, you should make a plan. First, you should have a goal to attract and retain customers. Second, you should deliver a product or service to the customer and the correct information. And to achieve this, you should come up with a distribution strategy that goes well with your business needs. This strategy will help you manage the complete sales process. But, do you know what it is all about? If not, don’t worry; this guide will educate you.
Table of Contents
- What is a Distribution Strategy?
- How to select the right Distribution Strategy
- Distribution Strategy: Stay competitive in the Digital world
- Distribution Strategy examples
- What are different types of Distribution Strategy?
- What are different distribution Channels?
- How can I select the right distribution strategy for my wholesale business?
- Key Modules of the Distribution Software
- What is the difference between Direct and Indirect Distribution
What is a Distribution Strategy?
In a nutshell, the best distribution strategy definition is a plan to help you deliver a product or a service to the customers you are targeting via a supply chain. This plan includes all the approaches you would use to give the customers what they expect from you finally. A good strategy can incorporate your distribution channels or employ other companies’ channels. In addition, your business can use its exclusive stores or sell through other retail stores.
Moreover, a business can use both its stores and third-party retail chains. In modern times, especially after the Covid-19 epidemic, companies are using online exclusive sales channels. Hence, you should pick a distribution channel strategy that suits your business. The best approach will help you deliver goods or services to the target audience at optimal distribution costs. It will also maximize your sales revenues and profits. On the other hand, Bad distribution strategy types will cause losses and let your competitors win.
How to select the right Distribution Strategy
Now you know what a distribution strategy is. Next, you will learn how to select the right one for your business. There are a few factors to reflect on, and they include:
Check the market status right now
Before coming up with a distribution marketing strategy, carry out a thorough market analysis. The goal is to discover the correct way to distribute the type of products you sell. For instance, if you deal with consumer goods, the proper technique is FMCG distribution. Only a meticulous market analysis can reveal the appropriate distribution channels for your products. It can also help you study customers’ buying behavior and pinpoint their specific needs.
No matter the channel you choose, there will be costs to incur. If you select a more comprehensive direct distribution strategy, it means you will sell directly to the final customer. The method is more straightforward, but it has some costs to incur. The more comprehensive strategy involving intermediaries is more convenient, and goods can reach the customers almost immediately. However, every intermediary should earn something to continue being loyal to you. In essence, you should develop charts and graphs showing potential costs and profits from each distribution channel.
Do you sell complex or simple products?
As you try to create a sales distribution strategy, focus on your product. The product is complex in that it requires technical support after delivery. Do the customers need an after-sale service, such as installation and maintenance help? If so, you should sell it more directly to go to a dealer and then to a customer. The dealer will help your customers sort out their issues. On the other hand, if your product is a typical household appliance, such as a blender, you can select an extended distribution channel for it.
What profits are you targeting?
If you choose the shortest distribution method, your business revenues can increase. Nonetheless, this can happen only if you don’t sell FMCG products. For these, you need a more extended distribution channel to increase your revenues and profits. In some situations, higher revenues may not translate to higher net profits.
What will be your market share?
How quickly can your business establish itself in a new market? If such a market is already saturated, you will find it hard to penetrate a new market. There will be competitors doing well already, and it will take longer to get a market share. So you have to do your distribute strategy math very carefully.
Where your product is in its life cycle
If your product is new, a more extended distribution channel is necessary to ensure it is recognized on the market. And as you choose who to connect and grow with, you should consider their availability and expertise.
Distribution Strategy: Stay competitive in the Digital world
As you think of how to make a distribution strategy, focus on technology. First, think of how to use technology to promote and sell your products. In this case, you should explore eCommerce as a distribution channel. It is estimated that by 2021, eCommerce sales will reach 4.8 trillion. Why wouldn’t you want to be part of that? Countless people are using apps to buy things online, and you can sell to them too. Secondly, you can use technology to implement your preferred distribution strategy. As you will learn below, there is software that can help you manage your supply chain processes
Distribution Strategy examples.
A suitable distribution strategy example will vary depending on the marketing channels you have selected. First, a direct channel occurs when a manufacturer sells straight to the consumer. The channel must be short if it’s direct. Hence, good examples of this are primarily retail brands that sell fast foods and perishable goods.
As for an indirect marketing channel, it occurs when the path is long and complex. Typically, there will be many distributors and middlemen. Examples can be soft drinks companies, including Coca-Cola and Pepsi
An intensive distribution strategy is more intensive and considers more than just the size of a distribution channel. It uses a more aggressive approach, and examples include vehicle brands and distributors of household appliances.
Moreover, a business can use an exclusive strategy when it has a high brand value to protect. It will open stores in major cities with upper income and classy customers and still outdo its competitors. Examples are big fashion houses with high-end designer products.
Lastly, some businesses use a selective distribution strategy. You will find them in almost every street, or they may start a few stores in every major town. Good examples are big supermarkets and retail chains.
What are different types of Distribution Strategy?
Here, manufacturers sell directly to the end consumer. Some direct distributors sell online, particularly those targeting younger generations that have more technological knowledge. The rest use product catalogs, product lists, phone calls, and other advertising methods.
It is the opposite of the direct distribution method. Simply, this method entails intermediaries like wholesalers, retailers, and agents.
As aforementioned, this technique entails a more aggressive and extensive marketing approach. Hence, several retail outlets are opened to reach more customers and increase sales revenues and profits.
Exclusive distribution strategy
This method is a preference of companies that sell luxury goods. To purchase their products, you must approach their dealership. A good example here can be the Mercedes Benz car brand.
This technique is partly similar to intensive and exclusive strategies. Those that use this technique know full well that not all people will be interested in their products. So they set up stores in some selected areas. Their stores don’t sell anything else, and if they pick external stores, these will sell closely related products.
What are different distribution Channels?
These channels are all about how to distribute products to customers. As a distributor, you obtain goods, store them, and then sell to customers via a distribution channel. Different channels include following levels:
- Zero – This distribution channel involves direct contact between manufacturers and customers. It is the shortest.
- One – This one entails one middleman standing between the manufacturer and consumer.
- Two – It involves two intermediaries, and this can be a wholesaler and a retailer.
- Three – This distribution channel has three middlemen, namely: agent, wholesaler, and retailer.
How can I select the right distribution strategy for my wholesale business?
If you are a wholesaler, you need a product distribution strategy that works for your business. There are different types of systems, but some may not work for your business. The system that might work for you might not help the next wholesaler. You can opt for direct marketing via telemarketing and product catalogs or choose eCommerce marketing. It can be trial and error at first, but eventually, you will discover the best strategy for your business. Briefly, you should:
Know your customers perfectly
Ensure you find out who your target customers are, what they need from you, and how soon they want it delivered and where
Focus on your product
If you sell perishable goods or daily-use products, by all means, choose a direct channel. On the other hand, if you deal with non-perishable goods, choose indirect marketing channels. More to the point, select your intermediaries wisely.
Seek professional help
As a wholesaler in any industry, you have competitors. Any small error in decision-making can cost your business considerable losses in terms of time and money. Thus, if you honestly can’t select the right distribution strategy alone, find a professional who can help you.
After finding a distribution strategy to get the message to customers, the next thing is to implement it. As technology has become more innovative than ever, you should use it in your business. More specifically, you should start searching for the best distribution software. It would be best if you bought wholesaler distribution software as it is designed for your business. Not only will it make the distribution process easier to track, but it can also reduce human errors and stress.
A good software tool for distributors should have automation capabilities. In other words, it should boost productivity and ensure that you complete tasks quickly. Another component of this software is RFID tracking that simplifies inventory monitoring in real-time. It is based on a modern technology called the Internet of things. Moreover, the software needs to have all business management modules in a central position. The most common modules are accounting, warehousing management, customer relationships management, inventory management, and procurement management. Lastly, the software should be cloud-based rather than in-house. Cloud-based distribution software is easy to access from any place, anytime, as long as there is a Wi-Fi hotspot and mobile gadget.
Key Modules of the Distribution Software
Distribution software includes the modules to manage the plan, administer, execute, track and report the task running in Distribution warehouses that belong to wholesale distributors business. Distribution software contains the ‘Flow’ of material for distributors. Key Features of the Distribution Software is:
- Sales Order Management
- Inventory Management
- Product Catalog
- Employee Management
What is the difference between Direct and Indirect Distribution
In direct distribution, the product is distributed to the end user from the manufacturer’s or distributor’s warehouse. This is usually the case of a manufacturer who sells their items via a distribution center or retail outlet. In indirect distribution, the product (i.e. a service) is provided through a supplier or agent who’s contractually obligated through the manufacturer to buy the products and supply them to the end user. The indirect distribution technique is regularly used by manufacturers and distributors to make certain they don’t oversell or have leftover products.
Direct Distribution = Direct to consumer (DTC) is a distribution channel that is not utilized by the brand. The main reason for the use of this channel is to gain a competitive benefit as it is a quicker and direct way to reach the customer. Companies use direct distribution channels for customer products as it is very effective. This is a direct method of reaching the consumer with the product.
Indirect distribution is an indirect form of distribution channel and is used to sell products and services. It is also called indirect marketing. It is a form of marketing that involves a company or individual taking someone else to make a sale for them. It is known as indirect distribution as it’s not involve the company or individual going to the customer directly.
If you want to create an effective distribution strategy, you should know that this is a multi-faceted and complex process. You have up to five distribution channels to choose from and a range of factors to think about. Whether you settle on the direct, indirect, intensive, exclusive, or selective marketing strategy, you need software to simplify the implementation process. In addition, if you cannot develop a strategy alone, you can consult a professional.