What is a Distribution Strategy?
In marketing, distribution strategies are the techniques used by companies or entrepreneurs in order to get their products or services into the hands of consumers.” Remember that the first rule of business is “to make money”. To make money, your product has to be visible and seen by consumers.
Fintalent’s distribution strategies consultants note that there is no one distribution strategy that is right for every business. Different businesses have different revenue streams, customer demographics, and competitive environments that dictate what type of strategy will work best for them. A business should take into consideration these factors when choosing their distribution path.
There are three main categories of distribution strategies viz; Direct Distribution, Indirect Distribution and Customization Distribution. We examine each of these below:
Direct Distribution. The first distribution strategy we will cover is direct distribution. Direct distribution can either mean selling your product through your own sales outlets or selling your product through the sales outlets of third party distributors. Both of these scenarios have been utilized by many companies in the past to great success. Direct distribution has been the most common strategy used by consumers to purchase their products.
A company can avoid paying sales tax and other transaction fees by selling directly through their own website. Distributors are typically paid a commission on each product sold, for more information about distributor commissions please see this previous post.
However, word of mouth marketing is a huge sales driver, so companies must ensure that they have quality people standing behind the counter. If your employees are not knowledgeable about your product then you will miss out on the benefits from the customers telling their friends and family about your product.
Indirect Distribution. This distribution strategy can be used by either a company that already has established stores or direct sales representatives, or by a startup that wants to make big money selling products in high-traffic locations. In indirect distribution, the sales of your product are still directed through third party distributors. However, the products are then sold to customers within those stores. Again, word of mouth marketing is extremely important for this type of sales model because the customer sees your product in person and not just on their computer screen. This allows them to determine if it is worth purchasing at all thus driving up your conversion rate.
Customization Distribution. The final distribution strategy I will be covering today is customization distribution. Customers that have certain needs and wants in their product will be the main target of a customization distribution strategy. Customization distribution is a great strategy for niche markets because it allows for companies to experiment with new products without taking on the risk of having to sell large quantities. Since customization distribution is used by niche markets there are not as many customers to go through, so companies with high capacities can take advantage of this by purchasing much less stock. The downside however is that if your product does not fit the clients needs they will not be receptive to the sales pitch, thus limiting sales potential.
There are many factors that can dictate the success of a distribution strategy. Some of the most important factors include the price of your product, how long it takes you to produce the product, how much money you lose from each sale (revenue).
Direct distribution has better results than indirect distribution. Direct sales require customers to go through distributors and distributors only make money on what they sell, so if no one buys it then there is no extra income for them. With direct sales, your company gets to keep all of the profits since you are the only one selling your product (no commission). In addition, your company does not have to worry about shipping costs which can sometimes be significant for larger items.
Companies that are using direct distribution will make more profit than a company using indirect distribution. This is because in indirect distribution, your company loses money from sales that are not profitable due to differences in price and production time. A business with slower production time makes it more difficult for companies to turn a profit because it takes them more time to receive their capital back.
Customizing products can increase the profit of companies. Customizing a product is a great strategy because it allows customers to get exactly what they want. In addition, customers will be more willing to purchase your product due to the fact that it is customized.
Companies can use a combination of two of the strategies listed above in order to get more sales. However, if you choose one strategy that does not produce any extra profit then you may not gain any sales thus losing out on income and profits.
Some Common Distribution Strategies
A retail distribution strategy is the simplest way to get your product out there. A lot of people tend to ignore this and opt for more complicated routes such as targeted-marketing, advance-marketing or even selling your product online.
However, selling through retail outlets can still be very beneficial to your business. For example, if you’re trying to sell a fitness product or a weight-loss product, retail chains such as WalMart or Target are perfect for getting it into the market and making them aware of your existence. If you’re selling a household product, then the likes of WalMart will be the best place to market it. They are usually opened 24/7 and have a high traffic of potential customers.
Important Points When Formulating A Retail Distribution Strategy
You can research on retail chains that sell similar products to yours and find out where they have outlets in your area. You can also consider placing your product in only a specific category if you think it’s something new or unique enough to make it stand out from the rest. In this case, you should pick smaller distribution chains so as not to compete with major products or brands, but instead work with them on the basis of promotion and marketing.
You should also have these retail chains in mind even before you conceptualize your product. That is, if you’re planning on creating something brand new and revolutionary, then find a new mass retailer to market it.
Marketing is different from advertising. Most people think that marketing means the distribution of ads or the posting of messages on social media platforms such as Facebook or Twitter, or even pay-per-click campaigns on major search engines. However, marketing is much more than this because marketers look beyond the mediums and other channels available to get their message across. They think outside the box and look for new ways to do things.
In the business world, marketing is just one part of the entire process of getting your product out there. It’s essentially a strategy that requires you to do more than set up a business and then wait for it to sell. Marketing is about knowing who your audience or customers are and “bringing them to the table”. It’s about knowing what they want and being able to find alternate ways to reach them or meet their needs.
Important Points When Formulating A Marketing Distribution Strategy
You should think of your organization as a hub: What spokes can you have? In this case, each spoke represents an individual person or group of people working towards a common goal and adding value to your core business.
You can work on distributing your products and services by giving out flyers, doing a door-to-door canvassing, or promoting through social media. If you want to promote better than your competitors, then try word of mouth marketing: Put a sign up in the local business area and ask them if they know of anybody who needs what you’re selling. In this case, word-of-mouth marketing is the best form since you don’t actually have to spend money on advertising. You can just let your customers do the talking for you!
Social Media Marketing (SMM)
Social media has become very popular. However, it is not the only way to help the visibility of your product. You can have a social media strategy, but you don’t have to. What you can do instead is opt for a social media distribution strategy. Social media distribution strategies are different from social marketing strategies because they target your customers or potential customers through their own activities on networks such as Facebook, Twitter and Instagram.
In fact, in 2012 alone, Facebook alone acquired over 1 billion active users worldwide! Due to this popularity among its users, it has become one of the best platforms to market products and services through. However, social media distribution strategies may not be the best route to take since they require a lot of time and dedication. If your business is already very busy, then such a strategy will likely take you away from your work and put you in another sphere that you’re not used to.
When Formulating A Social Media Strategy
Try to make your products more “socialable” by creating images, infographics, videos and using it for social media advertising. This way, more people will be interested in it and want to know more about your product or service.
You can follow people’s social activity on their profiles through analytics tools such as Facebook Insights or Twitter Analytics so as to understand their likes and dislikes. From this, you can decide on how much to promote your products and services.
You can create a Facebook page and start making some friends. Ask them to invite their friends and relatives to “like” your page. In fact, it’s best if you ask them not just to “like” your page but also to comment on it or share something you have posted. This way, more people will be able to see what they think of your product or service.
You can use tools such as Hootsuite or TweetDeck so as to post on all networks at the same time: Twitter, Facebook, LinkedIn and Instagram for example. Tools like these allow you to schedule your posts and create a greater consistency in your social media activities.
Conclusion. The distribution strategies outlined in this post give you the opportunity to sell your products and grow your business while ensuring you are able to turn a profit through each sale. Also, direct distribution will allow you to sell your products at much lower costs than through stores. In order to get started with direct distribution you must have a good way to reach customers and a high quality product. If you have these then you are well on your way down the road of success.