Distribution strategies are methods of providing products or services to end-users. The trick to obtaining sales and upholding customer satisfaction is to introduce the most effective distribution system. In addition, various businesses prefer to use different distribution strategies to conform to diverse customer bases.
It is not just about the consumer base but convenience and resources as well. A business may determine whether it wants to serve the product and service through its channels or through an alliance with other companies to use their distribution channels to perform the task.
Businesses may use their own exclusive outlets selling their own products or the available retail outlets to market their products. It may be a mix of both. Many businesses are now using online platforms to market their goods and services.
For example, if a company is selling leather products and wants to appeal to people aged 60 and above, they would want to sell items directly through the catalogue. However, if they want to target a younger consumer base, then they would partner with a famous retailer such as Walmart or an e-commerce website.
Different types of distribution strategies:
The two main types of distribution strategies are direct and indirect which are used by most of the companies. However, there are some other distribution strategies as well:
- Direct-: Direct distribution is a technique in which producers sell and deliver goods directly to customers. There are a variety of different ways to execute this method. Few companies prefer to take a more digital approach and use an e-commerce platform where consumers can shop online.
This is an effective choice for a client-based organization that is fairly educated about technologies, demands a specific approach to satisfy requirements, or is committed to a particular brand.
A significant aspect to consider while implementing a direct delivery system is the amount of capital required. For example, suppliers would need to add factories, equipment, and distribution workers to their expenses. This needs to be done in order to successfully sell products on their own.
- Indirect: Indirect distribution includes intermediaries who help with the logistics and positioning of goods. This is done so that they can reach consumers easily and in an appropriate location based on user habits.
Daily use items are often something that customers buy in a departmental store without any specific brand loyalty. A toothpaste tube is a good example of a regular buy. For such items, an indirect delivery system that positions a wide number of items in several retail outlets might be the best bet for the business.
In an indirect distribution system, the company has to share profits with retailers.
In addition to that, vendors also market the goods of competitors as well. However, merchants know their local customers and how to sell the products in the best way possible. So even though a company’s goods may face competition for shelf space, it still may witness higher sales.
Some more distribution strategies:
- Intensive: Items are placed in as many retail outlets as possible through an intensive marketing plan. For example, chewing gum is a product that usually uses this technique. You can find gum in gas stations, convenience shops, vending machines, and shopping outlets.
The intensive approach requires making a vast variety of products available in different places. These products normally do not require detailed research before making a purchase.
- Exclusive: When manufacturers opt for exclusive sales, they enter into an agreement with a retailer to distribute a product exclusively via a particular storefront.
Businesses often distribute products exclusively from their own branded outlets. This is another example of exclusive distribution. For example, consumers can’t purchase Lamborghini everywhere—they need to go to the Lamborghini dealership to buy luxurious cars.
Exclusive distribution systems work well for highly luxurious, exclusive products.
- Selective: Selective delivery is an alternative between intensive and exclusive distribution. In this approach, goods are sold at more than one location, but not as many as in an intensive distribution strategy. For example, garments of various brands can be sold selectively.
In addition to a few chosen department stores, some high-end brands may opt to sell their merchandise through its own stores rather than put their items in a number of locations. This will help to craft a high-end brand message. Also, this will help in growing the potential for consumers to buy one of the items.
Selecting the right distribution strategy:
Choosing the correct delivery plan for a company depends on various considerations. Such as the type of item you are making, the client base, storage capabilities, and logistics support.
Determining the right way to deliver goods to the market depends on what is being sold. It also depends on how much a company is willing to invest in distribution strategies. New small businesses typically do not have the resources to try several distribution networks at the beginning. Hence, they need to pick one that suits them and stick to it as the company expands.
If a company’s product is perishable or if it is being sold B2B, then it is better to have fewer channels of distribution between the production site and the consumer. In which case, the direct distribution might be the most suitable.
If a company is looking to enter a broader market, in the hope of putting its goods in front of as many customers as possible, then it may need to sell to manufacturers instead, and let them do the distribution work while the company focuses on making the product better for consumers.
If companies partner with a distributor then certain tests should be done. It is to ensure that they are willing to sell the goods and find the right marketing conditions for them. Prioritizing the creation of a long-term partnership is extremely important.
Lastly, the decision will not be whether to continue directly or indirectly. In fact, which one to choose to figure out the optimal mix. Few companies such as P.L Global are extremely successful in forming the right distribution strategies for their clients.
Pros and cons of distribution strategies:
Pros of direct distribution are-:
- It helps in the collection of useful data on consumer shopping behaviors.
- Bringing the goods to the market becomes easier.
- One doesn’t have to share income with a third-party dealer.
- It helps in building partnerships with customers.
Cons of direct distribution are-:
- One of the major problems is the high investment that comes with the direct delivery system.
- It may become more difficult to meet prospective clients without the network offered by an existing distributor.
Pros of indirect distribution are-:
- It helps in sharing transportation and storage costs.
- More importantly, it makes it easy for customers to identify the goods.
- Also, it helps in avoiding the complexity of delivery logistics management.
Cons of indirect distribution are-:
- It’s tougher to build brand loyalty when a company is not communicating personally with the client.
- On top of that, it also increases the amount of time for the product to reach the buyer.
In conclusion, it should be understood that choosing a distribution strategy entirely depends on the resources of a company. Forming a distribution strategy may seem like an easy task but it is not. Only giants like P.L Global have been able to carry out their strategies effectively which leads to customer satisfaction.