Product Distribution: How to prepare an effective distribution strategy

A product can be said to be distributed well only if it reaches the exact target customer base smoothly and in-time.  The supply chain management and the robustness of the logistics network is always at stake in this. 

Here, you will be reading about production distribution, in brief, understand the importance of the effective distribution and get a basic idea of how you can plan an effective product distribution strategy for your business.

What does a distribution strategy mean?

In simple words, a product distribution strategy is how you plan to distribute your products and reach the maximum customers in the least possible cost and time. If you see the traditional distribution model: 

• Manufacturers reach to the wholesalers or/and retailers.
• Then retailers & wholesalers reach either to the customers directly or vendors/contractors come in between &
• Then the product goes to the end-user.

No matter which way you go, as a manufacturer you will have to make sure the distribution channel is cost-effective and least time-demanding. The better the strategy, the more is the ROI.

Having a robust distribution channel allows you to leverage time, geography, and ownership to the maximum utility value.  You can make products available to the customer whenever & wherever they want. Distribution channels take care of the functions like storage, sorting, and transportation of goods. Distribution strategy allows you to facilitate services in two ways bulk breaking and creating assortments.

Different distribution channels:

There are primarily three types of distribution channels:

1. Direct Channel
2. Indirect Channel
3. Hybrid Channel of distribution
4. Direct Channel

This is also called the zero level channel. It is the shortest distribution channel you can adopt. Here the manufacturer goes directly to the customer. This type of distribution channel is adopted when the either or all of the following scenarios exist:

• You have an expert marketing team
• Direct distribution is the most cost-effective type for you.
• Middlemen are not required or not available.
• If buyers are expecting products directly from you., etc.

Here are a few examples of direct channel distribution:

• Selling at Manufacturer’s Plant:
• Door-to-Door Sales:
• Sales by Mail Order Method:
• Sales by Opening Own Shops:

Indirect Channel:

In this distribution channel, the distribution of goods is taken care of by middlemen.

Typical Indirect Channels of Distribution looks like the following:

(i) One-level Channel: Only one middleman between you and the customer.

(ii) Two-level Channel: Two middlemen between you and the customer.

(iii) Three-level Channel & 

(iv) Four-level Channel.

Hybrid or multi-channel Distribution:

You can use multi-channel marketing when you wish to reach customers from multiple segments. Those businesses operating in a complicated market structure can leverage this type of distribution channel. However, you have to have enough resources to handle such a channel as it is harder to control. If you are using an indirect distribution channel and suddenly decide to add a direct channel in the system, clashes ought to take place.

To avoid clashes while adopting any other distribution channel, you are recommended to follow the following steps:

Step 1:  Know the end-user

It is the end consumer who is going to utilize your products, hence you must KNOW your end-users.  You want to reach those people who are expecting and wanting the product you provide and they can buy the product. A little bit of market research will be required on your part to find this out.

Once you are assured of the end user’s buying ability and needs, you can start going back to the network and see how you can reach them. In case you are planning to add channels services, you will think about them too.

Step 2: Choose the distribution plan.

Now is the time to think which way of reaching customers is profitable, feasible and deployable for you. Whatever distribution strategy or path you chose, your customer relations, brand identity, scale of profit and product’s health need to be considered. As a responsible manufacturer, you do not want to end up failing in reaching customers at the right time.

Direct, indirect or hybrid distribution?

If indirect, how many intermediaries do you need in between?

Will it leave you with any profit?

Are the middlemen credible?

Once you get the answers to all the doubts, you can finalize the distribution plan.

Step 3: Pick potential intermediaries

Now you need to pick the right intermediaries for the distribution. Your profits, mutual business terms, logistic strength of an intermediary, credibility, and resources of an intermediary, etc will be considered before finalizing the partners.

Step 4: Build profitable distribution channels

After finalizing who would make a good distribution partner for your product, know which types of distribution channels are and go with the most profitable ones. Focus on ROI. You can consider the following three ways of distribution:

• Intensive distribution – Here you have to partner with multiple intermediaries to let the logistic and distribution cycle run well.
• Selective distribution – Here you decide to partner with a few intermediaries depending upon the product and geography to wish to cater to.
• Exclusive distribution – Limited intermediaries who agree to work exclusively with you and carry only your products.

Intermediaries are the extra cost you need to shoulder to reach more customers. So, you need to scale a mutually beneficial partnership and payment system.

Last but not least is to manage the channel and run it well! For that, you need to know Who’s Who?

The distribution channel starts looking complex as more and more partners get added to it. To be able to manage each partner you need to know each partner’s importance to the channel, its functions, and differences between each of them. Partners have to be managed well to avoid logistic potholes like running out-of-stock, damaged goods, etc.

Distribution partners help in:

• Collecting output
• Sub-categorizing and subdividing the products as per consumers’ needs.
• Logistics
• Obtaining maximum time and possession utility.

Types of distribution channel partners:

• Distributors.
• Wholesalers.
• Retailers.
• Brokers and Agents, etc.

Now, you can make an informed decision, after knowing the gravity of having a flawless distribution strategy.