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Distribution Strategy

Why would you buy a new car and never drive it? Working hard, saving money, and purchasing a new vehicle that sits in your driveway sounds ridiculous, doesn’t it? It’s just as absurd to spend thousands of dollars on marketing material without a proper distribution strategy.

Good marketers know how to create a marketing plan and improve your social media presence. However, great marketers know how to work these methods into your business plan to create a distribution strategy that gets your end product into the hands of your consumers.

 

Distribution Strategy and Channels

 

Your product or service is developed. You know your target customer, and packaging and price points are realized. Now it’s time to determine your distribution method.

There are many channels for your company to choose from. However, as Thom Holland states in his article on distribution strategy, there are only two ways for you to sell your product or service your consumer: directly to the end user, or indirectly via a marketing intermediary. Marketing intermediaries include:

  • Wholesalers – companies that buy in bulk directly from the manufacturer
  • Retail Outlets – companies that buy from wholesalers and sell to the end users
  • Agents – and outsourced sales force compensated by commission, salary, or both
  • Value Added Resellers – contractors who purchase a product with the intent of bundling them with their service, then reselling to the consumer

While your product or service can have wide commercial appeal, small businesses don’t often have the capital or the resources to select a variety of markets and channels. Thus, it’s important to keep your distribution strategy limited to channels that offer:

  • Low financial risk
  • Best ease of entry against the competition
  • Proper volume for immediate company goals
  • Cost-effective prices with acceptable profit margins

It can be hard for a company to decide what distribution channel(s) to take. Also, it’s harder to change a distribution strategy than it is to alter a marketing or sales plan. Picking the right strategy can make your business boom and choosing the wrong one can leave your new car amassing dust in the driveway. Luckily, there are ways to figure out which distribution strategy will work best for your business.

 

SWOT Analysis and Case Studies

SWOT analysis for distribution strategyConducting a SWOT analysis of your company will help you determine your distribution strategy. SWOT stands for Strength, Weakness, Opportunity, and Threat. Strengths and weaknesses refer to your company’s internal factors that affect your ability to compete in a market. Opportunities and threats refer to the external environment. What are your competitors doing, and what demographics and resources are untapped or underutilized? Entrepreneur has a great article on competitive analysis to assist you in determining your opportunities and threats.

Honesty and accuracy are important when conducting a SWOT analysis to understand your company’s capabilities. This will help determine what distribution channels to use. Case studies of McDonald’s and Apple are perfect examples of an in-depth, proper SWOT analysis.

 

Porter’s Generic Strategy

 

Using Porter’s Generic Strategy will help you determine your best distribution channels. In a nutshell, Porter’s General Strategy works like this:

When traveling, do you prefer a cheap hotel with no amenities or an expensive 5-star luxury resort? Also, are you more interested in a brand like Hilton or Marriott, even if they are a little further away? Hotels market to each of these avenues as a means of achieving competitive advantage in a crowded marketplace. Porter refers to these generic strategies:

  • Cost Leadership – a strategy used by businesses to create a low cost of operation within their niche to gain an advantage by reducing costs below that of their competitors
  • Differentiation Focus – a strategy wherein a company chooses to strategically stand out from the competition within a narrow or niche market via a product or service’s innovation, brand image, customer service, etc., and
  • Focus Strategy – a strategy in which a company concentrates its resources on entering or expanding in a narrow market or industry segment

Porter’s Generic Strategy allows you to take the information conducted on your SWOT Analysis and narrow in on a distribution strategy that will work best for your company.

 

Manage Your Distribution Strategy

 

Just like with marketing, it’s important to keep tabs on your distribution strategy. Keep your profit margins in mind and, if certain strategies aren’t performing as well as others, revise as necessary. There is no one right way to reach your end user. You will find yourself conducting a lot of trial and error. However, analyzing your company and your competitors before deciding on a distribution strategy will get you on the right track. From there, it’s all about polishing your methods and increasing your profit margins.

What distributions strategies have worked for you? Reach out to us and share your story!

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Onega Ulanova

Onega co-founded LA NPDT because of her love to innovation, brand development, and people. She is passionate about making the world around her a better place and gives back through volunteering.

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