Importance of Distribution Channels for your Business

You finally mustered the courage to open a small business. You have it all planned out, from the business name and logo, the product or service you will provide to your future clients. You even started the paper works for your business permits and licenses. But, aren’t you forgetting something? How will you market your business? How will your customers find you?

Whether you're a manufacturer or a budding start-up business, it's no doubt that you need to fully understand and maximize channels of distribution applicable to your product or service.

According to Wikipedia, distribution is one of the four components of the marketing mix. It’s the process of making a product or service available to the customer or business user who requires it is known as distribution. This can be accomplished either directly by the manufacturer or service provider, or indirectly by distributors or intermediaries. To fully understand what a distribution channel is, you need to go back to its basic foundation.

Marketing Mix and 4Ps

The marketing mix mentioned earlier was coined by Neil Borden. It refers to the combination of the four inputs that make up a company's marketing system. The marketing mix's core ideas; product, price, place, and promotion (also known as 4Ps) are the foundational aspects of successful marketing.

A product determines what you’re selling to your customers. Is it a clothing line for newborns? Or is it a delectable pastry shop? Whatever it is, you'll need to consider how to introduce your product. Also, the features and specifications of the product you'll be selling should be familiar to you. Putting a price on your product can be daunting, but with a little help, you can easily determine the right price for your product. You can research how your rivals sell their products and services, as well as how much your customers are willing to pay for them.

When we talk about the place, customers must be able to locate and buy your item. Is it accessible through the internet? Is it necessary for them to go shopping? You'll still have to think about how much inventory you will keep and where you'll store it. These days, inbound marketing strategies depend on compelling content to get customers to your store or your website. Lastly the promotion, We now have a variety of options for promoting your products. You'll need to determine which are right for your brand, from television advertisements to social media promotions.

The composition of the 4 Ps has changed as a kind of result of digitization (coexisting with or replacing physical products), but none has been affected to the extent that placement has. With their target audiences scattered across multiple digital platforms, business owners have more distribution channels to consider than ever before. Physical distribution channels, on the other hand, haven't disappeared. In the modern age, one must be taken into account in business models and marketing campaigns to attract more customers and generate revenue.

The marketing mix refers to a company's whole marketing strategy. It entails decisions about the product, price, place, and promotion. In this article, we will focus on the third P of the marketing mix—place or channel of distribution and will discuss the following:

  1. What is a Distribution Channel?
  2. Differentiate direct and indirect distribution
  3. Types of Distribution Channels
  4. The importance of Distribution Channels in a Business
  5. Choosing the Right Distribution Channel

Distribution channels made easy

It’s important that a business owner or retailer memorizes by heart the distribution marketing definition and how it can affect business revenue and operations.

Choosing your channel of distribution

So, what is a Distribution Channel? Distribution channels are the journey that a product or service follows from the producer to the consumer. The distribution channel is short if the customer purchased the product or service directly from the manufacturer. The distribution channel can be much longer if it involves a distributor, supplier, and retailer.

Some companies can sell straight to their clients, as well as using the services of a retailer or wholesaler as a middleman. Businesses may also use traders or dealers to help transfer products from manufacturers to retailers, who then market them to customers.

Distribution channels are usually created by a manufacturer or a company that sells products to a customer. This is, so they can find the product they want to sell, cut costs while still making a profit, and figure out the fastest way to get the product to the consumer in the shortest time possible. This step would take some time to study suppliers, gather all of the necessary information, and so on.

When a retailer sells several types of products, he or she can need more than one channel of distribution strategy, with each company being different. For example, a cosmetics retailer might decide to sell lotions online. Since make-up manufacturers and lotion manufacturers are not the same, the retailer must find a lotion manufacturer or wholesaler to purchase from. The wholesaler may or may not provide delivery, but since they are located in a different area than the cosmetics manufacturer, the retailer must find a delivery solution that works for them.

Differentiating direct and indirect distribution

Direct and indirect channels are the two types of channels. A direct channel involves buying and selling directly from the manufacturer, while an indirect channel allows customers to buy from a wholesaler or retailer. For products sold in typical brick-and-mortar shops, indirect channels are popular.

In general, the price of a product would increase when there are more middlemen in the distribution network. A direct or short channel, on the other hand, can result in lower prices for consumers since they are purchasing directly from the manufacturer.

Types of Distribution Channels

A business can use a variety of distribution channels to market its goods, products, and services, particularly now that digital channels are competing with traditional physical outlets.

The following are the eight most relevant distribution channels to be aware of:

  1. Direct Sales: A direct sales business model is a common channel of distribution that removes any intermediary in the distribution chain, leaving the company to deliver products to customers on its own. There is no retailer or third-party outlet (middleman) to stock inventory and promote products.
  2. Retailer: Consumer brands' most popular distribution channel is retail, which relies on third-party channels to introduce products to the market. Customers use supermarkets, big-box stores, convenience stores, and department stores as intermediaries and points of touch.
  3. Intensive Distribution: This form of retail distribution, in which goods are marketed through as many channels as possible, is possibly the most popular among consumers. This channel of distribution is ideally fit for items and products that don't have a lot of brand loyalty. If a customer's preferred brand is unavailable, they are perfectly content to purchase a comparable product.
  4. Exclusive Distribution: Companies affiliate with a single wholesaler or retailer in a specific market under this business model. To protect brand value and project a more selective and exclusive brand picture, availability will be limited.
  5. Selective Distribution: Not all businesses that sell to retail aim for the largest possible distribution. Premium brands are also picky about where their goods are shown and how they are presented. When brands and items cannot be traded out interchangeably, selective distribution makes sense. Target customers are picky, and they're willing to travel to particular locations where their favorite brands are sold.
  6. Wholesaler: Wholesalers, like retailers, serve as middlemen, buying items from suppliers and then reselling them to end consumers at a higher price. Scale and audience are the most significant distinctions between these business models. Brands profit from wholesale distribution because it allows them to move vast quantities of products at once. Wholesalers expect discounts and lower prices in return for purchasing in large quantities.
  7. Dual Distribution: Many companies chose to market their items across a variety of outlets, including wholesalers and retailers, as well as maintaining brand storefronts to sell directly. Brands can hit a wider audience with a variety of buying options thanks to dual distribution.
  8. Channel partners or value-added resellers: Most B2B companies are selling via the channel. That is, instead of selling directly to end consumers, they deal with channel partners who purchase their products, repackage them, and then resell to their customers.

Importance of distribution channels

Businesses need distribution channels because they allow for the seamless delivery of products and services to customers. Dissatisfied customers and insufficient service provision will result if a business does not procure the best set of companies for this reason. Establishing a smooth process from factory to customer can have a significant impact on how customers perceive your business.

Since fewer businesses are involved in the delivery of products across shorter distribution networks, there is a greater risk for businesses if products are not sold or delivered as promised. As a result, some companies prefer a longer distribution channel with lower profit margins to reduce risk and liability for each company.

Choosing the Right Distribution Channel

Identifying the appropriate channel of distribution is critical for your company's success. Whatever you choose affects how your items are managed, how quickly they are shipped, and how effective you are in bringing your products to your customers.

The distribution method can provide added value to the end-user. Is it essential to provide customized service to the customer? Is it necessary to service the commodity itself? Is it a product that the target audience prefers to purchase online or does the user want to hold and test it? Companies will use the answers to these questions to help them decide which platform to use.

Maximize Direct Sales

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Digitization has significantly changed the market situation, but certain aspects never change. Since not all distribution channels are appropriate for all products, businesses need to choose the best option. The channels of distribution should be consistent with the company's overall mission and strategic direction, as well as its sales objectives.

All types of distribution channels have advantages and disadvantages, but the most crucial thing is to make sure that operations function successfully and that the customer is at the core of everything. Hop on board and create your dream website with Strikingly!