What is the primary goal of every company? Despite the passing of time, both the literature and the practice indicates that maximization of profit, while providing a cash-flow, is the major objective. To achieve this purpose there are many other operations which should be done. Having skilled workers, regular market research carrying, competition analysis and constant monitoring of implemented changes… Every action should be in line with the company’s main long-term and marketing strategies. The last one is being done for facing the sales challenges, thereby meeting the consumer’s needs.
The impact on the market can be created by including the marketing mix in marketing strategy. Four essential elements are composing on the ‘4P’ marketing mix:
- placement (also known as a distribution),
Mentioned points are closely related to particular tools such as sales promotion, packaging, logistics, or discounts. Either well-thought-out 4P contributes to the company’s success, but for today, we would like to acquaint you with the best distribution strategies. Who knows, maybe you find it useful in your marketing plan!
2. Distribution strategy – definition
What is the distribution strategy? To put it simply, a distribution strategy is a plan aimed at providing products or services to the customers through the supply chain. It is connected with a place and time buyers want to purchase goods. What is more, a good distribution strategy should be done having regard to the analysis of distribution costs, including expenses for assortments, administration, coverage, or inventories.
Drawing up a distribution strategy embraces a marketing channels choice and processes coordination. The company must determine who would be its intermediary, and under what conditions he is going to deal with the products. It is about customer services, warehousing, and transportation.
3. Types of distribution
There are three distribution strategies:
- intensive distribution;
- exclusive distribution;
- selective distribution.
The option which should be enforced is dependable on the kinds of merchandise produced by the company, its goals, and purse. The details of specific one go as follow:
3.1 Intensive distribution strategy
Intensive distribution strategy involves a lot of brokers, who stock products on many available areas, where a customer is able to purchase an item. In other words, this distribution model concentrates on taking advantage of every possible place for selling goods. Companies which handling convenience goods, such as drinks, meat, dairy, or sweets, often use presented the type of distribution strategy. The specificity of items determines the choice of distribution type – food is a come-at-able kind of good. There are a dozen of competing products and substitutes, so the purchasers can easily buy a product of another manufacturer if they have a need but do not find an item of the individual brand.
3.2 Exclusive distribution strategy
Exclusive distribution strategery, a contrario to the intensive one, holds particular distributors, who are obliged to sell products exclusively in defined places. This kind of distribution policy is commonly practiced by businesses dealing in luxurious and high-end products. Exclusive distribution strategy is therefore correlated to the brand and prestige image. Its target audience is well-defined and joins people who are able to purchase the product, even if it is hard-to-reach.
Let’s look at the example. Do you know this popular energy drink, Red Bull? We’re sure you have seen it on the shopping shelves. There is a possibility to buy it in every grocery store, but also in gas stations, restaurants, and clubs. And now think about Porsche. How many Porsche outlets are located in your hometown? 1? 2? Or maybe you have to travel to another city for making a deal with Porsche dealer? There you are. Can you see this exclusivity?
3.3 Selective distribution strategy
Sometimes companies want to offer their products only in particular stores or geographic areas. Moreover, they cooperate with several distributors. Selective distribution is used in the scheme when buyers have an option to compare products in different points of sale. The distribution model lets reach to a sufficient number of clients.
For example, New Balance Athletic Shoe products are available not at every shoe stores, but only in selected shops. McDonald’s distribution is the same story. Franchising that fast-food restaurant is possible only under some conditions related to the city population, sales volume, or reinvestment capability. In this case, a franchisee is entitled to use mark trades and take a commodity from verified sources. On the other hand, the manufacturer still has control over prices and selling practices.
4. Channel distribution strategy
While on the subject of distribution strategy, it is necessary to mention its marketing channels. A channel distribution strategy is a planned route from the production point to the consumer basket. Assorting the distribution channel is related to the market forces, distinctive products’ features or legal regulations. There are two main types of distribution channels:
- indirect distribution strategy,
- direct distribution strategy.
4.1 Indirect distribution strategy
An Indirect distribution channel is a kind of chain involving different third parties to making manufacturers products available for purchase by the final customer. Businesses cooperate with warehouses, wholesalers, brokers or retailers and the length of the channel can be either short and long. The indirect channel lets companies outsource distribution operations and concentrate on the key points of business. But we should also underline the fact, this type of channel might be equated with a final price boost, which is caused by intermediaries mark-ups.
4.2 Direct distribution strategy
The shortest way to reach to the final customer. In a direct distribution strategy, all distribution matters are in producer’s hands. The manufacturer directly provides the items to the buyers and manages all distribution processes, e.g., warehousing or delivery organization. The direct channel distribution strategy allows the company to control the logistic issues fully. In consequence, it has a real impact on setting prices of goods being offered to the final purchaser. Because this direct type of distribution entails investment funds, it is often used in the market for services, such as automotive service, e-commerce, or consulting services. There are a few most popular direct distribution techniques, for example, telemarketing sales, door-to-door sales, or online selling.
5. Types of distribution – summary
To sum up, a distribution strategy might take different forms which are dependable on many factors – starting from the company goals, to its economic opportunity. Setting a company’s distribution strategy should also be based on business environment analysis and the customers’ behavior scrutiny, including their view for distributors, change. In the light of considerations above, the company should regularly update the particular distribution strategy – without the adequate response to the turbulent situations on the market, the company’s chances of succeeding are decreasing.
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