Distribution channel strategy helps the product managers to sell to its customers in market sectors or geographical areas where their direct sales teams are not able to reach. One can choose from a number of distribution channels which include internet, distributors, retailers and wholesalers.
For dealing with the prospects and customers, each channel gives different options. Your strategy must incorporate the right level of support and control to ensure that the distributors operate effectively. You should consider three things for your distribution channel strategy.
These distribution channel strategy are:
Channel selection is about product, customer, competition and producer. Firstly, you should meet your customer’s needs and you should then match with their buying behaviors, for instance, if they wish to download or buy the product from online. Secondly, you should meet the needs of producers. You should try to see that what sort of resources and skills are available. You should also try to find out that can they sell and produce directly. Thirdly, you should consider the product constraints, that is, are they bulky, big, small or expensive FMCG’s. Finally, you should consider the competitive factors, that is, you need to consider how you are going to overcome it if your competitors’ control parts of the channels.
You need to decide the intensity of your distribution once you have your distribution channel structure. There are three options over here which are selective where you use a limited range of outlets, exclusive where you offer your product only to one retail chain or intensive, that is, you are trying to saturate the market with your place and product as widely as it is possible. The intensity will depend on the product type, marketing mix and brand.
Channel integration is about how much distribution channel you have. You may own the whole thing at the end of the spectrum, for instance, H&M have a retail outlet and manufacturing plant. Each intermediary is owned independently on the other side, for instance, a local shop in corner and in the middle of it is the franchise such as McDonald’s.
You should identify a network of retailers or distributors that provide the existing coverage of the territories and you should highlight the geographical area you want to reach through the distribution channel if your strategy is to grow the business nationally or regionally. You should focus on the established distributors with detailed knowledge of the local market if you are planning to export the products. You should market your product on the net to extend the coverage to the customers where no suitable distribution network is present.
You should compare the dealing cost through the indirect distribution channels with the price of setting up your direct sales operation or network. To order processing, delivery, customer service, invoicing and stockholding you will have to commit resources without a distribution network. You should compare it with the lower margins you are making by giving a discount to the distributors for providing service of similar level and you should provide them with a training support and marketing program.