Distribution Channels and Marketing Analysis
When creating a marketing strategy, your distribution channels should be one of your four core subjects of discussion along with product, price and promotion. Many of your other marketing decisions and efforts will be affected by your choice of selling methods and locations. When analyzing potential distribution channels, look beyond your potential sales volumes.
Some marketers differentiate between how you sell and where you sell, classifying distribution channels as the macro selection of sellers, with distribution methods the micro selection of outlets. For example, distribution channels include direct sales, wholesalers, retailers, resellers and sales representatives. Distribution methods include retail stores, websites, catalogs, direct-response TV and radio ads. Some organizations reverse the use of these two words, with “methods” referring to how you sell and “channels” referring to where. A small business might use a wholesaler to get into more retail outlets until the business has enough capital to build its own sales force.
When evaluating distribution channels, a key concern is the effect each channel has on your sales volumes. Some channels might be more expensive to use but will provide much larger volumes. Others might produce lower volumes but give you bigger profit margins per unit and, potentially, bigger gross profits. A wholesaler, independent sales rep, sales rep company or retail channel can help you project your sales volumes based on their history with similar products. If you plan on selling online, you might have no way to project sales volumes.
When looking at distribution channels, it’s important to calculate all of the costs of using a particular channel to be able to effectively compare them against each other. Direct sales won’t require you to pay a middleman or sales rep commissions or offer price discounts to retailers, but it will add sales staff, credit card processing fees, shipping and customer services expenses. Different distribution channels also require different levels of marketing support, with direct sales requiring more spending out of your budget than the use or a retail chain, which brings in customers with its own marketing.
When you sell in a particular location, that location’s brand impacts yours. If you sell a high-end product through a discount retailer, such as a national big box, you not only associate yourself with that discounter’s brand but with the products on the shelf next to you. Selling in fewer high-end outlets might reduce your sales volumes but can maintain or enhance your brand, letting you increase your price and increase your margins. Look where your closest competitors are selling to determine how they are using distribution in conjunction with their brand-management strategy.