An often-neglected aspect of marketing by small-business owners is distribution. Distribution is one of the four cornerstones of the marketing mix taught to every college freshman studying the profession, and it affects your sales volume, brand image and profit margins. Reviewing your distribution options and how they fit into your marketing strategy will help you protect your brand and maximize your sales and profits.
Distribution refers to the location strategy and tactics you use to sell your product. The distribution section of a marketing plan includes a review of where your target customers like to buy, where your competition is selling, the effect selling in a particular place has on your brand, and your distribution channel options and the effects these channels will have on your sales volumes, costs and profit margins. Where you sell your product can affect your brand, sending a message to your customers based on what they think of the retailer selling your product. For example, selling through a mass retailer sends a different message about you than if you sell through boutiques.
If you choose to sell your product through retailers, you will need to assess the impact of hiring sales reps to prospect and service retailers, the amount of commission you are willing to pay or markdown you are wiling to offer, the potential sales volumes you will get from different retailers and the support you will need to provide to your accounts. Support will include in-store displays, sales rep visits and offering promotions and discounts. Your costs will include shipping, extending credit, any support expenses, sales rep salaries, benefits and commissions and bad debt.
Instead of selling directly to retailers, you can sell to a wholesaler who distributes your product to retailers. A wholesaler will charge you a higher commission than a retailer but can get you into more stores than you might on your own, help reduce your sales and shipping costs and provide other benefits that make using a wholesaler more cost effective. Wholesaler contracts can include requiring retailers to handle complaints and returns through the wholesaler, rather than coming directly to you.
Selling directly to your customers eliminates many expenses but adds others. For example, you eliminate sales rep commissions, retailer and wholesaler commissions or discounts, invoicing and associated bad debt. If you sell products online, using a catalog or over the phone, you add staff time, technology costs and shipping expenses. If you have a brick-and-mortar location, you have all the expenses of running a store.