As a business owner, it's important to familiarize yourself with the four basic elements of the marketing mix. These are commonly referred to as the four P's of marketing and include product, pricing, placement and promotion. The distribution channel is an integral component of product placement. It represents the path or route through which your products travel until they reach the end customer.
Types of Distribution Channels
Manufacturers can either sell directly to customers or reach out to them through various distribution channels. In general, the place where the goods are produced is not the same as the place of consumption. For example, a computer manufacturer is unlikely to sell directly to the end customer. They will sell the products through retailers, wholesalers or authorized distributors.
A typical distribution strategy will involve one or more intermediaries. The only exception is direct distribution. In this case, the manufacturer will reach customers directly. They may sell through a specific retail location or own all elements in its distribution channel. By cutting out the middlemen, they will have better control over the products and pass on the savings to customers.
There are four main types of distribution channels, and each has distinctive characteristics. They include:
- Direct distribution channels
- Indirect distribution channels
- Intensive distribution channels
- Selective distribution channels
Manufacturers who opt for indirect distribution channels may sell to wholesalers that further distribute the goods to retailers. The end customer will purchase the product from retail outlets.
Experts use various classifications of distribution channels in marketing. Some say that there are only three channels. Others categorize them based on the number of intermediaries. You may see terms like dual distribution, reverse distribution, extensive distribution, three-level channels and so on.
Examples of Distribution Channels
Dual distribution, for instance, involves a mix of direct and indirect selling. The producer may sell directly to customers as well as to retailers or wholesalers.
Reverse distribution is the practice of collecting damaged or outdated goods and selling or returning them to the manufacturer. For example, customers may recycle electronics and send them to the producer to make a profit.
There are endless distribution examples that you can use to develop your own strategy. Suppose you want to ensure the widespread availability of goods. In this case, you can opt for mass distribution or intensive distribution. Chewing gum, soda, pens and other commonly used products can be found in most outlets, from gas stations to newspaper kiosks to supermarkets.
High-end brands, on the other hand, typically use a selective distribution strategy. Designer shoes, for example, are only available in luxury stores and premium retail outlets.
Develop Your Own Distribution Strategy
Now that you know the different types of distribution channels, decide how you're going to sell your products to the end customer. Consider your audience and its characteristics. Where do your customers spend their time? Do they prefer to go shopping online or in a store?
Millennials, for example, spend approximately six hours per week shopping online. Seniors dedicate only two and a half hours each week to online shopping. If your products appeal to seniors, consider selling your products in stores rather than online.
Factor in your budget too. The more intermediaries you use, the less you'll earn per sale. Also, beware of channel conflicts when developing your distribution strategy. These usually occur when producers kick out sales reps, retailers, dealers and other partners from the distribution channel.
Consider the types of goods you're selling as well. Perishable products, such as fresh fruits and vegetables, have a short shelf life. Therefore, they need to be sold as quickly as possible. If you have a small farm, you may want to sell your products at local markets and grocery stores.