Exotech | For a business to run well, a company must have a series of strategies. Not only in terms of product design and marketing, distribution also needs to be done with the right steps. With a distribution strategy, the products produced can reach end consumers without problems.
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Having a good distribution strategy is the key to increasing profits and maintaining consumer loyalty. To understand further regarding distribution and strategy, let's look at the following description!
What is a Distribution Strategy ?
Distribution strategy is a method or plan for distributing goods and services produced to end users. Implementing efficient distribution methods is the key to making profits while retaining your loyal customers.
Basically, a distribution strategy is created with reference to your ideal customer. For example :
- How do your customers usually buy goods
- As a manufacturer, what can you do to make the purchasing process easier
- Is selling directly from the factory the best option
- Or do your consumers prefer to buy it through retailers
All of this will have an influence when you determine the distribution strategy for your product. On the other hand, if your target market is the young age group, you can choose to work with retail companies or offer it through online stores and marketplaces. So that all targets can be reached, you really have to design an appropriate distribution strategy, according to each consumer group.
Types of Distribution Strategies and Examples
In general, there are two types of distribution strategies, namely direct and indirect. There are also those who divide distribution into 3 types, namely intensive, selective and executive distribution.
To make it easier for you to determine what kind of strategy is suitable to apply in your business, let's look at the differences between each type of distribution below!
1. Direct Distribution
Direct distribution is a strategy where producers directly send or sell products to consumers. There are several different ways to apply this method. Some companies prefer to do this with sites such as e-commerce or marketplaces where consumers can make purchases online.
Other direct distribution methods are by using catalogs or telephone orders. This method generally targets existing consumers or customers who are already used to placing orders this way.
One important factor to consider if you want to implement this strategy is the investment that must be prepared. You must have a warehouse, vehicles and staff whose job is to deliver products independently and effectively.
2. Indirect Distribution
The term intermediary often gets a negative impression. However, in distribution, companies can actually gain convenience in getting goods into the hands of consumers. This indirect strategy involves intermediaries who assist in logistics and placement of goods.
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The goal, of course, is so that the product can reach the customer's hands quickly at the desired location based on consumer habits and preferences.
Generally, this strategy is chosen based on business needs, targeted clients and product type. It all depends on the preferences of the company doing the distribution.
3. Exclusive Distribution
When manufacturers choose this distribution strategy, they will make deals with retailers to sell their products in certain storefronts only. Some stores even sell items through their own stores. For example, you won't be able to buy a Lamborghini unless you go directly to the dealer. The same also applies to products like Louis Vuitton and Chanel.
4. Intensive Distribution
In an intensive distribution strategy, the manufacturer's focus is on getting as many products as possible in as many retail locations as possible. One example of a product distributed in this way is chewing gum or soft drinks. You can find both in various places, from gas stations, grocery stores to minimarkets.
Products sold using this distribution method generally do not require complex purchasing decisions. This means that customers are used to buying it and retailers can sell it easily without involving complicated efforts.
5. Selective Distribution
A selective distribution strategy can be said to be a middle ground between intensive and exclusive distribution. By using this strategy, products can be distributed in more than one location. But the number is not as large as what is usually done using intensive distribution.
For example, several clothing brands can be offered selectively. Gucci, for example, can choose to distribute their products through their own stores. However, they can also choose several malls or department stores to place their products there.
Types of Distribution Channel Strategies
Distribution channels are a flow or map that describes how products can reach consumers from producers. Below are several types of distribution channel strategies that you can use as a guide.
- Producer to Consumer: This distribution channel is the simplest and quite frequently encountered. Producers can sell their products directly to consumers when the product or goods are available.
- Producer – Retailer – Consumer: Different from the previous distribution channel strategy, this strategy adds the retailer as an extension of the producer. Retailers will get goods from producers which will then be sold to consumers.
- Producer – Wholesaler – Retailer – Consumer: This distribution strategy is commonly used by large companies with high levels of productivity. Manufacturers will then place their goods or products with wholesalers who can receive or store goods in high quantities.
- Producer – Agent – Retailer – Consumer: This strategy is quite unique because the producer does not indicate who the goods will be sold to. Instead, the producer will appoint an agent who is then tasked with selecting distributors or retailers who are deemed capable of selling the products produced by the producer to consumers.
Factors that Influence Distribution Strategy
So, what is the most appropriate way to determine your company's distribution strategy? Please note that making plans related to distribution must be done by considering various factors, including:
- Business location. This is the most important factor in determining strategy. If the business location is in a place where distribution can be done easily (for example close to a port or train line), you can rely on the direct distribution mode
- Location of your target market. Distribution is about how a product and service can be found by potential customers. If you are targeting office workers as the main market, then make sure the distribution location is close to the office or in an office complex
- Availability. The distribution strategy must ensure that the product reaches potential customers in all retail stores in sufficient quantities
- Warehouse. Storing stock in the right location is an important aspect before deciding on the right strategy
- Transportation and logistics. Transportation is the most important aspect of distribution. Without proper transportation, products will not reach consumers on time or in conditions that do not meet expectations. For example, companies producing frozen food must ensure that the product reaches the buyer with the right storage method and temperature.
Determining a distribution strategy cannot be done by considering just one thing. Make sure you plan everything well so that products and services can arrive in good condition in the hands of end users.