How Businesses Distribute Products to Consumers
Selecting Distribution Channels is a Major Business Decision
Jan 17, 2009
Marketing is seen as attending to 4 Ps - Product, Price, Place and Promotion. Distribution is the third P, Place, emphasizing the fact that it seeks to get your product to a place that is convenient for your customer.
Product Distribution Affects Customer Satisfaction
The distribution method you select can significantly impact on customer satisfaction, as well as your marketing costs. If your products are available in the right assortment and quantities at the right place and time to the customer, you gain a distinct competitive advantage. On the other hand, if prospective customers cannot find your widely publicized product at a convenient outlet, you stand to lose large volumes of sales.
Selected Distribution Channels Influences Product Image
You have very different images about Swarovski crystals distributed through exclusive outlets and the trinkets distributed through discount stores. This is known as "positioning" the product. Products can be positioned as luxury items that generate high margins but low volumes, or as commodities that have low margins but sell in large volumes.
Distributing your product is thus a strategic issue, as well as a practical one intended to get your product to the final consumer. Let us now look at the kinds of distribution channels producers typically use.
Typical Distribution Methods
Direct Distribution: Producers sell direct to the final consumer, thus eliminating intermediary costs. Direct mail, phone selling, selling through the manufacturer's own sales force and selling over the Internet are examples of direct selling.
Indirect Distribution: Eliminating intermediaries is not always a wise decision. Intermediaries are specialists who:
- Have the right kind of facilities and experience for distributing products
- Have direct contacts with particular customer population and familiarity with their needs.
- Can supplement your own products with products from other producers. For example, a wholesaler can stock a range of products from different manufacturers and offer retailers the convenience of buying all their merchandise from one source.
- Can organize the finance to carry out the distribution tasks
As a result, different patterns of indirect distribution have become common:
- Producer sells to a wholesaler or jobber
- Jobber might sell to wholesalers, retailers or final consumers
- Wholesalers sell to jobbers or retailers
- Retailers sell to final consumers
- Agents get orders and pass it on to producers or wholesalers in return for a commission
Distribution Logistics
Where physical goods have to be moved from a point of origin to points of consumption, issues of storage, handling and transportation come into the picture. This can prove a complex exercise where the variety and quantity involved are large. It will involve:
- Moving the right assortment of merchandise in right quantities
- Using the right kinds of transport vehicles considering the nature of goods and speed of delivery
- Routing and scheduling the movement to minimize overall transport costs
- Ensuring that the merchandise is received at the destinations when needed
Computer based logistics management solutions are used to handle the complexities involved.
Distributing your product to consumers is a key business issue. The distribution method you select have both strategic and profitability implications. Complex logistical issues also enter the picture where the variety and quantity of merchandise are large.
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