Distribution Strategies: Channels, Value, and Intermediaries
Distribution Strategy
- Distribution/Marketing Channels
- Placement or Distribution connects Production with Consumption, making products or services available to consumers.
It involves making a product or a service available for the consumer:
In the Quantity that the consumer demands
In the Moment when the consumer needs it
In the Place where the consumer wants to have it
Distribution creates three types of value:
- Time Value: Consumers can purchase the product when they need it.
- Place Value: Selling a product in different stores or points of purchase.
- Possession Value: Channels allow customers to access a wide offer, finding the exact product or brand they need in the required quantity.
Marketing channels are sets of independent organizations involved in making a product or service available for use.
They are composed of intermediaries: Retailers, wholesalers, brokers, agents, representatives.
Key Functions of Intermediaries
Intermediaries facilitate sales from manufacturers to final markets by accumulating products from various manufacturers.
Intermediaries carry out:
Negotiation techniques (especially where prices are not fixed), they adjust, adapt & classify the offer to the demand, they also carry out logistic functions, promotions at the point of sales, they assume risks by purchasing a product, and provide financial benefits for their customers.
Verticality Strategies
(By deciding the number of levels of the channel)
Each level performs tasks that facilitate the Flow of the Product from production to consumption.
The number of levels indicates the channel’s length, distinguishing between direct and indirect channels.
0-Level Distribution Channel (Direct Channel)
Directly selling the product from the factory to the final consumer, involving no intermediaries.
1-Level Distribution Channel (Indirect Channel)
Retailers sell and distribute the product to the final customer. It is a short indirect channel, using only one level of intermediation (e.g., Amazon).
2-Level Distribution Channel (Indirect Channel)
Distributing the product to wholesalers, who then distribute it to different retailers. This is a long indirect distribution channel.
Horizontality Strategies
Channels with more intermediaries at each level increase availability but may reduce control over the channel.
There are three strategies:
- Intensive: Placing the product in many different locations using many intermediaries, making it very available for the final customer.
- Selective: Using fewer intermediaries to restrict coverage.
- Exclusive: Reducing market coverage by using very few intermediaries at each level, granting exclusive rights.