Effective Product Distribution Strategies: Key Considerations
Key Factors in Product Distribution Strategies
Selecting the right distribution channels is crucial for product success. Several factors influence this decision, impacting sales, profitability, and market reach. Here’s a breakdown of key considerations:
Product Features
- Price: High-priced items may benefit from direct sales or exclusive distribution. Lower-priced items often require distribution through intermediaries, potentially shared with competitors.
- Seasonality: Seasonal products face reduced distribution windows, requiring efficient logistics.
- Turnover: High-turnover products demand frequent interaction between manufacturer and channel, often with lower margins.
- Size & Preservation: Large products or those requiring specific preservation necessitate distributors with adequate facilities.
- Complexity: Complex products often require trained, potentially exclusive, distributors.
- Fashion/Seasonal Appeal: Fashion-forward or seasonal items need rapid exposure and immediate order fulfillment.
- Product Range: A wider range of products and models increases the feasibility of direct distribution.
- Customer Service: Significant customer service requirements favor unique distribution channels.
- Prestige: Prestige products require less effort from the channel, allowing for a broader distributor selection.
- Newness: Newer products demand consumer education, necessitating specialized channels.
Characteristics of Intermediaries
Consider the availability, efficiency, and compatibility of distributors with the manufacturer’s objectives.
Competence
Established distribution methods used by competitors create consumer habits that can be difficult to change. Imitating successful competitor distribution strategies may be a viable option.
Business Strategy Objectives
Manufacturers can adopt either a ‘push’ or ‘pull’ strategy:
- Push Strategy: Relies heavily on channels to drive sales through incentives like better prices, discounts, and cooperative advertising. Requires qualified channels with strong collaboration capabilities.
- Pull Strategy: Focuses on generating consumer demand through heavy promotion, attracting consumers to the channel. Requires less channel qualification and promotional activity.
Available Resources, Revenue, and Costs
Direct distribution involves high fixed costs, requiring high sales volumes or margins to compensate. Distribution through intermediaries has lower fixed costs but higher variable costs. Direct distribution is advisable when the difference between variable costs of intermediary distribution and direct distribution offsets the fixed costs of the latter.
Legal Limitations
Competition laws aimed at preventing restrictive practices can impact distribution alternatives. Setting retail prices by the manufacturer may be considered an anti-competitive practice. The sale of certain products (e.g., explosives) is regulated and subject to restrictions.
Alternative Assessment
The selection of distribution channels depends on the factors mentioned above and available alternatives. Alternative methods can be evaluated by scoring relevant criteria or factors.