5 Factors Affecting Distribution Strategies

5 Factors Affecting Distribution Strategies

Distribution strategy is a strategy to make  products or services available to targeted customers through the supply chain. Companies may determine whether to provide the products through their own channels or partner with other companies. 

The type of model chosen for providing products to the customers may have effects on the costs and energy requirements.

The Importance of Distribution Strategy

The distribution strategy refers to the strategy implemented by companies to reach as many potential customers as possible at the lowest usable cost. 

An effective strategy maximizes a company’s revenue, but a poor and ill-planned strategy can lead to a loss and even enable competitors to gain from it. There are three approaches of distribution strategies,

   

Mass distribution

The marketer of a mass market product will seek out a third party that has an extensive base market.

For instance, snacks and light drinks that are sold in supermarkets, department stores, caffe, and so on. The outlets chosen tend to give mass market at efficient costs. 

Selective Distribution

Stores selling a company’s products can be limited. In the case of premium electricity tools, for example, companies choose department stores and independent stores that can offer more value in support of their products.

Another example is health-related products such as therapy sandals that are sold only in pharmacies. There are also some cosmetics sold  in certain stores. 

Exclusive distribution

In this approach, companies only choose to partner with a party or one type of party. Through this type, companies will be able to continue to have bigger control.

In this exclusive agreement, distributors will partner with companies by adding product value through after-sales services and client’s support. 

Factors Affecting Distribution Strategy

There are many factors that affect business strategies. A precise business strategy can take into account these factors. Here are some factors which affects in distribution strategy,

Business location

Location is a crucial factor in determining distribution strategy. A strategic location can be different depending on the type of products and services. 

Additionally, it is connected to roads and ways to distribute products. Businesses located near harbors and rail trains, for example, can use the tracks nearby. 

The location of the target market

When distributing products to the final customers, it is important to consider their location. The distribution of products may be planned according to the locations of targeted customers.

If the intended market is a professional worker, then the products need to be available in the store near the office or into the office itself by partnering with other parties. 

Reach target market

The final destination of a product is to reach targeted customers. Product distribution strategies should make sure that the product reaches out to potential customers.

For example, beverage companies will ensure the whole of retail sells a huge amount of their products when summer comes.  

Warehouse

The location of inventory plays a crucial role in deciding a company’s distribution strategy. In addition, it is also important to supply management and warehouse management. 

Storage warehouses need to be well-organized so that the necessary amount of products is available. There cannot be too much or too little.

Transportation and logistic  

One of the pivotal aspects that needs to be taken into account is transportation. Without reliable transportation, the product will never reach its target market in time. 

It may affect the quality of products, if it’s not long-lasting products.  To maintain the condition of products, packaging of products must be considered as well. 

The Type of Distribution Channel

Distribution channel is a method used by companies to distribute products to customers. The channel is chosen by considering which one is the most effective and efficient.

There are four types of distribution channels that can be used by companies. Here are the types,  

Direct selling

Direct selling is the method of distributing products directly to the consumer. It occurs without the involvement of intermediaries. Amazon, for instance, sells its products directly on its website. 

Apple also uses this method when selling their iPhone through its stores. This method does not require an intermediary.

This approach can be online stores, sales door-to-door, telemarketing, and more. Small businesses, in particular, benefit from direct selling because the costs are reduced.

Companies are able to sell their products without paying third parties for marketing, selling, or delivery. However, it also means that the company’s responsibilities are getting bigger. 

Selling through intermediaries

Selling through intermediaries is the model of distribution channel indirectly. In this model, companies use wholesalers and retailers to sell their products. Both of them purchase the product from companies.

They will purchase a huge amount of products,however the cost will be cheaper than buying just one product. Wholesalers don’t sell directly to their customers. They will sell them to other intermediaries to gain more profit. The intermediaries can purchase the products then sell them to final customers. 

Dual distribution

Dual distribution describes the type of product distribution when companies sell their product directly to the customer and to the third parties as well. There are two channels used by companies in order to reach the customers.

Through this dual method companies are able to interact directly with customers. However, they still partner with intermediaries.  The strategy tends to be costly and requires a lot of energy. 

Despite having many benefits, some companies choose dual distribution. Therefore, there are variations of the product that can be performed. Apple, for example, uses a direct selling method to its stores. 

However, they also sell their products to other stores. This method will be the best choice for manufacturing companies. Companies can gain more profit from the dual distribution approach.

Reverse channel 

A reverse channel differs from other distribution channels that deliver products from companies to customers. In this model, the flow changed, the products went from customers to customers or other companies. 

It also means products from customers can be distributed to intermediaries then back to the companies. Products that use reverse channels usually are second-hand products, refurbished products, rubbish, or recycled products.

The products may vary ranging from plastics, papers, furniture, computers, to organic waste. Another example is Goodwill, a company sells donated items.

Implementing the right types of distribution strategy can benefit companies. Companies management may take into account many factors to determine which types are best suited for their products. 

The method companies use should give many advantages to them, if it’s not, they need to evaluate which factors need to be repaired. 

Find Potential Location to Expand Your Products with LOKASI Intelligence

If the business has been running steadily and in stable condition, then the next step is expanding the market to get more new customers. Expanding your market is the same as enlarging your business as high demand will increase the amount of production as well.  

Expanding the market can be performed by selling products or services in places that haven’t been covered yet. Companies can use whitespace analysis feature in LOKASI Intelligence platform to achieve that goal.

Whitespace refers to opportunities that can be tapped by businesses to expand their products to the places that have been explored yet. 

Find out more about how whitespace analysis features can help businesses to expand their business by contacting [email protected] or WhatsApp at 087777977731.

  Photo by Tima Miroshnichenko: https://www.pexels.com/photo/man-person-people-street-6169177/
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