Distribution strategy
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Distribution strategy is a plan developed by a company to ensure its products are available in the right quantity, at the right place, and at the right time for the target customers. It includes decisions about the selection of intermediaries, the location of warehouses, and the method of delivery.
Example of Distribution strategy
The distribution strategy of a company is an important part of its overall marketing plan as it outlines how the company will ensure that its products are available to customers in the right place, at the right time, and in the right quantities. There are three main types of distribution strategies which are intensive distribution, selective distribution, and exclusive distribution. Intensive distribution involves placing the product in as many outlets as possible, selective distribution involves using a limited number of intermediaries, and exclusive distribution involves appointing one intermediary to distribute the product in a specific geographical area. Each type of distribution strategy has advantages and disadvantages, and companies should carefully consider which type is best suited to their needs.
When to use Distribution strategy
Distribution strategy is used when a company wants to ensure its products are available to its target customers in the right quantity, at the right place, and at the right time. The company needs to choose the right strategy depending on the product and the market it is selling to. For example, if the product is a luxury item, the company may opt for exclusive distribution, while if the product is a high-volume item, intensive distribution may be the best option. Additionally, distribution strategies can be used to target specific markets, as different strategies may be suitable for different markets. For example, a company may opt for selective distribution to target a specific niche market.
Types of Distribution strategy
There are three main types of distribution strategies which are:
- Intensive distribution: This strategy requires a company to place its product in as many outlets as possible. The goal is to make the product widely available to the customers.
- Selective distribution: This strategy involves using a limited number of intermediaries to distribute the product. It is used when the company wants to be associated with certain outlets that have a specific reputation.
- Exclusive distribution: This strategy involves appointing only one intermediary in a specific geographical area to distribute the product. This type of strategy is used when the product is highly exclusive or when the company wants to maintain a high degree of control over the distribution of its product.
Steps of Distribution strategy
Distribution strategy involves four main steps which are:
- Defining the target market: This is the first step in the distribution strategy. It involves identifying the target market and the segments within it.
- Selecting intermediaries: This step involves selecting the intermediaries that will be used to distribute the product. Factors such as geographical coverage, cost, service, and expertise should be considered.
- Establishing channels of distribution: This step involves determining the best way to get the product to the target market. Factors such as cost, time, and reliability must be taken into consideration.
- Establishing pricing policy: This step involves setting the price for the product. Factors such as competition and the target market's willingness to pay must be taken into consideration.
Advantages of Distribution strategy
There are several advantages to having a well thought out and well-executed distribution strategy. These include:
- Increased reach: A well-defined distribution strategy helps to ensure that a company's products are available to a larger number of customers. This can help to increase sales and expand the customer base.
- Improved customer service: A well-defined distribution strategy helps to ensure that customers can access products quickly and easily. This can help to improve customer satisfaction and loyalty.
- Greater control: With a well-defined distribution strategy, a company can have greater control over how its products are distributed. This helps to ensure that the product reaches the right customer in the right quantity, at the right place, and at the right time.
Limitations of Distribution strategy
Distribution strategy has some limitations that a company should be aware of. These include:
- Cost: Distribution strategies can be expensive, as they require the company to invest in infrastructure such as warehouses and delivery vehicles.
- Complexity: Distribution strategies can be complex and require a lot of coordination between different parties such as suppliers, intermediaries, and customers.
- Time: It can take a long time for a company to establish an effective distribution strategy, as it requires careful planning and execution.
In addition to the three main distribution strategies, there are other approaches that companies can use to get their products to the market. These include:
- Direct marketing: This involves selling the product directly to customers without the use of intermediaries.
- E-commerce: This involves selling products through online platforms such as websites, social media, and mobile applications.
- Franchising: This involves giving independent entrepreneurs the right to sell a company's products in a specific geographical area.
In conclusion, companies have a variety of approaches available to them when it comes to getting their products to the market. Each approach has its own advantages and disadvantages, so it is important for companies to carefully consider which approach is best for their needs.
Suggested literature
- Pitt, L., Berthon, P., & Berthon, J. P. (1999). Changing channels: the impact of the Internet on distribution strategy. Business Horizons, 42(2), 19-28.
- Dizqah, A. M., Lenzo, B., Sorniotti, A., Gruber, P., Fallah, S., & De Smet, J. (2016). A fast and parametric torque distribution strategy for four-wheel-drive energy-efficient electric vehicles. IEEE Transactions on Industrial Electronics, 63(7), 4367-4376.
