Channels of Distribution Argumentative

Once you have selected and developed a unique product or business idea, correctly positioned and targeted it to buyers, and developed your packaging and pricing, the selection of distribution channels and sales representation is key to successful marketing.

It’s fairly easy to change many of your marketing tactics and strategies on a periodic basis; pricing, packaging, and product mix are among these flexible choices. However, distribution and sales decisions, once made, are much more difficult to change. And distribution affects the selection and utilization of all other marketing tools.

There is a wide variety of possible distribution channels, including:

Retail Outlets owned by your company or by an independent merchant or chain

Wholesale Outlets of your own or those of independent distributors or brokers

Sales Force compensated by salary, commission, or both

Direct mail via your own catalog or flyers

Telemarketing on your own or through a contract firm

Cyber Marketing, surfing the newest frontier

TV and Cable direct marketing and home shopping channels

Distribution choices for a service business follow the same lines as those for a physical product. For example, financial planning services may be offered from printed material, sold at retail by consultants, delivered electronically by computer, or relayed by phone, fax or mail.

Steps for selecting distribution and sales force representation include:

Identify how competitors’ products are sold.

Analyze strengths, weaknesses, opportunities, and threats for your business.

Examine costs of channels and sales force options.

Determine which distribution options match your overall marketing strategy.

Prioritize your distribution choices.

Identify How Competitors’ Products are Sold.

Small businesses may face a particular difficulty in identifying their directly competitive selling channels, not usually in identifying where target buyers buy competitive products. How Are Competitor’s Products Sold?

Small companies should make a list of any competitors in their marketing area that could compete directly with them for the same list of potential customers. The list of competitors should then be divided into different distribution channels, if applicable.

In the architect example, a list of competitors broken down by different local distribution channels includes:

*competitors who advertise in local city and county magazines, newspapers, and real-estate flyers, subdivided by home-design only firms and home-design + industrial-design firms

*competitors who work with contractors and developers in the local county

*the local university’s architectural design department

Architectural competitors who advertise in local city media may be local, regional or national. In some cases, these competitors solicit home design business from wealthy industrial design clients they are doing work for. Other competitors have contracts to design and modify development-tract homes for local developers. And some competitors work with contractors to design home remodeling/addition projects. The local university is active in publicizing student residential design projects that result in several new homes and remodeling/addition jobs each year.

Analyze Strengths, Weaknesses, Opportunities, and Threats for your Business.

Strength and weakness analysis is an internal company exercise to gauge your ability to compete effectively. Opportunity and threat analysis is an external exercise centered on competitors and the external environment that affect a company’s ability to compete effectively. Taken together, they are referred to as SWOT analysis.

Each distribution channel alternative and sales force option carries specific costs that can be estimated in most industries and categories.

Small businesses need to network with potential or current customers, industry associations, trade suppliers, and competitors to help answer these questions. Key questions are:

*What are the barriers (difficulties) to entering this product category via each distribution channel?

*How much do various distribution channels cost to successfully enter? Over what period of time is this money being spent?

*Should we distribute our business products locally, regionally, nationally? And in what order, or through all channels at the same time?

*Are some or all of the items we sell subject to varying product life cycles? How do our products compare to competitor product life cycles by channel?

*What types of competitive spending, promotions, advertising, and field sales response will our business entry encounter by type of distribution channel?

Examine Costs of Channels and Sales Force Options.

Obviously, financial resources and cost-effectiveness are important in considering distribution and sales force options. What can you afford, and what will give you the most for your buck?

There are three primary distribution channels for services and estimated costs for each one:

Media sales: This channel is composed of competitors who advertise in local city and county magazines, newspapers, and real-estate flyers.

Contractors and developers: This distribution channel is composed of referrals from contractors and developers who receive a commission from home owners and buyers. The contractors and developers are the “sales” personnel, who expect a commission and entertainment.

University design department: This is a closed distribution channel for students and professors only.

Determining which Distribution Options Match your Overall Marketing Strategy.

Small company must work harder at focusing limited resources, especially with distribution and sales force options. In some cases, the only sales force option is for the owner to do it himself or herself, as in a small retail shop, or consulting/service businesses.

Some distribution channels and sales force options may be attractive, but off-strategy for the small company. A list of all possible distribution channels and accompanying sales force options should be matched against company marketing objectives.

For example, companies selling gourmet cooking equipment has many options for distribution and sales force representation, including:

*company retail stores, with company sales personnel

*specialty food stores, with sales brokers

*department stores, with sales brokers

*hardware stores, with sales brokers

*specialty chains (e.g., Williams-Sonoma, Crate & Barrel), with sales brokers

*direct mail, with company personnel

*distributors, with company sales managers, brokers, distributor sales reps

Prioritize your Distribution Choices.

In some cases, a small business can pursue distribution into several different channels. However, most small businesses must prioritize distribution channel and sales force options over several years of growth and evolving resources for the company. For example, food supplements and vitamins are sold through a multitude of channels, including:

*multi-level “network” organizations, with company and independent sales reps

*health food stores, with company reps and sales brokers

*department stores, with company reps and sales brokers

*drug stores, with company reps and sales brokers

*grocery stores, with company reps and sales brokers

*mass merchandise stores, with company reps and sales brokers

*club member warehouse stores, with company reps and sales brokers

*direct mail, with company personnel

*distributors, with company sales managers, brokers, distributor sales reps

*doctors’ offices, with company sales managers, brokers, distributor sales reps

It is not always possible for a company, small or large, to take advantage of all possible channels that match the marketing strategy it wants to achieve. Financial considerations aside, it may be wise to prioritize the orderly development and attack each distribution channel in order of easiest entry and least competitive resistance, for example.

Other factors such as geographic proximity, ability and availability of management to control many different channels simultaneously, availability of experienced sales reps, marketing experience by channel, competitive strengths by channel, manufacturing capacities, and product life cycles by channel should be considered.

For small companies, key factors to prioritize your choice of channels include a shorter list:

*financial resources and risks (“How much money do we have to risk against our objectives and marketing programs?”)

*competitors’ strengths and market share (“Are they big enough and mean enough to hurt us, and what are their objectives?”)

*management experience by channel (“What do we know about each channel’s opportunities and threats?”)

*product positioning to target buyers (“Will the strengths of our product uniqueness help sell it to interested buyers and can we communicate our uniqueness effectively?”)