Businesses use distribution strategies to disseminate their products and services to the end users, and effectiveness of the strategy influences the revenue obtained from sales and customer loyalty. Often, companies use multiple distribution strategies to stay on top of things, especially in an environment of tough market competition. The distribution strategies selected by businesses are influenced by the nature of the customer group. For example, if you want to cater to an older age group, you might probably go with the option of direct selling but if you have a younger customer base, you might probably decide to work with retailers.
Here is a list of the types of distribution strategies used by businesses.
In direct distribution strategy, the manufacturers directly sell their products to the customers and different organizations opt different ways of implementing this method. Some might adopt a modern strategy by setting up an ecommerce website enabling the users to make online purchases. The businesses do so by analyzing whether their client base has moderate or better knowledge in technology, is fond of specific brands or wants a specific solution that meets their needs perfectly.
Another direct distribution method makes use of catalogs or phone orders and the strategy especially aims users in particular industries or older age groups who are used to placing orders this way.
Implementing a direct distribution strategy offers better returns by eliminating distributing agencies that might come in the middle but the strategy demands additional infrastructure. The manufacturers would have to add vehicles, warehouses and delivery staff for enabling effective distribution of goods on their own.
Indirect distribution strategy uses intermediary agencies that assist the manufacturer in logistics analysis and help them reach customers swiftly. The distribution centers can be placed in appropriate locations fixed by analyzing the habits and preferences of customers. By selecting the best distribution companies, businesses can make better profits than when they were to undertake the product supply task on their own.
Customers do not often pay much attention to routine purchases and they make the purchase at the nearest store without being much conscious about brands. Choosing an indirect distribution method by setting up multiple retail locations and placing the low commitment products there, could help greatly in increasing the sale of the product.
In this distribution method, products are made available in maximum retail locations and the availability of particular goods in large numbers will help the manufacturers earn better returns. The products that are sold using intensive distribution strategy do not often require much involvement from the part of customers in terms of research, and thus they might not need to put in much effort in the selling process.
In addition to giving better returns, intensive distribution has multiple advantages. The strategy is efficient in increasing the brand awareness because when your product is visible in every store, consumer trust increases and they start recognizing your product as an authentic brand. Customers opt some brands impulsively when certain brands are not available and the increased availability of products in intensive distribution strategy increases the chance of impulse buying that gives better returns.
Adopting an appropriate distribution strategy is quintessential for the success of businesses and a thorough research of the customer base has to be conducted before choosing a distribution strategy.
In exclusive distribution, an agreement is made between the supplier and retailer granting the sale rights of selling the manufacturer’s product within a specific geographical location to the retailer. The supplier often limits the number of products supplied to the retailer as well.
Manufacturers adopt exclusive distribution strategy by analyzing multiple factors including the type of their product, their competitors, as well as consumer base. A natural question that arises about exclusive distribution is why any business would choose the strategy knowing that fewer products can only be sold. One reason is the nature of the business. The limited resources that small businesses have will make it difficult for them to supply large amounts of products and they often prefer exclusive distribution strategy.
Exclusivity is another reason why businesses adopt exclusive distribution strategy because the distributor can offer limited edition products if the amount of products are limited. Luxury brands often adopt this strategy to increase the brand loyalty and value.
Selective distribution resembles intensive and exclusive distribution in specific ways .In this strategy, products are distributed in more than one location but not in as many locations as in intensive distribution. The manufacturer chooses the best performing outlets in appropriate locations to set up distribution centers and focus their efforts in these locations.
When customers have preferences for particular prices or brands, they will be ready to search for the outlets that supply the products they want, and selective distribution is the ideal strategy in similar instances. The associated cost of selective distribution is less than that of intensive distribution but the manufacturer can still gain optimum market coverage.
The size of businesses as well as the nature of the products they supply decides the distribution strategy that would suit them best and once they identify that they would require assistance in distribution, companies start looking for distributors.