Distribution Strategy Meaning | What are types of Distribution Strategy?

End-users are the target audience for a distribution strategy. In order to generate money and maintain client loyalty, it is essential to use the most efficient distribution strategy for your organization possible. It is common for organizations to use a variety of distribution methods so that they may better cater to the needs of their customers. Catalog sales are an excellent option if you’re selling a leather futon and want to target customers in their 60s and 70s. If you’re targeting a younger demographic, you may want to work with a shop like Walmart to market your products. At the heart of your distribution plan should be an understanding of who your ideal consumer is and how they shop. What can you do, as a manufacturer, to streamline the purchasing process? Whether of not it’s a one-time transaction or a recurring one, it’s important to consider whether the hassle of purchasing directly from the manufacturer outweighs the possible benefits. Product role and the sort of purchase decision linked with a product are essential considerations when developing a strategy for a company. To define distribution strategy first we need to understand the types of distribution strategies

Different types of distribution strategies

Direct Distribution Strategy

Using direct distribution, manufacturers sell and ship their own products directly to customers. It is possible to use this distribution strategy in a variety of ways. E-commerce websites allow customers to buy products directly from a company’s website, which is an option for some businesses. Clients that have a basic understanding of technology, need a specialised solution, or are loyal to a certain brand may benefit from this approach. Catalogs or phone orders can also be used for direct distribution. An older consumer base, especially those in certain industries, may benefit from this choice. Investing in a direct distribution strategy is a significant factor to take into account. Manufacturers, for example, will need to acquire warehouses, cars, and delivery personnel in order to be able to distribute their own products.

Related: Read more about Direct Distribution | Direct Distribution Explained

Indirect Distribution Strategy

When it comes to distributing goods, the phrase “middleman” has a poor reputation, yet in this case, these firms might be beneficial. Indirect distribution involves the use of intermediaries that aid in the logistics and placement of items so that they reach clients quickly and in the best possible position depending on consumer habits and preferences. This distribution technique is often used for business reasons, such as targeting specific clients or a specific sort of goods. When shopping in a department store, customers are more likely to make impulsive purchases that they have no intention of returning for. It’s not unusual to buy a tube of toothpaste. A company’s best option for these types of products is to use an indirect distribution strategy that places a big number of items in different retail locations.

Extensive Distribution strategy

The extensive distribution strategy aims to get products into as many retail outlets as feasible. Gum is an example of a product that frequently employs this tactic. In addition to petrol stations, grocery stores, vending machines, and retail locations like Target, gum can be found in many places. This distribution strategy relies on the availability of a big number of products in a variety of places. There is no need for a customer to conduct extensive study before making a purchase of these products. To put it another way, certain products are so commonplace that selling them requires no effort.

Exclusive distribution strategy

It is common for manufacturers to enter into an exclusive distribution strategy with a single shop to sell their products only at that location. It’s possible for businesses to sell their products only through their own branded storefronts. To acquire a Lamborghini, for example, clients must visit a Lamborghini dealership rather than any other dealership. AT&T’s exclusive distribution agreement with Apple is an example of an exclusive distribution relationship between a manufacturer and a retailer. People gave up their other phone plans to get their hands on this special product as a result of this deal. Using this distribution strategy is ideal for highly sought-after, limited-edition products.

Selective distribution strategy

In between intensive and exclusive distribution, a selective distribution strategy is a good alternative for those looking for a balance. It’s not as many locations as with an extensive distribution strategy, but it’s still more than one. Clothing from various companies, for example, maybe offered in limited quantities. It’s possible that a high-end company like Gucci would choose to sell its wares in its own boutiques and select department stores rather than in a wide variety of outlets like Walmart or Target. An implicit high-end brand message and an increased opportunity for customers to acquire one of its items can be achieved through this method.

How to select proper distribution strategy for your business?

Item type

The preferred strategy of distribution may differ based on the sort of purchase decision customers make when purchasing a manufactured item. Routine, limited, and large purchases fall into one of three categories: Hand soap or paper towels are examples of “regular” purchases, which are typically inexpensive and easy to find. Customers aren’t likely to be loyal to a single brand and expect things to be available in a variety of locations when it comes to these products. Having a large number of these products on hand can lead to increased sales. There is a halfway ground between regular and large purchases and limited purchase decisions. These things are usually reasonably priced, however the process of picking an item may take longer than with a typical transaction. Toasters, for example, are an example of a limited-edition product. As a result of their low cost and ease of usage, these products are viewed as less of a significant investment than a house or automobile. These products may benefit from a more targeted or aggressive distribution approach. The final type of purchase choice is incredibly complex. Buying a house, a car, or going to college are all examples of large-ticket things. The more expensive an object is, the more difficult it is to make a choice about purchasing it. Extending an item’s perceived value by restricting its availability could be a good strategy for certain products. Having fewer of these high-priced products on the market may also be more profitable due to the high production costs of each item.

Customer base

Direct distribution options include e-commerce, direct mail, and manufacturer-operated shops, among others. Corporations used to send catalogs of their products to clients, and you had to call the company if you were interested in placing an order. Due to technological advancements, direct mail delivery is becoming less frequent, although certain organizations who have a customer base that prefers this method may continue to use it. One of the most prominent distribution channels is e-commerce. Global e-commerce revenues are expected to exceed $4.8 trillion by 2021, according to a Shopify analysis. Many consumers are already familiar with web-based technologies in order to make this distribution channel a win-win situation for both the companies and the customers. As a bonus, this strategy eliminates the need for customers to leave their homes in order to make a purchase; all they need is an internet connection and their credit card details. Despite the fact that storefronts are closing around the country, some firms continue to distribute in this way. As a benefit, shoppers may simply acquire related products because they are curated at a brick-and-mortar location. When the price of a product and the severity of a purchase choice increase, consumers can inspect and feel the object in person.

Warehousing capabilities

How much you’re willing to invest in things like a transportation fleet, shipping people, and a warehouse to store goods determines whether or not your business will use an indirect or direct distribution approach. Manufacturers need to be cautious about entering into this venture, as it requires a significant upfront cost to acquire the necessary components. When choosing on a distribution method, your firm will have to consider the advantages and disadvantages of performing your own distribution or employing an intermediary.

Technologies that aid in distribution strategy

Automation

The use of automation can speed up the completion of work and free up the time of employees. Depending on the distribution software vendor you choose, this feature can be used for a variety of purposes. Based on where the other materials in the vehicle are headed and their intended path, this may be implemented by assigning goods to a vehicle automatically.

Internet of Things

The distribution process can be made more efficient by utilizing the Internet of Things (IoT). RFID tracking is common in many distribution systems, allowing users to scan things and see where they are in relation to one another and to the rest of the process. Users can watch the inventory move in real-time.

Cloud-based ERP system

Cloud-based ERP software allows users to access solutions at any time and from any location. If you’re working in a distribution center, you may need to glance at data while you’re really doing your job. This choice allows for a wide range of options, as well as greater accessibility and flexibility.

Conclusion

The process of devising an efficient distribution strategy has many facets. The appropriate distribution strategy for your business depends on a variety of criteria, including your target demography, product kind, and present logistical set-up. Many organizations choose to employ an indirect distribution strategy or distribution software to streamline the process because there are so many moving pieces associated with distribution. Regardless of the approach used, it is critical that the needs of your customers and the level of their purchasing decision be taken into consideration in order to identify the best distribution plan.

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