by Art Piccio . August 16th, 2014
It’s a testament to the seat-of-your-pants nature of entrepreneurship that so many attempt to start a business without even a passing knowledge of basic marketing concepts such as distribution. In this part of the series, we explain the “Big Four” distribution strategies.
While there are alternate frameworks with which to view distribution strategies, the truth is there are no hard and fast rules, regardless of whoever business writer you try to follow. Strategies can be multi-pronged or be viewed differently depending on context.
In the end, it’s less important to argue about specific terms than it is to understand how certain strategies will broadly affect your market share and how your offers are seen.
Yes and no.
It’s fairly obvious that planning where your products and other offers are made available should be a major part of a distribution strategy.
As far as distribution channels is concerned, many newbie entreps fall short is planning their:
These are just some of the things to consider when creating a distribution strategy.
Toothpaste, cigarettes, detergent, batteries, phone credits, feminine hygiene products, and similar knickknacks and daily necessities are usually distributed widely enough so that customers don’t have to go out of their way in order to purchase them. It works best when your offer isn’t very different from your competitors’.
When you think of an item that’s got a “household name,” it’s likely distributed this way.
Upsides for producers
Downsides for producers
Selective distribution involves selecting specific markets and optimizing offers so that they are easily available only to those markets.
This strategy is most often used with items such as higher-end electronics and furniture. General Electric and Whirlpool for instance, are well-known for distributing their home products in some stores, but not others. High-end clothing is also often distributed this way. This type of distribution normally gives more rights to the producer.
Traditionally, this strategy was severely limited by geography. The same broad principles are now easily applicable through online channels, so now anyone can easily target specific niches, instead of being hampered by your market’s physical location.
Most items and services available online through multiple intermediaries can be considered to be distributed this way.
Exclusive distribution involves having a single online/offline channel for a given market. This strategy is most commonly used for “upscale” items such as jewelery and bigger ticket, expensive items such as cars.
This method is also common for specialty items in smaller markets. Food trucks are one offbeat example. This distribution method often gives more rights to the distributor, due to the special requirements of these items.
Upsides for producers
Many of the other advantages are similar to those of a selective distribution strategy.
Many of the other disadvantages are similar to those of a selective distribution strategy.
A franchisor allows an operator, or a franchisee, to use their trademark and distribute the supplier’s goods. In return, the operator pays the supplier a fee. In many cases, the franchisor also acts as a supplier.
The operator often does the heavy lifting on the front end, while the franchisor develops products, develops the brand’s direction, and ensures a consistent experience for customers.
This business model has famously been applied to fast food businesses, but has also been proven a viable option for events, social enterprises, hotel and lodging businesses, and small-scale manufacturing.
Why bother including it?
Many other frameworks for understanding distribution strategies omit franchising. This is because for all intents and purposes, you could franchise your business and still distribute offers intensively, exclusively, or in select channels. It is worth mentioning, however, that franchising offers risk reduction
This won’t come close to covering all the implications of each of these major distribution strategies, but hopefully at least a few of you walk away with a better understanding of where your good and services should be available, as well as how to promote and develop them.
Other parts of our Basic Marketing Concepts series!
The Marketing Mix: The 4 P’s of Marketing
Customer Relationship Management
The Sales Process
The Purchase Funnel
Did we mess up somewhere? Help us out and comment below!
Arthur Piccio manages YouTheEntrepreneur and has managed content for major players in the online printing industry. He was previously BizSugar's contributor of the week. His work has appeared multiple times on The New York Times' You're the Boss Small Business Blog. He enjoys guitar maintenance and reading up on history and psychology in his spare time.