Best Distribution Channels for Small Businesses

Small business distribution is incredibly important and can set the tone for your company. You want to be sure your customers are getting the best quality products possible. You also want them to be the right price, and given in a timely manner. In order to better understand small business distribution, this article is going to discuss distribution channels in business, the key difference between direct and indirect distribution channels, and the various distribution methods within marketing.

Small Business Distribution

Small business distribution is all about the path a product or service embarks on to reach the consumer. This can be easy or complex, depending on the process and the availability of products. Getting the product or service to the customer with small business distribution might require multiple intermediaries.

You always want to keep in mind the end-user. What is most convenient and best priced to the end-user that would result in repeat sales from the consumer? When you think about the end-user you want to consider all the different characteristics they possess that make them your target market. Maybe you look at their age, location or other factors that directly impact your sales and your overall ROI or return on investment.

Distribution Channels in Business

In general, distribution in business is all about how you get the product or service to the consumer. Choosing a distribution channel is different for every business, as you want to make sure you are maximizing your revenue. There are different steps you should follow when considering what strategy best aligns with the needs of your company and consumers. 

Determine the most Effective Channel

Distribution channels in business might seem intimidating at first because there are so many options to choose from. The first step is to determine what channel works best for your business and provides the most amount of revenue while also satisfying your customers.

The question you must ask yourself is: is it possible to sell your product to the end-user directly? In some cases, the answer is yes, but in others this method is just not a viable option. The rule of thumb is: the longer the channel, the less profit you will experience. Wholesalers can rack up the prices against small businesses. Unfortunately, for some products, using long channels is inevitable and this must be accounted for when determining distribution.

Recognize your Target Audience

You need to find out what the needs are for your target market. You want to make the most money possible, but you want to take care of your customer. This goes back to the idea of identifying their age, gender, preferences, and much more. For example, if your target market is a group of teenagers, integrating a strategy that allows for online purchasing might be best. If your target market is people in their 50s, another method of distributing your product might be more fitting. This is why it is so important to consider your consumers’ preferences. Some distribution channels are better than others, so it is imperative to discover your consumer preferences and make an informed decision.

Learn to Make Changes as Needed

Some channels will be more successful in achieving your desired goals than others. This is why you need to go back and evaluate what distribution channel you are using. You need to know whether or not it is meeting or exceeding your goals. Constantly be asking yourself: is there a better way I can do this? What are my competitors doing that seem to be working so well for them? You want to stay innovative and optimistic about change.

The Strategic Profit Model

When evaluating your channel, something useful you can use is referred to as the Strategic Profit Model. The Strategic Profit Model examines and evaluates the data of a channel’s overall performance. This can help you determine how effective your intermediaries are as well. You can also distribute surveys that people can take to rate their satisfaction level. Both of these tactics can give you a combined idea of how your distribution channel is performing. If you determine that changes need to be made, carefully look through surveys and see the most common point that dissatisfied customers, then adapt your distribution channel to fix the concerns.

Direct vs Indirect Distribution Channels

The main concern many businesses face is to use direct vs indirect distribution channels. Businesses can use either or a combination of both. Businesses tend to prefer to use direct but sometimes it is not possible or is not the best option for a particular product. For this reason, there are key differences when considering direct vs indirect distribution channels.

Direct Distribution Channels

First off, the key difference between direct vs indirect distribution channels is that direct allows your business to organize and manage the distribution itself. In this case, there are no intermediaries. This means your company oversees everything and gets your product or service to the customer without help from wholesalers. Direct distribution channels tend to be more expensive when first starting out, however, once you get past the initial capital investment, the direct channel is actually the more inexpensive choice when compared to indirect distribution channels.

Indirect Distribution Channels

Indirect distribution channels are the opposite of direct distribution channels. These channels rely on intermediaries to perform the majority of their distribution functions. The difficult part about this is that you must trust your business with another party and all that comes with it. The benefit of indirect distribution channels is that the business does not have to worry about covering startup costs like they would if they were using direct distribution costs. This is referring to the initial capital investment which includes warehouses, logistic systems, and delivery.

Managing indirect distribution channels are much easier for businesses when they maintain a good relationship with their intermediaries. This way they have less to worry about and can focus their efforts on other aspects of their business. Indirect distribution channels do produce other costs. This can ultimately increase the cost to the customer and slow down delivery.

Benefits

Depending on the industry you operate in, indirect distribution channels might be more beneficial. For example, let’s say you are selling a line of products that uses a lot of corn. It might be beneficial to reach out to farmers to supply your corn instead of growing it yourself. In this situation, if you have no experience growing crops before, an expert is beneficial and necessary for this particular strategy. However, if you specialize in growing crops already, you can use your own business to grow the corn and get it to your end-user.

Distribution Methods in Marketing

Distribution methods in marketing are important to understand. You want to attract your consumers to visit your website or store, then make a compelling argument to make a sale when all is said and done. This is achieved through the four types of marketing channels which are: direct selling, selling through intermediaries, dual distribution, and reverse channels.

Direct Selling

Direct selling simply put is the selling and marketing of a product directly to consumers. This can be accomplished through company demonstrations, sales via the internet, and more. Consumers benefit from direct selling because it allows them to get a thorough understanding of the product they are investing in and how to use it. They are free to ask questions and see the product for themselves. For example, if a company is selling a new television, they can demonstrate to consumers how to use it before they make a purchase. This way when the consumer gets home, they can feel confident in their abilities to use the product and avoid frustration and confusion.

Selling through Intermediaries

Selling through intermediaries is an indirect channel where a company’s products are distributed via wholesalers and retailers. Most companies end up using intermediaries to sell some of their products. For example, Wal-Mart sells Maybelline cosmetics products which increases sales and credibility for the company.

Dual Distribution

Dual distribution is when the business uses multiple channels to reach their end-user. They might use a combination of direct selling and using intermediaries like wholesalers and retailers. This way customers have the option of where they can buy the product and the company will experience more sales and customers.

Reverse Channels

Reverse channels literally reverse the flow of the product. Instead of starting at a producer and going through channels to finally reach the consumer, the process instead starts at the consumer and goes back up the chain. Technology has fostered individuals’ ability to do this, This was impossible only a few years ago.

Distribution Channels and You

Knowing how to properly implement different distribution channels into your strategy is crucial. For help with all your questions and to meet with a team of experts who can determine what distribution channels will best benefit your company, contact SEO Design Chicago today!