Choosing a distribution channel for your products is far from being a “one size fits all” process. With so many unique factors going into choosing a business or other intermediary through which your product can pass, it’s important to deeply consider all your options. A correct distribution channel has the ability to drastically improve your product’s sales strategy. Without it, reaching your target customer becomes that much more difficult. Especially in regards to products that are new to the market, choosing the right distribution channel is the gateway to spreading the word about your product to the right people. But with so many options, the task of choosing a channel can seem extremely daunting at first. Consider the following before picking a path for your product.
The Four P’s
In the marketing world, finding a distribution channel falls into one of the “P’s” of marketing. The Four P’s include:
Place/placement is essentially the same as distribution and through which channel your product is sold. Why is this important? It’s a key element in your brand’s marketing strategy, and therefore will contribute to the growth of your company.
What are your distribution options?
When selling products, especially in the beauty industry, here are a some distribution channels that you should consider:
- Direct/Sales Team
- Value-Added Reseller (VAR)
- Sales Agent/Manufacturer’s Rep
An example of a beauty company that has done very well in regards to choosing a proper distribution channel is Glossier. The beauty powerhouse pledges to “build the future beauty company in collaboration with its customers.” Emily Weiss, founder and CEO of Glossier, speaks about the company’s approach of making customers their stakeholders. She said, “Thanks to this direct relationship with our customers, we have access to endless inspiration for new products, experiences, and ways of building an enduring business—all while staying true to our core belief that beauty should be a celebration of individuality and personal choice.”
How do you want to position your product?
When first releasing a product to the masses, it might be difficult to avoid jumping on the first offer that comes to you. However, it’s important to keep in mind that taking the first offer might not be the most beneficial for your product and brand in the long run. Prior to even searching for distribution channels that might suit your product, take a deep look at how you want to position it. Some elements you should consider analyzing are:
- Product Class: What type of product is it? What category would it fall in?
- Target Audience: Who and what kind of people would be interested in your product? Where do these people like to shop?
- Brand Image: What kind of people and ideologies would you like your product to be associated with?
Example of product positioning
For instance, if someone was selling high end soap, it likely would not be sold in drugstores and gas stations. Instead, the line of products would likely be sold on the shelves of specialty stores such as Whole Foods and Trader Joe’s. Thinking about your product’s positioning will help you choose a distribution channel that aligns with your brand image.
Do you understand the current market?
The manner in which the market is functioning is crucial to which distribution channel you choose for your product. But what does this mean? In order to examine the current market function, analyze how products similar to yours are being brought into the current market. If you’re product steers clear from “normal” distribution practices for your product’s class, it may become more difficult to acquire a customer base. Customers may hesitate to adjust to your new method of distribution. Therefore, analyzing the current way the market operated is best to expand your products reach.
Example of market function impacting a product
A great example of this is in regards to e-commerce, which is a distribution channel that has been increasing greatly. Even though e-commerce is a great way to sell products, some items such as alcohol, produce, and jewelry make more profit from retail and grocery stores. If you are attempting to launch a product that falls into any of those three categories, analyzing the market beforehand would allow you to know the benefits of your product having an in-store presence.
Who is your competition?
In order to properly choose a distribution channel, take a look at other products that serve a similar purpose or target market as yours. Asking yourself if your product contains a significant advantage, and if a certain distribution channel contains a specific advantage is a great way to further narrow down the process of choosing a channel.
- Is there a specific channel most of your competitors utilize?
- Have they overlooked an important channel?
Looking at the competition with this viewpoint and asking yourself these questions is an important part of the process.
When will they need your product?
Depending on the nature of your product, the timeliness of the distribution channel might be exceptionally important in regards to sales of the product. Since customers oftentimes shop for products for different reasons, it’s important to consider the customer’s drive for buying a product prior to choosing a distribution channel.
Example of product timeliness
Take for example, traditional over-the-counter pain medication. A product of this nature would likely sell better in a retail drugstore rather than online. Why is that? People purchase over-the-counter pain medication to relieve moderate pain immediately—something that would not be possible with online shopping and shipping time. Considering how customers use your product will hence help you choose a distribution channel. Thinking about scenarios like this will enable you to understand where exactly your potential customers would shop.
What are your costs?
Although not necessarily the most joyful part of choosing a distribution channel, it’s important to your business that you take into account the costs associated with the operation of varying channels. Companies with smaller budgets (such as startups) have simplified their approach, using online marketing as their biggest tool. Yet even with that approach, middlemen are necessary, and hence costs are inevitable. Examples of distribution costs include:
- Administrative expenses
- Rent (Also known as warehousing costs)
Warehousing costs are a huge part of distribution costs, especially when considering expansion for your company. For production purposes, warehouses are required in each major area where your company is located, leading to costs such as rent, electricity, and utility expenses.
- Salaries/Professional Fees
Dealing with finances can seem overwhelming but plotting out different distribution costs and profit potential in the form of a chart can be extremely helpful to you during the process.
Finding the right distribution channel is the first step in building a long life for your product. Not only does it serve as a competitive advantage, but ensures a connection with your target consumers, regardless of where they reside. If you keep in mind the tips above, the process of choosing the right channel will no doubt be a bit easier to tackle.
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