Running a business takes time and effort. From manufacturing to shipping, there are many moving parts.
A strong distribution strategy is one of the most critical factors for successful businesses. It can help improve customer satisfaction, leading to increased profits. However, developing an effective distribution strategy can be challenging.
Determine Your Target Market
Identifying your target market is one of the first steps in creating a practical product distribution strategy. This involves identifying all potential customers who can afford and access your product and how often they purchase it.
This information can then determine which distribution channels will work best. Businesses can choose from intensive, selective, or exclusive distribution strategies. Intensive distribution uses many intermediary partners, like grocery stores, gas stations, restaurants, and online ecommerce platforms, to reach a wide range of customer segments. Selective distribution limits the number of outlets to a smaller group but allows more control over pricing and customer engagement strategies. Exclusive distribution only works in specific locations but offers high-profit margins. This is an excellent option for brands prioritizing maintaining a unique brand image.
Identify Your Distribution Channels
Distribution channels are the paths you create to bring your products and services closer to consumers. These may include marketing intermediaries like agents and brokers, wholesalers, distributors, or contractors that add value to your product through reselling, packaging, or service.
Channels could also include direct-to-consumer sales and e-commerce sites. Determining your distribution channels will impact your marketing, sales, and inventory management. Consider your sales goals, current infrastructure, and how it stacks up to your competition when deciding on your channels. For channels that involve marketing intermediaries, it’s essential to keep them informed about your products and market trends so they can make well-informed decisions on their behalf. This will help prevent channel conflict, which significantly hinders your overall success.
Create a Marketing Plan
A marketing plan helps you stay focused on your product distribution strategy. This includes identifying the target market, channel choices, and marketing goals.
Your plan should also include your company’s mission, vision, and values so that anyone who reads it understands why you are doing what you are doing. We have a great marketing plan template here that you can download to get started.
You should also have a clear set of marketing objectives, which should be specific, measurable, attainable, relevant, and time-bound (SMART). For example, your goal could be to increase awareness about your new product by 10 percent next year. Also, it’s important to keep evaluating your channel choices and performance so that you can conduct what is called distribution network optimization.
Develop a Pricing Strategy
Pricing is complicated, and finding the right strategy to attract customers while staying within your production costs and profit goals is challenging. It takes some experimentation, and you’ll need to research—from surveys and focus groups to casual conversations with potential customers to determine the price they’re willing to pay.
Before deciding on a pricing model, consider your business goals and competitors’ actions. For example, if your primary goal is sales volume, you may choose a competitive pricing model that competes on price to increase market share. But to maximize revenue, you might opt for a value-based pricing strategy focusing on customer-perceived value. You might also try dynamic pricing, such as Uber’s surge pricing during high-demand times.
Build a Logistics Plan
A product distribution plan is essential to running an efficient logistics business. It allows you to minimize delays and ensure that customers receive the proper sizes of goods at the correct times.
It also helps you control inventory and avoid over-ordering, which can cost your business in several ways. For example, if you have an opportunity to purchase discounted raw materials but need more storage space, you may end up with overstock. If you later need to order replacement stock, you’ll pay the total price for that merchandise.
The best logistics plans are based on accurate demand forecasts. Reassessing these forecasts periodically can help you improve your distribution strategy and stay on top of your customer needs. This way, you’ll be able to serve your target market better and increase customer loyalty.