How to Develop a Distribution Channel Strategy


How to Develop a Distribution Channel Strategy

A distribution channel strategy enables you to sell to customers in geographical areas or market sectors that your direct sales team cannot reach. You can choose from a number of distribution channels, including wholesalers, retailers, distributors and the Internet. Each channel gives you different options for dealing with customers and prospects. However, to ensure that your distributors operate effectively on your behalf, your strategy must incorporate the right level of control and support.


If your strategy is to grow your business regionally or nationally, highlight the geographical areas you want to reach through a distribution channel and identify a network of distributors or retailers that provide existing coverage of the territories. If you are planning to export products, focus on established distributors with detailed local market knowledge. Consider marketing your products on the Internet so that you can extend coverage to customers where there is no suitable physical distribution network.


Although a distribution strategy gives you a ready-made platform for expansion, it’s important to compare the cost of dealing through indirect distribution channels with the cost of setting up your own network or direct sales operation. Without a distribution network, you will have to commit resources to order processing, stockholding, delivery, invoicing and customer service. Compare that with the lower margins you will make by giving distributors a discount for providing a similar level of service and providing them with a program of marketing and training support.


Your strategy should also take account of the potential contribution of each distribution channel. Concentrate on working with distributors that give you access to an additional customer base, with no additional direct sales and marketing costs. Distributors also provide you with local market knowledge, enabling you to establish your business in new markets without incurring heavy market entry costs.


Support and control are critical factors in your distribution strategy. Appointing a manager to work with distributors enables you to monitor their performance and identify their support needs. Develop marketing support programs to meet the needs of different channels. Options include funds for advertising or direct marketing campaigns or templates that enable partners to develop their own campaigns. If channel sales represent a significant proportion of your business, develop advertising and marketing campaigns to drive business to your channel partners. Operating a training program will improve distributors’ product and marketing knowledge and enable them to deliver a higher standard of service to customers.

Customer Service

It’s important to identify the types of customers you wish to serve directly. Typically, these would be your largest customers or customers that demand levels of technical support beyond your partners’ capability. Use channel partners to deal with large numbers of smaller customers cost effectively so that you can concentrate your resources on your key accounts.


Posted by Nguyen Cao Cuong  Posted on 08 May 
  • Distribution channel, Distribution strategy
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