Today we want to talk to you about What are Distribution Strategies? It is about everything related to the logistics of the distribution of goods through the definition of channels and the development of strategies that help you reduce risks and optimize your costs.
It is important that you know that it is a complex and diverse area, whether depending on the product you distribute, the value you plan to obtain, the regulations that you must comply with and the specific circumstances that you must face to achieve a distribution, you will have to adapt multiple maneuvers .
We are sure that here we will help you with the definitions and recommendations so that you achieve success in your sector!
What is Strategy?
The first concept you need to know is that of Strategy. We aspire you to know that it is a plan that you must define so that you can address an issue. So you must define a series of actions that will help you make decisions and achieve the best possible results.
As the strategy will help you achieve a goal, you need to be aware that you must follow a pattern of action and apply various tactics. Keep in mind that strategy differs from tactic. The strategy is the general process that you set out, while the tactic is the way in which you are going to execute it.
A simple case that will help you better understand this difference is with the following illustration. For example, in the case of a textile company that considers itself as objective increase your sales in the market, a strategy you can be the enlargement of the segments. The tactic It could be the establishment of a strategic alliance with a chain of stores to offer products in their establishments. Do you notice the distinctions? Let’s go on then.
In the case of your company, a strategy will take various courses to address all areas of expertise, the regulations that you are obliged to comply with, as well as the teams and the profile that your people must have. It is about applying all the necessary steps so as not to deviate from the objectives, be efficient in the use of resources and also flexible enough to adapt to the behavior of the markets.
On strategy you will get an infinity of definitions and types. There are them for large sectors such as the economy, the military, and the health sector. And in turn for the areas within these large plots, such as business, commercial, marketing, investment, etc.
What is distribution?
Another concept that you need to handle is that of Distribution. As the word itself indicates, it is about the action that you must apply to trade or distribute your products: divide something between several people, fulfill an established destination, deliver a merchandise. We want you to know that the term comes from Latin distribution and refers to a usual commercial activity for the distribution of products.
The definition of a distribution plan will achieve your goods physically arrive to a consumer. To be successful, the product must be in good condition, it must arrive directly at the place and in the promised time.
Within this distribution planning, you must include the distribution chain or channels according to the different agents and stages defined so that your product reaches the final consumer. It is important that you are aware that the most frequent are:
- wholesalers who buy the product from a factory and ship it to a trader;
- retailers who are those who buy from a productive agent and sell it to an end customer.
- And there may also be intermediary agents in the trade chain.
What are the Distribution Channels?
At this point, it is good to talk to you about distribution channels. This has to do with the specifications of the distribution system and the types of distribution of your company, depending on whether they are internal, external or mixed.
A decisive aspect in this matter is that you must make the decision of the dispatch routes considering their cost-benefit ratio. In the same way, we recommend that you consider the infrastructure you have, the logistics you handle and the expenses that this process causes you.
Another possible analysis you can do is If it is better for you to dedicate yourself only to producing and that you subcontract to another company or business partner to carry out the commercialization process.
We tell you that the distribution systems can be the following:
- Internal is when the company carries out its own marketing process. For you to decide this route, you must consider if you have the appropriate infrastructure and logistics to develop the process efficiently.
- External is when the company considers it cheaper to dedicate itself solely to producing. Here is the decision that another company is in charge of the commercialization process.
- Mixed is when a company uses the internal and external distribution system to achieve greater coverage and reach. Perhaps this decision will give you more strategic flexibility.
The direction you choose on the distribution channels will depend on the number of members or intermediaries who will be able to participate in the process of bringing the product from your company to the final consumer.
In turn, the distribution channels can be of two types:
- Direct when the company brings the product to its final consumer. In this case you will not need intermediaries.
- Indirect is when intermediaries are used to bring the product to the customer’s hands. Here you must evaluate whether they should be long or short indirect distribution channels, depending on the number of intermediaries that can operate in the intermediation.
Finally, we comment that the decisions you must make about distribution strategies must consider three important elements: system, type and distribution channel. In addition, you should consider the type of customer you serve and the products you offer to the market.
What are Distribution Strategies?
A distribution strategy is the way in which you will carry out the distribution of your product. It consists of a series of decisions that should take over the channels, distribution systems and types to reach the largest number of customers possible, in a timely, safe and with the expected quality.
The more successful are your decisions, the company can bring products to its customers in the best possible way. In this way, your customers will have access to the products in an easy and comfortable way, which will allow you to make a greater number of effective sales.
Finally, the distribution strategy will allow you to define what your main points of sale will be according to the customers you serve and the type of product you sell. It will also help you define how you will carry out the transfer and what type of transport you should use.
Types of Distribution Strategies
Next, we will name some of the most used distribution strategies that have proven to give the best returns for businesses:
- From large-scale intensive distribution, with indirect channels and various intermediaries from the manufacturer to the final consumer. The commercial branches that use this plan the most are food, cosmetics and pharmacy.
- On selective distribution for non-mass sales. These are products aimed at selected stores, where the end customer must go specifically to the store. The items that apply the most to this strategy are clothing or fashion accessories.
- From exclusiveness referring to brands or designs unique and timely. It has to do with designer stores, jewelry and very specific tastes.
Which of the Strategies is Adjusted to the Needs of the Company?
We know that up to now it has been clear to you What are Distribution Strategies? And everything you need to put together your best distribution plan. Remember that the key is that you have clearly defined your business objectives and evaluate the necessary infrastructure and logistics.
Now you wonder how you will know which is the most successful strategy for your company. We think that is the plan of the logistics the main definition that will help you to determine it. First, you must choose if your competitiveness will remain at a local level or if you are willing to expand it to a geographical area.
Your entire distribution method will depend on this choice, as it will depend on the size of the market you are targeting, the pricing policy, the competition and the amount of products that you are able to manufacture with respect to market demand.
As everything will depend on your decisions and established plans, we We want to leave you the main advantages that you will obtain in the application of each distribution strategy above. So it will be your own strategy that should respond to your business needs.
Advantages of the intensive distribution strategy:
- You achieve global trade coverage. Your product will be seen everywhere.
- You get a source of loyalty for your client, because you will be willing to go anywhere.
- You achieve strong recognition of the product.
- You increase sales in proportion to the number of points of sale.
Advantages of the selective distribution strategy:
- You save money as the costs are lower compared to intensive distribution.
- You activate the coordination of campaign actions between different points of sale.
- It allows you to focus more efforts on fewer brands.
Advantages of the exclusive distribution strategy or square strategies:
- You directly control your point of sale.
- You fully manage product availability.
To achieve greater precision in your strategies, you need to have information and technologies to help you analyze, monitor and evaluate the distribution chain of your company, and thus optimize your planning through the calculation of critical paths.
An excellent strategic plan for your logistics must ensure that distribution does not affect costs and achieves customer satisfaction. That is why we advise you to include some of the following factors:
- The quantity and type of items per shipment.
- The type of transport.
- Global transportation costs.
- The timelines.
In addition, you should consider the type of transport you need according to:
- The type of products you sell (perishable, non-perishable, dangerous).
- The availability of the products and the time it takes to obtain them.
- Access to providers.
- The necessary delivery time of the product to the customer.
- Customs requirements.
- The amount of merchandise you are going to send.
- The security conditions and its technology.
In short, your distribution method requires a business plan, a comparative study of costs, and consideration of the legal and regulatory aspects of distribution strategies.
We are sure that you are ready to define your own distribution strategy!
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