The distribution strategy is an essential element of the marketing mix, which is commonly known as the 4 Ps.
The 4 Ps are product, price, place, and promotion, and they are crucial in efficiently reaching consumers with products and services.
An effective marketing mix distribution strategy makes sure that the products are available at the right place and at the right time in order to increase customer satisfaction and meet their demands.
This approach, which is also known as ‘Place’ in the marketing mix, consists of multiple techniques and procedures that transfer products from producers to consumers.
Here, I will explore the key elements and factors of an effective distribution plan.
What is a Marketing Mix?
Businesses utilize a framework called a marketing mix to develop and carry out their marketing strategies. It’s commonly known as the “4 Ps” of marketing. They are:
- Product is the component that you are selling. It involves the features, quality, design, and how it meets customer needs.
- Price is how much you charge for that product. It includes discounts, payment terms, etc.
- Place is where and how you sell your business products. It involves the distribution channels, which will be the source of communication between the seller and the consumer. These distribution channels can be online or in physical stores.
- Promotion is how you communicate and offer your products to your consumers. It includes advertising on multiple channels, sales promotions, public relations, and direct marketing.
What is a Distribution Strategy?
Distribution strategy involves a company’s plan for reaching its customers with its products and services.
It is a way of moving products from the manufacturer to the final consumer. Distribution is an important part of a company’s marketing mix.
The main goals of this strategy are to have products at customer convenience, time, and place. All these must be within an economical and effective operation.
Distribution strategy is important because it affects the growth of the brand with product availability.
It helps in customer satisfaction, and also has an impact on costs to the company and profitability.
Key elements of distribution strategy are:
- Choosing distribution channels, which can be retail stores, online platforms, or direct sales.
- Deciding on distribution intensity, which means how widely available the product will be.
- Managing logistics, which includes transportation, warehousing, and inventory management.
Types of Distribution Channels
The choice of distribution channels is very important to have a well-structured distribution strategy.
Brands that use both direct and indirect distribution channels have claimed up to 20% higher market penetration compared to brands that rely solely on one channel.
There are two types of distribution channels:
Direct Distribution
In direct distribution, the product or service is directly distributed from the manufacturer to the consumer.
For example, direct sales on ecommerce platforms and company-owned brick and mortar stores.
Direct distribution helps businesses gain greater control over their brand image and customers’ experiences.
It also has higher profit margins than indirect distribution.
Indirect Distribution
In indirect distribution, the product is dispersed through a mediator. This type of distribution utilizes middlemen like wholesalers, retailers, and traders.
Indirect distribution has the advantage of wider market reach and reduced operational burden on the manufacturer.
Factors Influencing Distribution Strategy
The distribution strategy for marketing your brand is heavily influenced by various components. These factors make or break your strategy.
Primary factors affecting the distribution strategy are listed below:
Market Characteristics
You have to understand consumer preferences for a greater experience.
For example, you are selling athletic shoes. Athletes and sportsmen prefer to try on shoes in person, feeling the material and seeing how they look and fit on their feet.
In this case, having a strong presence in physical retail stores would be great.
Understanding these preferences isn’t just about guesswork. It involves market research, surveys, and paying attention to shopping trends.
For instance, the rise of “try before you buy” services in online fashion reflects a blend of digital convenience and the traditional desire to try on clothes.
Market size and density considerations play a vital role as they influence the market your brand is serving.
Let’s assume that you are distributing a new energy drink.
In a dense urban area like Manhattan, you should focus on getting your product into numerous convenience stores and gym vending machines.
High foot traffic means visibility in many small outlets could drive sales.
In a sparse rural area like Montana, if you focus on larger supermarkets or general stores that serve as community hubs it will be more effective.
Product Characteristics
Businesses offering perishable products must make a well-executed plan to keep their products safe and reach customers on time before they perish.
For a company selling fresh-cut flowers, the shelf life is extremely short, and the flowers need to reach customers quickly as their lifespan is quite short.
To keep the flowers fresh and well-preserved, flower businesses utilize a distribution strategy involving local growers, refrigerated cold chain transport, and partnerships with florists or grocery stores for quick turnaround.
Berkeley First Supply is one of the many companies that locate distribution centers near local flower farms and maintain the cold chain.
For even more perishable items like prepared meals, companies like HelloFresh have developed sophisticated logistics networks with precise delivery windows to ensure food arrives fresh and safe to eat.
Another important characteristic of products is their complexity.
Take high-end audio equipment, for example. Audio systems have numerous features and settings that can be overwhelming for consumers.
A distribution strategy for these items should involve specialized electronics stores with trained staff who can demonstrate the products and answer detailed questions.
Samsung is a great example as their trained team demonstrates their gadgets to the consumers.
Similarly, enterprise software companies use a direct sales approach.
These companies have dedicated account managers who work closely with consumers to understand their specific needs and provide ongoing support and training.
Amway is a successful company that runs its entire business via direct sales.
This personalized approach is necessary due to the complex nature of the product and its significant impact on the client’s business operations.
In both cases, the complexity of the product necessitates a distribution strategy that prioritizes education and support rather than just making the product available for purchase.
Company Objectives and Resources
Aligning distribution with business goals is very important.
For example, you have got this amazing little cheese company. Now, you are at this point where you are trying to figure out how to make your cheeses more popular.
It’s not just about shipping boxes of cheese everywhere, it’s about thinking through what you want for your business and what you are working with.
Are you aiming to be the fancy cheese people splurge on for special occasions, or do you want to be the go-to cheese for everyone’s everyday sandwiches?
It makes a huge difference in how you approach things.
If you are going for the gourmet vibe, then you should make contact with some high-end restaurants or specialty food shops.
But if you are thinking bigger, like your product on a supermarket shelf, you would be looking at getting into major grocery chains, which means thinking about mass production and competing with big cheese brands.
Another important factor is how you utilize available resources.
Did you get a nice little grant or investment? Now, you can afford that fancy refrigerated van you have been eyeing.
You could be delivering your cheeses to shops and restaurants yourself, making sure they are perfectly aged and ready to eat.
And if you are working with a tight budget. Then you should start with farmers’ markets.
You get to meet your customers face-to-face, share your passion, and even let them taste your latest creation. It’s a great way to build a loyal following without breaking the bank.
Competitive Landscape
Keeping an eye on the competition is a smart distribution move.
When you are figuring out how to get your products to customers, it’s super helpful to take a peek at what your competitors are up to.
For example, you are running a small craft brewery and you have been selling your beers mostly in local bars and a few liquor stores.
But then you notice that your biggest rival has started selling their beers in grocery stores and even has an online store for direct-to-consumer sales.
This is valuable intel and tells you a few things:
- There might be untapped potential in grocery store sales.
- Customers might appreciate the convenience of online ordering.
- Your current distribution strategy might be limiting your reach.
Instead of just copying your rival, you could use this info to do something different.
You can partner with local food delivery apps to offer beer with meal orders, something your competitor hasn’t thought of yet.
By analyzing your competitors’ moves, you are not just catching up to them. But you are finding gaps in the market and unique ways to reach your customers.
Developing a Distribution Strategy
Here are the top methods that you need in order to build your own marketing distribution strategy:
Channel Selection
You must decide on a channel for the distribution of your products or services, which will have a major impact on your business.
Direct and Indirect Channel Strategy
When you follow the direct channel strategy, you take the wheel yourself. You are in control, but you also have to manage everything.
Businesses using DTC methods report profit margins that are 15-20% higher as they have direct access to client data and do not need middlemen.
Start by setting up your own ecommerce site. You can also use platforms like Shopify or WooCommerce to create an online store.
Join trade shows or farmers markets. Research events that align with your target audience. Also, create an eye-catching booth design to attract customers.
Open a physical store, which will be the 3D version of your brand. Select a location that has good foot traffic or is near your target demographic.
Design the space to reflect your brand and showcase products effectively.
In an indirect channel strategy, you hire experts to take your product to market. Indirect sales account for 75% of global commerce.
When you partner with distributors, you are partnering with someone who already knows the route to your customers.
Research for potential partners that align with your brand. To do so, prepare a compelling pitch highlighting your product’s unique selling points.
Short and Long Channel Strategy
The short channel strategy is the express route to your customer as it has few intermediaries between the manufacturer and the customer.
Go directly to the consumer by developing a direct-to-consumer (D2C) approach. Create targeted marketing campaigns to reach end-users directly.
Work with local retailers and offer consignment deals or favorable terms to encourage partnerships. Provide point-of-sale materials to help showcase your products better.
The long channel is the longer route, with more stops, as it has more intermediaries but potentially wider reach.
When you team up with wholesalers, they act as your product’s tour guides to new markets. Attend more and more industry trade shows in order to meet potential partners.
Start by developing a compelling wholesale pricing structure.
Next, you should set up a sales rep or training program where you recruit and train sales representatives in different regions.
By doing so, you will have brand ambassadors spreading the word far and wide.
Map out the different levels of distribution, such as national distributors, regional wholesalers, and local retailers, to create a multi-tiered system.
With that, you will have your product traveling through well-organized phases to reach customers.
To implement channel selection strategies effectively:
- Analyze your target market and product characteristics.
- Set clear goals for reach, control, and profit margins.
- Start with one or two strategies and test their effectiveness.
- Gather data and customer feedback to refine your approach.
- Gradually expand or adjust your strategies based on results.
Logistics and Supply Chain Management
Create a strong inventory management system to balance stock levels. Select an inventory management program that is compatible with your point-of-sale software.
Add the option of automatic alerts for low inventory levels so that you can be notified when it’s time to restock.
Utilize methods for demand forecasting so you can examine past sales information to anticipate future market needs. 45% of companies are already using demand forecasting technology.
Keep an eye out for changes in trends and upcoming deals to restock your inventory accordingly.
Adopt a Just-In-Time (JIT) inventory approach by working closely with suppliers in order to receive stock as needed.
You can reduce warehouse costs by maintaining this idea of minimal inventory.
Conduct regular stock audits and schedule physical inventory counts at least quarterly. Use cycle counting for high-value or fast-moving items.
Place fast-moving items in easily accessible areas. Use a logical organization system, for example, by SKU or product category.
To move products efficiently, different shipping options for transportation must be evaluated. Compare rates and services from multiple carriers.
Try a mix of fast and economical shipping methods to check what is working in your favor.
Start by designing packaging that protects products while minimizing size and weight to optimize your packaging.
Include eco-friendly options in your packaging ideas so that your brand can be appealing to environmentally conscious customers.
Across all age groups, 82% of customers said they would be ready to pay more for packaging that is sustainable.
Implement route optimization for local deliveries by using software so that you can plan the most efficient delivery routes. Also, think about time windows and vehicle capacity constraints.
Exploring dropshipping for certain products is a good option as well. It is projected that dropshipping will expand by 22.8% per year between 2023 and 2030.
Partner with suppliers who can ship directly to customers and integrate their inventory with your ordering system.
To outsource logistics research, third-party logistics (3PL) providers for warehousing and shipping compare the costs with those of managing logistics in-house.
Implement real-time tracking by offering customers the ability to track their orders. Take the help of GPS tracking for your delivery fleet.
To make logistics and supply chain management strategies work for your business:
- Start by assessing your current logistics and supply chain processes.
- Identify the biggest pain points or areas for improvement.
- Prioritize changes based on potential impact and ease of implementation.
- Invest in staff training for new systems or processes.
- Regularly review and alter your strategies based on performance metrics.
Channel Integration
Channel Integration can be vertical and horizontal.
Vertical integration is when a company expands its business activities into different steps of the same production path or supply chain.
Vertical integration has two types which are forward integration and backward integration.
- Forward Integration: Imagine a farm that grows apples. Usually, they just grow and sell the apples to stores. But if they decide to open their own store to sell their apples directly to customers, that’s forward integration. They are moving “forward” towards the end consumer.
- Backward Integration: A clothing company that usually buys fabric from suppliers deciding to purchase a textile mill to produce its own fabric will be called backward integration. They’re moving “backward” in the supply chain to control the production.
Horizontal integration is when a company expands by acquiring or merging with other companies that work at the same level of the supply chain in the same or similar industry, it is called horizontal integration.
Form strategic alliances with complementary businesses.
For example, Uber users can conveniently stream their Spotify playlists while they are taking a ride due to the strategic alliance of both the brands.
This encourages Uber users to subscribe to Spotify Premium and gives the Uber experience a more personal feel.
Partnerships with well-known retailers can boost product visibility by 30%.
Implement cross-selling strategies to sell more of your products.
For example, McDonalds uses the cross-selling strategy when a consumer buys a burger, they sell them a combo with a drink and fries or a sandwich to sell more of their items.
Join or create a buying group by finding other businesses in your industry to pool purchasing power. Negotiate better rates with suppliers based on larger order volumes.
Merge with or acquire competitors to collaborate on shared distribution channels. For example, two rival food trucks join forces to create a mini-food empire.
To implement channel integration strategies effectively:
- Assess your current supply chain to pick out areas where you lack control or efficiency.
- Evaluate your financial resources and risk tolerance for major investments.
- Start with smaller integration projects and scale up based on success.
- Maintain open communication with existing partners about your integration plans.
- Regularly review the performance of integrated operations vs. outsourced ones.
Technology Utilization
Ecommerce platforms are your 24/7 digital storefront.
In 2022, ecommerce sales made up 21% of total retail sales worldwide, showing a notable rise from 14% in 2019.
Choose your platform wisely. It is similar to picking the location for a physical store, as it needs to fit your needs and grow with you. Evaluate options like Shopify, WooCommerce, or Magento.
Make your online store shine by creating an intuitive navigation structure. It should be neatly organized so that customers can easily find what they need.
Ensure mobile responsiveness for on-the-go shoppers. Implement high-quality product images and detailed descriptions.
Secure payments are a must to earn your customers’ trust. Offer multiple payment options (credit cards, PayPal, Apple Pay, etc.).
Make sure that your ecommerce platform is PCI-compliant for customer data protection. You can be fined $100,000 every month if you don’t comply with PCI and maybe even more.
Streamline the checkout process by removing all the obstacles between your customer and payments.
Expand to marketplaces by listing products on platforms like Amazon, eBay, or Etsy. Use
multi-channel management tools to sync inventory across platforms.
Use chatbots for support. It is like a friendly, knowledgeable assistant who is always ready to help your customers.
Because of bots, 90% of companies reported faster resolution of complaints.
You have to utilize data analytics to make business decisions.
Start by implementing inventory management. Choose a system that provides real-time stock levels.
Use demand forecasting as it helps you prepare for seasonal events and sales with accurate forecasting.
You should also employ CRM software and keep track of every customer interaction and purchase history. Use data to personalize marketing efforts and improve customer service.
CRM software, according to 92% of organizations, is crucial to reaching their revenue targets.
Utilize web analytics to see how every customer browses your store.
Set up Google Analytics or similar platforms to track website traffic. 28.1 million websites use Google Analytics.
Analyze user behavior in order to optimize product placement and site design.
Create BI dashboards, which are like a control panel that shows you the vital signs of your business at a glance.
Create visual representations of key performance indicators. Use tools like Tableau or Power BI for easy data interpretation.
Also, use predictive analytics for pricing. Implement dynamic pricing based on demand, competition, and other factors. Use A/B testing to optimize pricing strategies.
With machine learning, you can optimize the supply chain.
Implement algorithms to make the best of delivery routes whilst using predictive maintenance for delivery vehicles or warehouse equipment.
To make technologies utilization strategies work for your business:
- Assess your current technological capabilities and identify gaps.
- Prioritize implementations based on potential impact and resource requirements.
- Invest in staff training to ensure effective use of new technologies.
- Start with pilot projects to test new systems before full-scale implementation.
- Regularly review and update your tech stack in order to stay competitive.
Performance Evaluation
Key performance indicators are your business health metrics.
Think of KPIs as your business’s vital signs. They tell you if your distribution is running like a well-oiled machine or if it needs a tune-up.
Pick software that is compatible with your existing arrangements to set up a tracking system.
Ensure that you are collecting real-time data for accurate monitoring.
Measure the time from the customer’s placing an order till it’s delivered to them.
Due to concerns about delivery, 54% of consumers who buy large items avoid making purchases online.
Break down your delivery tracking into stages, for example, processing, shipping, and last-mile delivery. Set benchmarks and targets for each stage.
Check order accuracy, and to do that, you should see how many orders get fulfilled and are right on time.
Track the percentage of orders fulfilled correctly and identify common errors and their sources.
Measure inventory turnover. Think of it as checking how quickly items fly off your shelves.
Finally, monitor customer satisfaction to know whether your customers are feeling hot or cold about your service.
Implement post-purchase surveys and monitor the net promoter score (NPS).
Analyze returns so as to evaluate the potential opportunities for better revenue and avoid losses.
Approximately 30% of items sold online are returned, compared to 8.89% of physical stores.
Track the percentage of orders returned and categorize reasons for returns so that you will be able to easily address root causes.
Make sure to monitor the cost per order. Calculate total distribution costs divided by the number of orders, then break them down into components like picking, packing, and shipping.
The feedback mechanism is a very important factor in running an impactful business.
It helps you hear what’s really going on inside your business and how your products are performing.
You can also learn why your products are performing well and why they are not.
Use customer surveys to gain feedback. It’s similar to having a quick chat with each customer after their purchase.
Send post-purchase emails asking for their feedback, make them short, and add focused questions for higher response rates.
Provide an easy-to-remember phone number for immediate feedback. Train your team and staff so that they are able to handle calls professionally and log issues.
By monitoring social media, you will be able to know what is trending and what people want from you.
64% of Gen Z buyers use social media sites to find new products.
Set up alerts for mentions of your brand and always respond swiftly to both positive and negative feedback.
Use QR codes for feedback by leaving a note in each package asking, “How did we do?”
Also, include QR codes on packaging linking to the feedback form. Offer incentives like discounts and loyalty points for providing feedback through those codes.
Conduct focus groups on a regular basis. You can invite customers to discuss their experiences in depth and use those insights to guide product and service improvements.
Create an internal feedback system with which you can always be on the lookout for ways to improve.
Additionally, encourage employees to report issues or suggest improvements and implement a rewards system for valuable feedback.
Analyze customer behavior data to inspect how your customers, or the ones that you are targeting, interact with your business.
Also, examine customer behavior like browsing patterns and cart abandonment. Pick out the pain points in the customer journey to target them better.
To implement performance evaluation strategies effectively:
- Start by identifying which KPIs are most relevant to your business goals.
- Set up a dashboard to visualize KPI performance at a glance.
- Establish a regular schedule for reviewing performance data.
- Create action plans for addressing underperforming areas.
- Communicate performance data and improvement plans with your team.
Distribution Strategy of Coca-Cola
Coca-Cola is spread across the entire globe. Here’s how they make sure their drinks reach every nook and cranny:
The Secret Recipe Club
Coca-Cola doesn’t actually make all the drinks themselves. They have a special club called the “Franchise Bottling System.”
These people (bottling partners) add the local water and do the bottling, while Coca-Cola keeps the super-secret concentrate to themselves.
Think Global, Act Local
Coca-Cola changes its flavor slightly to fit in wherever it goes.
They keep the main recipe the same (that’s the global part) but let their local partners change the packaging a bit to match what people in different countries like (that’s the local focus).
Below is the Coca-Cola packaging in Asia:
And below is the European packaging of Coca-Cola:
Helping Hands of Coca-Cola
Sometimes, their drinks’ recipe club partners in different countries need a little help.
So Coca-Cola has a special team called the Bottling Investments Group (BIG) that comes in to help these partners get back on their feet.
Drinks are Present Everywhere and Everytime
You know how you can find a Coke almost anywhere? That’s because they have made connections with all types of stores.
From the corner shop to the fancy restaurant and even those soda fountain dispenser machines- Coca-Cola has made sure their drinks are never far away.
Not only that, but Coca-Cola has themes for its drinks according to the local region, which makes it more personal and visible.
Advanced Technology and Robot Helpers to Ease the Process
Coca-Cola isn’t stuck in the past. They are using robots to automate the packaging and even delivering their drinks.
With technological advancements, they have automated their warehouse management systems and even 3D printing to make sure their drinks get made and delivered super efficiently.
Conclusion
It is crucial to grasp the basics of the marketing mix and understand the complexities of supply chain management.
The process of distribution involves managing various elements to achieve a blend of effectiveness and customer satisfaction.
Whether you are a small startup company or a huge corporation like Coca-Cola, the fundamentals remain unchanged.
One should know their market, select their platforms carefully, and stay flexible.
Keep in mind that your distribution plan can determine whether you become a market leader or are forgotten on store shelves.
Therefore, utilize these strategies in your specific circumstances and be willing to think creatively. In the end, the next major change in distribution might be initiated by you!
