Effective distribution can make or break a business. With proper distribution, a product will reach its intended audience in a wide and even manner, resulting in greater profits for the seller. A proper distribution plan is a key feature of strategic planning. Here are some important factors to consider in order to develop a proper distribution plan for your product:
Distribution should be based on a coherent strategy in accordance with the company’s strategic vision and mission. Generally, three broad approaches to distribution are used on a strategic level: mass distribution, selective distribution, and exclusive distribution. Each distribution approach requires a different number of intermediaries. Ultimately, the distribution strategy must add value for both the distributor and the consumer. Often, it is necessary to employ a continuous feedback loop for successful distribution.
Many multinational companies choose to direct sell their products in developing countries. They establish regional and country managers to oversee distributors. By hiring local managers, multinationals can keep a close eye on the distributor’s performance and customer needs. In addition, direct selling allows companies to reach more consumers. While this approach is convenient, it can be expensive and disruptive. In order to effectively implement a direct sales strategy, multinationals must ensure that they obtain detailed market data from distributors.
Effective distribution planning focuses on minimizing the number of stops between the producer and the final consumer. Distribution channels must be efficient and effective. They can be classified as direct or indirect. Direct distribution involves a single producer, while indirect distribution channels typically include intermediaries. Direct distribution channels are typically used by niche producers or companies with high-end, perishable products. These channels can influence product prices, positioning, and more. For example, a direct distributor might have a high cost per unit of product.
Many data conform to well-known mathematical functions. These functions include the standard deviation and mean. They are also commonly used as shorthand for quantities related to one another. A Gaussian distribution plot shows the shape of a particular distribution and its relationships to others. There are also a variety of statistical distributions, including those involving the chi squared. Some of these are visual and others are numerical. In either case, a probability density function is important.
When companies choose to distribute profits, they can return that money to shareholders. Distributions can take the form of cash, stock, or physical products. The primary purpose of distribution is to return money to shareholders, as it allows companies to target a specific market and limit the number of locations in a particular region. Alternatively, exclusive distribution means distributing products exclusively to specific stores or locations. These methods help to preserve a brand image. Luxury brands, such as Chanel, use exclusive distribution as a way to limit the availability of their products.
In choosing a distribution channel, organizations should consider their target audience, profitability, and scale of operations. Distribution represents a fundamental relationship between a manufacturer and a consumer, and a strategic alliance between a retailer and a manufacturer can help strengthen that relationship. For example, a rare antique rug might be better suited for a specialty store than a brick and mortar store. When choosing a distribution channel, a B2B company must consider the pros and cons of each.
A lump-sum distribution, on the other hand, is a payment to the shareholders at once. These can come from pension funds, earned commissions, or certain debt instruments. In addition to cash payouts, investment trusts award monthly or quarterly distributions to investors. The distributions function similarly to stock dividends, though they usually have higher yields. It is important to remember that distributions are often nontaxable. The money will not be taxed until the investor sells the stock in the company.
Local distributors should be treated as marketing partners and long-term partners rather than just temporary market-entry vehicles. A traditional relationship structure involves giving local distributors national exclusivity, but this can quickly become unproductive when conflicts of interest arise. Distributors are the de facto marketing arm of multinationals in their countries. The relationship should be structured so that local distributors receive appropriate incentives for meeting their objectives. They also play a key role in multinational companies’ global strategy.