Put bluntly, the naked
truth is that any business enterprise that does not take into maximum
consideration its distribution channel before starting is dead on arrival.
A channel, in business
parlance, is a method or system
that people use to send something somewhere.
Distribution is the
system of transporting (moving) and delivering goods.
Therefore, channel of
distribution is the route/path through which goods (consumables and
non-consumables) travel from the manufacturer to the target (prospective)
market i.e. final consumer.
Of course the activities
involved be as short as a direct transaction from the factory to the end user,
or may include several middle men such as wholesalers,
distributors, agents, even the internet and retailers.
Understandably, each
intermediary receives the item at one pricing point and puts increment until it
reaches the final buyer. For instance, Yoghurt does not reach the consumer
before first going through a channel involving the farmer, factory, distributor and the
retailer.
In view of this, for
every production there is need to ensure an effective distribution channel that
will be in line with market forces such as price, demand, competitors, etc. The
manufacturer must figure out how all of the different market forces will change
the direction that the business will go.
Each channel gives you
different options and/or strategy 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.
Thus effective
distribution can be harnessed through the following ways:
1. REACH (COVERAGE)
Knowing and identifying
the geographical/regional areas to cover via the distribution channel. Also try
to know the established agents or retailers that cover the territory for local
market knowledge. Internet can also be used to penetrate territories with no
suitable physical distribution network.
2. COST
It is very essential
to compare the cost of dealing directly or indirectly with your target market.
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.
3. CONTRIBUTION
You must identify 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.
4. SUPPORT/CONTROL
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.
5. CUSTOMER RELATIONSHIP
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
All things being equal,
the above-stated strategies would, in no small way, ensure the effective distribution
from the factory to the final consumers. Q.E.D.
- MIKEL FADEYI
