Distribution channels in marketing are one of the classic “4 Ps” (product, promotion, price, placement a.k.a. “distribution”). They’re a key element in your entire marketing strategy — they help you expand your reach and grow revenue.
B2B and B2C companies can sell through a single distribution channel or through multiple channels that may include:
Here are three examples of distribution channels in marketing:
|DIRECT TO END USERS||SELL THROUGH A DEALER NETWORK||SELL THROUGH A VAR (VALUE-ADDED RESELLER)|
|You have a sales team that sells directly to Fortune 100 companies.
You have a second product line for small businesses. Instead of using your sales team, you sell this line directly to end-users through your website and marketing campaigns.
You have two markets and two distribution channels.
|You sell a product through a geographical network of dealers who sell to end-users in their areas. The dealers may service the product as well.
Your dealers are essentially your customers, and you have a strong program to train and support them with marketing campaigns and materials.
|You sell a product to a company who bundles it with services or other products and resells it.
That company is called a Value Added Reseller (VAR) because it adds value to your product.
A VAR may work with an end-user to determine the right products and configurations, and then implement a system that includes your product.
To create a good distribution program, focus on the needs of your end-users.
Wholesalers, resellers, retailers, consultants and agents already have resources and relationships to quickly bring your product to market. If you sell through these groups instead of (or in addition to) selling direct, treat the entire channel as a group of customers – and they are, since they’re buying your product and reselling it. Understand their needs and deliver strong marketing programs; you’ll maximize everyone’s revenue in the process.
|Best Case||Neutral Case||Worst Case|
|You’ve used one or more distribution channels to grow your revenue and market share more quickly than you would have otherwise.
Your end-users get the information and service they need before and after the sale.
If you reach your end-user through wholesalers, VARs or other channel partners, you’ve created many successful marketing programs to drive revenue through your channel and you’re committed to their success.
|You’re using one or more distribution channels with average success.
You may not have as many channel partners as you’d like, but your current system is working moderately well.
You devote resources to the program, but you wonder whether you’d be better off building an alternative distribution method — one that could help you grow more aggressively than you are growing now.
|You probably aren’t hitting your revenue goals because your distribution strategy is in trouble.
With your current system, you may not be effectively reaching your end-users; your prospects probably aren’t getting the information and service they need to buy your product.
Your current system may also be difficult to manage. For example, channel members may not sell at your suggested price; they don’t follow up on leads you deliver; they don’t service the product very well and you’re taking calls from angry customers.
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You can evaluate a new distribution channel or improve your channel marketing / management at any time. It’s especially important to think about distribution when you’re going after a new customer segment, releasing a new product, or looking for ways to aggressively grow your business.
Your distribution strategy should deliver the information and service your prospects need. For each customer segment, consider:
If you want to grow beyond the direct model, look for companies that have relationships with your end-users. If consultants, wholesalers or retailers already reach your customer base, they’re natural partners.
If you’re setting up a distribution channel with one or more partners, treat it as a sales process:
If you use multiple channels, carefully map out the price for each step in your channel and include a fair profit for each type of partner. Then compare the price that the end-user will pay; if a customer can buy from one channel at a lower price than from another, your partners will rightfully have concerns. Pricing conflict is common, and it can jeopardize your entire strategy, so do your best to map out the price at each step and develop the best solution possible.
Service your channel partners as you’d service your best customers and work with them to drive revenue. For example, provide them with marketing funds or materials to promote your products; run campaigns to generate leads and forward them to your partners.
As you’re creating a new channel you’ll need a pricing strategy and a sales process. When your channel is up and running, you can start launching marketing campaigns to channel partners and end-users.
EVERYTHING YOU NEED FOR YOUR DISTRIBUTION CHANNEL PROJECT
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