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How to develop and manage the ideal distribution channel for your business

Customer satisfaction is a key component of a flourishing business. And in order to deliver goods or services smoothly to customers, setting up the most convenient distribution channels is essential. Which is why finding the right channels will help your business to increase the value of your products. However, increased distribution opportunities can pose a challenge and raise questions about which channel works best for your business and product.

What is a distribution channel?

A distribution channel is a chain of businesses or intermediaries, from manufacturer or service provider, through which a product or service reaches the end consumer. Depending on your business and strategy, the ideal distribution channel for you can be digital or physical, indirect or direct.

What are the different types of distribution channels?

Direct channel of distribution

A direct channel of distribution brings the product or service directly to the end consumer without intermediaries. Common means of direct distribution would be through own retail shops/ chain stores, through a website or door to door sales, or by selling the product at the manufacturer´s plant.

For example: A beverage company is brewing their own alcoholic beverages and selling them directly on their company website or in their own taprooms.

Advantages: A direct channel of distribution is the shortest route to the end consumer and the revenue is all yours.

However, the disadvantages must be taken into consideration. A direct distribution network requires heavy investment in, and management of, your own infrastructure. The necessary (local) knowledge may not be present yet and it can most certainly be a challenge to achieve a wider reach with your product.

Indirect channel of distribution

In an indirect channel of distribution, the product or service is sold with at least one intermediary to the end consumer. Meaning, your product or service moves through a distribution chain.

There are different types of indirect channel distributions:

  • Value-added retailers – a retailer adds value to the individual product before selling it to the consumer.
  • Consultants – including consultants in the chain of distribution can support the sales process and create a strong sales strategy.
  • System integrators – specialised system integrators combine products or services from various manufacturers to sell them as a bundle.
  • Managed service providers – including managed service providers in a distribution channel can be a method for outsourcing IT and handling of tech management.
  • Original Equipment Manufacturers – if the product is produced to be part of another product, the original manufacturer can be part of an indirect distribution strategy. An example would be a tyre manufacturer who is selling the tyres to car brands.
  • Wholesalers – including wholesalers in the distribution network is an option to create a wider reach through indirect distribution, as they sell in bulks to retailers.
  • Distributors – distributors can function as logistics hubs in an indirect distribution network. They can manage logistics and distribute products to wholesalers as well as retailers.
  • Retailers – retailers are a direct link to the consumer in an indirect distribution chain.

 

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Advantages: Intermediaries can provide expertise and do not need to allocate resources to manufacturing. Indirect distribution channels have a bigger reach and can even open up new markets.

disadvantage, on the other hand, is a shared revenue with the intermediaries.

Hybrid channel distribution / multi-channel distribution

In a hybrid or multi-channel distribution system, different distribution channels are developed. The distribution channel is based on the respective customer segmentation.

  • Segment one – direct distribution channel
  • Segment two – indirect distribution channel (wholesale – retailer – consumer)

Advantages: Increase in coverage and opportunities with a simultaneous individual approach. The distribution channel is based on your customer’s needs.

disadvantage to a multi-channel distribution may be the need for more control and oversight. You must make sure the segments do not compete with each other. A hybrid distribution network can also be challenging if both segments are marketed with different pricing.

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You can do many things besides advertising to market your consulting services. In fact, advertising is usually the last promotional method consultants use, because it is expensive and too diffuse to reach their target markets. Instead, consultants usually rely on ``expertise marketing,`` which is done in a hidden marketplace that places great emphasis on trust and relationships. Advertising on the other hand is really all about creating brand identification and is therefore usually confined to products where trust and relationships are not as commonly required.

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"HADISS Group is the perfect balance of professionalism and personality. Their team is fun and easy to work with and the service they deliver is top-notch. As a company with a “pay it forward” mentality as well, Bayshore appreciates all that HADISS Group does to support our community of seniors and caregivers in Tampa Bay with great information and easy-to-follow links to valuable resources. They take the time necessary to really dig in and figure out what a company needs to expand their audience and reach out to the people they can help the most. It’s been a pleasure to work with them through the Better Living for Seniors organization in Pinellas and the Area Agency on Aging website."

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It can be overwhelming when you are looking to make a big decision about the future of your company. Whether it is deciding on a new marketing budget, to hire new staff, or if it is time to sell, it is always helpful to have a fresh pair of trained eyes on the situation! At  HADISS Group, our proven results, and experience with the local market allows us to help you to sort through the distractions, and make the best decision to take your business to the next level.

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