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Distribution (also known as the place variable in the marketing mix, or the 4 Ps) involves getting the product from the manufacturer to the ultimate consumer. Many of the cost savings associated with having an efficient system of intermediaries result from specialization. Most manufacturers would prefer to have their products distributed widelya€”that is, for the products to be available in as many stores as possible.
In a very small number of cases, some manufacturers prefer to have their products selectively, or even exclusively, distributed. Manufacturers of different kinds of products have different interests with respect to the availability of their products.
Parallel distribution structures refer to the fact that products may reach consumers in different ways. In general, a brand can expect lesser distribution in its early stagesa€”fewer retailers are motivated to carry it.
Manufacturers may be tempted toward intensive distributiona€”appropriate only for some; may be profitable in the short run. Market balance suggests a need for diversity in product categories where intensive distribution is appropriate. Diversion occurs when merchandise intended for one market is bought up by a distributor that then ships it to a different market. For some time, during difficult economic times in the mid 2000s, discount stores like Wal-Mart actually tended to increase sales as consumers seemed to switch their purchases of the same products from higher priced to lower priced stores rather than reducing the quantity and quality bought in the product categories. During the last two decades, there has been strong growth in the a€?category killera€? chains which specialize in a moderate assortment of goods.
Although their total purchase volumes are usually smaller than those of the giants such as Wal-Mart and Target, these purchases are focused in more limited areas. The mega store chains will often negotiate very large contracts early in the purchasing cycle.
LensCrafters competed in a market dominated by low price retailers and fashion eyewear boutiques. Analysis of Lena€™sCraftersa€™ 35 million customer base revealed that their core customer segment spent less, but were highly loyal to the brand. The best time to sell security services is when people are buying new homes and feel an increased need for security.
To maximize credibility, ADT let the consumers do the talking, in a TV campaign called a€?Real Stories, Real Resultsa€?. ADT also held a presence in high traffic venues, public relations events and sponsorships which generated consumer buzz and even more credibility through second party exposure. You sell a product through a geographical network of dealers who sell to end-users in their areas.
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.
A VAR may work with an end-user to determine the right products and configurations, and then implement a system that includes your product.
If users need personalized service, you can utilize a local dealer network or reseller program to provide that service. If your users prefer to buy online, you can create an e-commerce website and fulfillment system and sell direct; you can also sell to another online retailer or distributor that can offer your product on their own sites. You can build your own specialized sales team to prospect and close deals directly with customers. Wholesalers, resellers, retailers, consultants and agents already have resources and relationships to quickly bring your product to market. You’ve used one or more distribution channels to grow your revenue and market share more quickly than you would have otherwise. 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 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. Create a free account in our marketing planning and management web app for step-by-step guidance. If your end-users need a great deal of information and service, your company can deliver it directly through a sales force. If you need complete control over your product’s delivery and service, adding a channel probably isn’t right for you.

If you want to grow beyond the direct model, look for companies that have relationships with your end-users.
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. Service your channel partners as you’d service your best customers and work with them to drive revenue. The Marketing MO planning app is your behind-the-scenes Chief Marketing Officer, a comprehensive resource that will improve your overall business, whether it’s a consulting practice, start up, or mid-size company. The truth is that intermediaries, such as retailers and wholesalers, tend to add efficiency because they can do specialized tasks better than the consumer or the manufacturer.
It would be highly inconvenient for customers to have to buy each product at a different store. Certain small manufacturers may have difficulty waiting for payment until goods are sold to the end-customer.
Manufacturers specialize in what they do wella€”manufacturing productsa€”while others specialize in handling various phases of the distribution path. Many stores have started out as discount facilities but have gradually added services that customers have desired. This is especially the case for convenience products where the customer has little motivation to go to a less convenient retail outlet to get his or her preferred brand. In food product categories, for example, the larger supermarkets can carry a large number of brands.
For convenience products such as soft drinks, it is essential that your product be available widely. A small manufacturer of potato chips would like to be available in grocery stores nationally, but this may not be realistic. Sometimes, a manufacturer will run a promotion in one region but not in another, and speculators will then buy extra quantity in the promoted area and ship it another area. Over the past decade, there has been considerable growth in both extremes of the continuum from low price, low service to high price, high service retailers.
It appears that consumers have done most of the switching that can be reasonably done this way already.
Chains like CompUSA, Best Buy, Staples, Circuit City, Office Depot, and Home Depota€”which were rare before the 1990sa€”have expanded rapidly and have captured a very large share of the market in their respective areas of emphasis. Thus, the purchases of each a€?gianta€? account for a large proportion of the sales of many firms. Manufacturers are often willing to offer especially low prices to a buyer who will commit to taking large quantities well ahead of the time that these products are actually needed. By identifying a market segment of women who desired more fashionable frames but still wanted the convenience of a national retailer, we presented LensCrafters with an area for growth.
These customers were not motivated by fashion, so any brand repositioning to expand customers beyond the core had to be done without alienating the traditional franchise. The resulting segmentation, which yielded nine unique segments, allowed us to develop more relevant messaging based on distinct motivations and opportunity. At the same time, incremental ROI over a 12 month period increased by over 300% and costs were reduced 20% through the elimination of unproductive deciles from direct communications. But in the fall of 2007, homes sales were down nearly 13% and property crime rates were down almost 14%. And to highlight ADTa€™s superior technology, every touch point contained a technologically sophisticated code graphic that underscored ADTa€™s flagship message, a€?Always Therea€?. ADT Security was one of the nationa€™s few companies that enjoyed an increase in revenue in 2007 of 3.5%.
Learn how to set up, manage and improve your distribution channels with this detailed how-to guidance in the Marketing MO planning and management app.
Learn how to set up, manage and improve your distribution channels with this detailed how-to guide from the experts at Marketing MO. Instead of using your sales team, you sell this line directly to end-users through your website and marketing campaigns.
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. 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. If consultants, wholesalers or retailers already reach your customer base, they’re natural partners.
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. For example, provide them with marketing funds or materials to promote your products; run campaigns to generate leads and forward them to your partners.
When your channel is up and running, you can start launching marketing campaigns to channel partners and end-users. When tackling any new marketing task, have confidence that we have your back – with the structure and detail you need to get things done right.

Because wholesalers and retailers exist, the consumer can buy one pen at a time in a store located conveniently rather than having to order it from a distant factory. This service reduces quantity discrepancy in the supply-demand relationship between manufacturers and end customers. Most American consumers today also have limited patience with specialty stores in most categories.
Some specialize in retailinga€”usually selling a large assortment of goods in small quantities to a large number of end customers. Other products are shipped through a wholesaler who can more efficiently handle, and combine, products from many different suppliers. For example, the main purpose of shopping at establishments like Costco and Sama€™s Club is to get low prices.
Smaller convenience stores and warehouse stores, however, are likely to carefully pick a few brands. Chances are that if a store does not have a consumera€™s preferred brand of soft drinks, the consumer will settle for another brand rather than taking the trouble to go to another store.
Certain large chains may, however, demand to buy directly from the manufacturer since they believe they can provide the distribution services at a lower cost themselves.
The speculator will then sell it to local retailers or distributors for a price slightly lower than what is being charged through the regular channel but at a price that still allows a nice profit.
There has been considerably growth both in the Wal-Mart and Nordstrom-type retailers than there has been in between. Best Buy, for example, accounts for a large percentage of the sales of firms that make DVD players, TV sets, video games, and, to a lesser extent, computers and printers. This guarantees the manufacturers a certain volumea€”albeit at small marginsa€”freeing the firm to commit to production and produce large quantities without having to worry about selling a large portion the production.
Sophisticated new direct mail and print-focused communications were developed for the fashion-oriented expansion segment and emphasized designer frames, reality-based fashion models and highly designed creative concepts. Media emphasis concentrated on broadcast TV, print, DM and additional support through the online channel. Concerted marketing efforts propelled ADT to #1 in the 65 billion dollar industry, helping ADT become the worlda€™s largest electronic security provider with over 7 million customers and over $8 billion in worldwide revenue. Understand their needs and deliver strong marketing programs; you’ll maximize everyone’s revenue in the process. 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. Rather than having to go to one store to buy produce, one store to buy meat, and other stores for other household products, there is considerable value in having everything available in a supermarket. Wholesalers, in turn, specialize in moving and goods from numerous manufacturers to a large number of retailers. After all, if convenience stores were to carry as many products as supermarkets, the purpose of having a neighborhood store with easy entry and exit would be defeated. Occasionally, however, manufacturers will prefer selective distribution since they prefer to have their products available only in upscale stores. In turn, of course, they want lower prices, which may anger the traditional retailers who feel that this represents unfair competition. Such deals often account for the very low sale prices that can be offered on select models in various product categories. Communications to core customer segments were designed to reinforce value, doctor loyal, convenience and service. The consumers can buy at a neighborhood store, which in turn can buy from a regional warehouse.
As we discussed in the unit of international marketing, a gray market occurs when a product is bought in one country and exported to another where the price is generally higher. The segmentation also provided the basis for aggressive testing to eliminate unproductive communications, focus on moving medium value segments to higher revenue tiers, and readjust frequency loyalty mailings to optimize results.
Secondary channels micro-targeted specific audiences for which the various benefits would be most relevant a€” always emphasizing the value of total security solutions.
It would also be very inconvenient for supermarkets and most other retailers to have to receive deliveries individually from each manufacturer.
Agents usually do not handle products, but instead take care of the business aspect of negotiating with distributors, which manufacturers may feel uncomfortable or ill prepared for doing themselves. To allay concerns held by conventional stores, however, these factory outlet stores are usually located in areas where they are not easily accessible. Both Louis Vuitton suitcases and golf clubs were imported to Japan, depressing prices there.
Wholesalers consolidate products from different manufacturers so that a large number of different products can be received in one shipment.

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