The Importance of Distribution Channels in Marketing

Marketing is a focus area of a business. The marketing process creates awareness of products and services through promotion to a target potential buyer market. It is not enough to just have strong marketing strategies promoting your product to prospective customers if they never get a chance to see to purchase your product due to lack of distribution channels, product availability and selection. Distribution channels are a critical component of any marketing strategize. 

Distribution channels are the road in which the product takes from the mass manufacturing, wholesaler, retailer or e-commerce vendor selling the product. Distribution channels are critical attributes to reaching your target market of customers and being able to sell your product.

A distribution channel is defined merely as the path a product takes between the maker and the buyer. A distribution channel illustrates the means by which brands distribute their products to buyers and serves as a user-friendly route for companies to sell and deliver their products in an effective and cost-efficient manner. Distribution channels can take many forms of intermediaries including wholesalers, retailers, agents, and e-commerce. Each of these companies does some form of market research, promotes the product, and engages the buyer for the manufacturer.

Distribution channels provide businesses several advantages. They are responsible for ensuring customers have their products at the time they desire, managing stock levels, and providing important data on what is made available to market for customers to consume. At this point, let us review the main drivers on why distribution channel is important.

Distribution channels provide for timely delivery of product to customers. Timeliness is paramount because if customers cannot find a product available to them at the time they need it, they will become dissatisfied. Proficient distribution will ensure that your products are present at the time a buyer wishes to purhcase.

Distribution channels provide businesses the capacity to displace distance as a limitation. Distance as a limitation also allows businesses to serve customers that are not in close proximity to the location of their manufacturing facilities. A business in one city can get products to customers at a different city, or state, or even across the globe with a properly constructed distribution network.

Distribution channels also help by maintaining adequate levels of inventory of products. They store products in warehouses and supply them as demand in the market dictates. This serves as a buffer against the risk of any shortages developing in the market so customers can buy a product when they want.

Businesses gain valuable market intelligence through distribution channels. Intermediaries in the distribution channels provide information about supply and demand, pricing, and competition and customers use distribution channels to provide valuable feedback and recommendations used to inform decision-making and strategic planning by businesses.

Distribution channels serve in marketing products as intermediaries will market the products available to the customers. They introduce new products and demonstrate the product strategy and benefits to customers motivating them to purchase. For these reasons, distribution channels are an important part of getting products marketed and promoted efficiently.

Businesses can receive financial assistance through distribution channels. Intermediaries will purchase large quantities of products from producers and pay them upfront. Intermediaries will then sell products in the quantities that customers want, often providing credit to customers for their purchases. Regulating business cash flow is critical for ensuring a businesses ability to meet their payment obligations to producers in a timely matter.

Distribution channels create jobs by providing employment to many people in the economy. Wholesalers, retailers, agents, and delivery people, as well as possible staff, earn a living through distribution channels. Consequently, distribution channels, as methods of getting merchandise to customers, provide a lot of good employment to people.

Risk is always evident in a business, but risk can often be resolved with efficient distribution channels. Intermediaries assume the risk of getting product to customers, and as a result, they are responsible for making sure the product is delivered safely, on time, and at the lowest price. Intermediaries deal with inventory, transportation, and delivery, so the producer can be better focused on the production of the product.

Businesses can receive financial assistance through distribution channels. Intermediaries will purchase large quantities of products from producers and pay them upfront. Intermediaries will then sell products in the quantities that customers want, often providing credit to customers for their purchases. Regulating business cash flow is critical for ensuring a businesses ability to meet their payment obligations to producers in a timely matter.

A direct channel occurs when the product manufacturer sells directly to the product-consumer without intermediaries. Examples are company-owned stores, branded websites, or direct sales.

Advantages:

• Total control over the consumer experience
• Total profit margin from sales
• Direct feedback from customers
• Better control over brand

Disadvantages:

• High investment involved
• Limited reach in any one geography.
• More work to operate.

A distribution channel involving the manufacturer and consumer with one or more intermediaries between the two.

One-Level Distribution Channel: Manufacturer to Retailer to Consumer

This channel is often used for items like furniture and electronics where manufacturers sell product to retail locations that in turn sell to the consumer.

Two-Level Distribution Channel: Manufacturer to Wholesaler to Retailer to Consumer

This channel is the traditional distribution network that does well with packaged food/candy/beverage household products, etc. A wholesaler typically buys the product in bulk and then sells typically to a few smaller retail stores.

Three-Level Distribution Channel: Manufacturer to Agent to Wholesaler to Retailer to Consumer

Three-step channels can be even longer in a distribution channel where agents are involved to connect the wholesaler and the manufacturer. In a domestic and/or international pharmaceutical distribution market long chain distribution models typically exists.

Many modern businesses will employ more than one, concurrent distribution channel. A clothing brand may sell products through its owned stores, department stores, and/or online marketplaces. This strategy provides an added distribution source.

Distribution channels are factors in marketing success. Here’s how.

The first rule of marketing is quite simple: you cannot sell what customers cannot find. Distribution channels expand the number of existing sales opportunities. Every store that carries your product is another potential sales opportunity.

Consider Coca-Cola as an example of distribution in use. Their products are available in mom and pop shops, restaurants, airports, and vending machines around the world, basically anywhere you want a beverage, you are likely to find Coca-Cola product. The simple fact that Coca-Cola is available everywhere is a big part of their success across the globe.

Customers of products appreciate convenience. By having your products locally available through retail partnerships, customers can look and feel the products prior to actually purchasing them. If a product does not work or something else goes awry, it is easy for the customer to return the product or seek attention from the retailer.

Your distribution partners will assist in the promotion of your products. Retailers will make promotions with displays, recommend products, and demonstrate features to customers. This is promotion, and it could happen without you spending additional features of advertising money.

Sometimes distribution can be, or become, your greatest competitive advantage. If you developed a distribution network that cannot easily be replicated by competitors, you have created a sustainable value to your business.

Not every distribution channels fit every product. We gives a guide to help you select wisely.

Where do your customers like to shop? If you are targeting young consumers, your best option may be online channels. If you have luxury products to sell, you want to be sure to have your product available in premium retail outlets.

If you are going to build out a distribution channel, be prepared to make an investment. Given the potential costs to open channels, it is essential to realistic assess what your business can afford. You will also find that businesses may have more success starting simply and building scaled business over time rather than trying to do too much too soon.

Building distribution channels requires investment. Be realistic about what your business can afford. Starting small and growing gradually often works better than trying too much too soon.

Take a look at your competitors distribution channels. Where are they successful? Where did they miss an opportunity? It is important you take this assessment and make informed decisions based on previous observations.

Keep in mind that as you add distribution intermediaries, all of those intermediaries will take a piece of your profit share. More intermediaries means sharing a larger piece. And even though it is possible to charge lower profit margins, you may find it more effective to sell higher volumes with a bit of a lower profit margin rather than wait for sales at a higher margin.

Amazon has created one of the best distribution systems in the world. They invested in warehouses and delivery systems to devote thousands of employees and trucks. Now they can deliver a product to a customer in a matter of days – perhaps one of the biggest reasons people land on Amazon in the first place.

McDonald’s has gotten as many restaurants as they can practically acquire, and that is an important part of their distribution system, so a customer can find a McDonald’s no matter where they are.

Asian Paints built such a strong distribution network in India that even small villages have the ability to purchase their products. They worked hard to create relationships with dealers and retailers to achieve that. Their expansions in distribution played a large part in them becoming the leader in the market.

When you have multiple channels, channel conflicts can arise. For example, if your online prices are lower than your retail prices, your retail partners may complain to you. Create clear channel policies to avoid conflicts.

Depending entirely on one channel is dangerous as it puts a great deal of risk on your entire business. If that channel runs into troubles, your whole sales will be negatively hit. It is always safer to have multiple channels to minimize risk.

Distributors and retailers are your business partners, and not just your vendors. Good relationships with these partners will help to drive better performance in your business.

Markets change. Customer preferences change. Technology creates new ways of doing things. Make sure to take a good look at your distribution strategy on a regular basis and evaluate if changes should be made.

The future is not about choosing online or offline; it is about connectively collaborating the two. Customers may start their research about purchasing products online and then finish the transaction in stores, and vice versa. Business will need to fulfill orders via both avenues/providing these service.

Technologies such as artificial intelligence and automation will provide better services for distribution channels. Technology can predict demand better, allow for automated warehouses, and initiate smart logistics which will provide more effective, faster, and cheaper avenues of distribution.

Increasingly, consumers are interested in the environmental impact. The mode in which the products in your inventory are delivered has relevance. Eco-friendly packaging and carbon neutral delivery of products will become consequential.

People can now receive deliveries or use food delivery to receive their items. The underpinning of faster delivery will become a must for organizations both large and small.

Distribution channels are critical to marketing success. Even though you may focus on advertising and social media, it is in channels that your marketing plans become actual results. When knowing your distribution, you can ensure customers actually have access to buy your product. Your distribution will determine your pricing, creates customer perception of your brand, and influences sales and profitability. 

For those of you who are the future of digital marketing professionals or business owners, recognizing the importance of distribution is necessary.  It’s common practice to recognize a successful business recognizes distribution is too often seen as a minor detail rather than a significant detail of their overall marketing strategy. 

As you begin creating your marketing plans, remember the importance of a suitable distribution plan. Select your distributions channels accordingly, coordinate with your distributors, and be flexible and willing to change your plan if necessary.  But most importantly, always advocate for the customer’s convenience! 

In today’s saturated market, simply having a good product is just the start of the process. Getting that product to your consumer in an efficient and convenient way is the critical part of the process that ultimately leads to successful business. Distribution channels is the true muscle of your marketing plans.