Distribution strategy designed for customer convenience
Just like all the other decisions made about the marketing mix, the channel strategy should reflect the needs and wants of the consumer/customer. Marketers look on ‘Place’ as the channel through which they deliver consumer/customer value.
And the same process applies to the channel strategy creation as the other marketing elements: Marketers research and analyse the consumer/customer needs and wants; set SMART objectives; identify all the options and then align the best options with the consumer/customer.
At its simplest, the marketing distribution strategy seeks to bring products and services to customers in the best way possible.
And we have explored how this strategy is designed with the customer in mind and their expectations, particularly in today’s 24/7 shopping environment.
So the channel strategy will reflect the consumer/customer needs and wants which can be simply summarised as:
- High levels of product availability
- Convenient location and/or access
- Flexible shopping hours
- A great shopping experience
Types and function of intermediaries
A manufacturer may have the option to sell through an intermediary (businesses or individuals who act as part of the products/services channel process).
The use of an intermediary is influenced by the nature of the product, the market and the business.
Intermediaries are used when a business is not large enough to have a sales force or distribution system or simply because it makes economic sense to outsource a stage in the supply chain.
And the different types of intermediary are not mutually exclusive. A business may need or want to use a multi-level strategy that integrates a number of intermediaries.
Individuals or businesses that act as the selling function for the brand. They do not own the product/service and mostly work from a fee or commission on sales. They facilitate sales on behalf of the manufacturer.
An example of an Agent/Broker is car insurance giant Aviva and financial services firm Santander who both sell financial products on behalf of other companies.
Businesses who buy products in bulk for re-sale to other business are known as Wholesalers. Unlike Agents/Brokers, Wholesalers own the product and they have some flexibility to set price.
An example of a wholesaler is Bookers Cash and Carry and UK Sports Warehouse.
Similar to Wholesalers, Distributors will act as a central channel to distribute goods through other retail channels. They will own the products and decide which retail channels to re-sell through.
Distributors are typically engaged when a manufacturers wants to enter a different market and it makes economic sense to out-source the sales infrastructure.
Retailers are the ultimate customer for the manufacturer. The retail channel takes ownership of the product and plays a major role in setting price and carrying out promotional activity.
- Retailer Franchise
The Retail function includes Franchise Retail. Independently owned retail outlets that trade under a well-known brand name. The Franchisee pays for the right to use the brand and buys the brand’s products/services to re-sell.
For example, McDonalds, Pizza Hut and Holiday Inn are all franchised operations.