Operating Your Startup Business
Distribution Channels
Written by Samuel Muriithi for Gaebler Ventures
Distribution and distribution channels fall under the 'placement' or 'place' aspect of the marketing mix. What should the entrepreneur know about these integral aspects that determine how their products and services will get to the final consumers?
Distribution is the most fundamental attribute of placement as an aspect of the marketing mix.
Placement also includes several other aspects including logistics, channel management, channel decisions, purchasing, retailing and customer support.
Distribution is all about the logistics that must be addressed so as to get a product/service to the final customer in a target market. Here the entrepreneur must have a clear understanding of how the product/service will be sold and indeed when and where the product/service will be made available. He/she must determine what the best way to get the product distributed will be in terms of wholesaling or retailing. This is very much linked to the decision concerning whether or not multi-level marketing channels will be employed. The entrepreneur must know what the nature of the distribution will be in terms of being exclusive, extensive or selective. Similarly, he or she must decide whether channel associations will be contract-oriented or informal. The costs to be incurred in distribution e.g. storage of inventory in warehouses must be well tabulated.
Distribution channels are those chains through which products/services pass downward from the producer to the consumer/end-user. These distribution channels don't only apply to physical products; the same concept applies for services. In distribution channels management a product/service supplier - the entrepreneur in this context has to clarify his/her take on three important fundamentals i.e. channel membership, channel motivation and the management and monitoring of the distribution channel.
Channel membership is all about deciding on the organizations that will be incorporated in the distribution chain. There are three types of membership to consider. Intensive distribution is where a product/service is stocked by a high number of resellers. Price-based competition may occur. In selective distribution a number of 'appropriate' resellers are selected to stock the product. Exclusive distribution sees the appointment of specially chosen resellers to stock the product/service.
The entrepreneur can employ a couple of incentives to keep the distribution channel members motivated. These can include them higher margins as compared to the competitors, rewarding members who have achieved designated sales volumes, and offering to train channel members so that they can be at par with the producing firm's internal staff.
Distribution channels need to be monitored through appropriate mechanisms all aimed at gathering feedback from members of the chain and more so from the end-users. This is important for the constant improvement of product/service quality.
Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.
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