Building a distribution
strategy is one of the greatest challenges for an organization. When we opt for
a strategy of selling through distribution channels very often we have to face
the dilemma of efficiency vs. closeness to the end-user. That is, we seek a
model that allows us to reach as many customers as possible with a profitable
distribution cost. However, at the same time we are giving up contact with the end
consumers and thus loosing first-hand information about their habits,
interests, purchasing criteria and their reaction of offerings.
The longer the chain of
intermediaries, the more disconnection between the manufacturer brand and the
customer. Perhaps the most significant risk is that each intermediary pursue
own objectives and policies that do not always conform to the interests of the
manufacturer. As if all this were not enough the manufacturer must deal with
another issue: a distributor of a product or service is not always the best for
a new product. This implies that there are constant changes that can
potentially affect the performance of a particular distributor.
According to Alexander Chernev from the Kellogg School of
Management these are some of the pros and cons of the distribution:
PROS
Greater cost efficiency
Rapid distribution that can be implemented instantly
Specialist knowledge of the region and customer buying habits
Broad coverage that enables the company to reach majority of target
customers.
Greater effectiveness of entire process due to specialization
No
large upfront investment
CONS
More complex channel structure can have negative impact on efficiency
of distribution system
Intermediaries can add extra layer of profit margins, thus increasing
total costs
Loss of control over selling environment
Less flexibility with changing strategy
Greatly diminished ability to communicate with and collect information
directly from customers
Potential for channel conflicts resulting from different strategic
goals and profit-optimization strategies of each intermediary
There
are certainly no magic recipes. All distribution strategy decisions have pros
and cons. However we must remember that this is a long-term decision and it is
necessary to maintain a certain coherence and consistency over time if we want
to succeed. Very frequent changes in distribution policies always affect in
some way the customers experience and
therefore the brand reputation. So take your time and think very carefully what
kind of distribution strategy you want to implement in your company.
