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Three Simple Steps to Develop a Distribution Channel Strategy

25Jul, 2022
Three Simple Steps to Develop a Distribution Channel Strategy

Before developing a distribution channel strategy, let’s have a refresher on what a distribution channel is. Direct channels allow consumers to buy directly from the manufacturer, while an indirect channel allows consumers to buy from a wholesaler or retailer. A distribution channel is the path that a product or service takes to reach your customer. Distribution channels can be simple or quite complex. If you are a D2C seller or a direct sales associate, there are some easy steps you can take to develop the best distribution channel for your product and create brand loyalty.

Identify the Proper Channel for Your Product

The first step to a robust distribution channel strategy, identify which channel works best for your product. You need to consider if you are going to sell your product directly to the end consumer or must you go through wholesalers and retailers. These are important considerations. The main point is that the longer the channel, the less profit you’ll likely receive from your sales and that selling directly to the consumer means a higher profit. Because of this, many manufacturers skip wholesalers entirely and prefer to sell directly to retailers and consumers.

Always Contemplate Your Customers

As you know, in business it’s all about keeping your customers happy and coming back for more. Therefore, when you attempt to identify the proper distribution strategy, consider your target group. Consider the needs of your customers and how they access your product. You might find that the answers to these questions will help you figure out what distribution channels you choose. And sometimes, businesses find out over time and through trial and error. In the end, a direct channel of distribution is the easiest and fastest way to get your product to the consumer, while an indirect channel can reach a larger audience. Ultimately, the pros and cons of each will help you decide which route, literally, to take.

Evaluate Each Channel, Metrics and Adapt

To get the best distribution channel for you right now, you will need to evaluate the performance of each channel. You can choose to evaluate your channels using the Strategic Profit Model. Also known as the DuPont Equation, it provides one method for calculating the return on equity. Return on equity refers to a business’s profit relative to shareholder equity. In other words, the effectiveness of the business at turning assets and investments into profit.

Once you chose a distribution channel it is important to keep strong relationships with buyers and sellers through periodic satisfaction surveys designed to measure partner satisfaction. These metrics will greatly help you have a complete picture of your distribution channel strategy and how it can be improved through the changes and growth of your business.

These are simple steps that can help you narrow down the many choices you have when it comes to developing a distribution channel. Some channels will work better than others and you may need to adjust your distribution channel dependent on the needs of your online business.

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