How to Distribute Your Products to Your Customers

How to Distribute Your Products to Your Customers – Even the best product won’t get you very far if you can’t distribute it to customers. Learn how to develop an effective strategy to deliver your product or service to your customers.

Distribution is the process of getting your product or service into the hands of your customers. It is easier to visualize the distribution path of a product than a service, so let’s begin there.

When you have a product, you must decide how and where it will be manufactured. For many small businesses, initial production is done at home, usually in the garage. Once you have the product in hand, the question becomes: How will it reach your customer? You should consider these factors:
1. Where will the customer purchase your product (a specialty store, a
supermarket chain, etc.)?
2. How will you ship your product to the place where the customer will purchase it.

Traditional Channels
Fundamentally, you have two choices for distribution. You can either sell directly to your customers, or you can make it available through intermediaries. Traditionally, intermediaries include:

Brokers and agents: Agents and brokers typically negotiate the sale of your
product for a fee or commission. Often they have well-established relationships with buyers in various types of retail stores. For example, if you want to sell a new product in grocery stores, a broker specializing in the food and drug industry is critical in getting your product onto shelves.

Wholesalers: When you wholesale your product through middlemen who sell to retailers and other intermediaries, they generally take title to the goods; you are selling your products directly to them. This increases the risk and cost to the wholesaler.

Retailers: These intermediaries are the ultimate traditional distribution channels for consumer products. You will find many different types of retailers, so you should think carefully about which type of retailer services your ideal customer.

You may partner with one, or more than one, of these intermediaries for the
distribution of your product. If you sell directly to a retailer, only one middleman stands between you and your customer; this is known as a one-level channel of distribution. If you use a broker who sells your product to a retailer, there are two channels in your distribution system.

Next you must decide how you will physically move your product from where it is manufactured to where your customers will purchase it. Consider all of the options that make sense for the type of product, and the volume you will be transporting. Investigate regular rates, second-day delivery, and overnight. If you are selling pallets of goods to retail stores, you must research the bulk shipping rates of trucking companies.

Non-Traditional Channels
Today’s marketplace offers many choices for non-traditional distribution. The fastestgrowing category is the Internet. With the recent explosion of e-commerce, the Web has emerged as a significant distribution option.

Most entrepreneurs are choosing Web-based distribution systems to either
supplement or replace traditional channels. The advantages of Internet distribution include:

Reduced distribution costs: Because the Internet brings customers directly to your company, you can avoid the costs of distributing through traditional
intermediaries.

Added control: By selling your product on your own Web site, you have increased control over customer service and product image issues. A Web site can also be a great tool to promote your product and provide information to potential customers.

Another non-traditional distribution option is the “home party.” Many companies successfully use word of mouth and home-based distribution to market their products and services. Amway and Mary Kay are among the largest companies that employ this method.

Other non-traditional distribution methods include door-to-door sales, telemarketing, flea markets, and swap meets. Any creative way you find to distribute your product and service can be considered a non-traditional approach. Brainstorm and be creative!

Internal and External Sales Forces
Brokers, wholesalers, and retailers are all examples of an external sales force. Some businesses find it advantageous to take on some of the functions of these intermediaries “in-house” by hiring a sales force as part of their staff. You will find pros and cons to both internal and external sales forces.

Internal Sales Force
Advantages to having an internal sales force can include:
Greater control over your message: An internal sales force allows you to
communicate directly with your potential customer.

Exclusivity: Staff salespeople are only concerned with selling your product, so they can focus 100 percent of their attention on making sales for you. External intermediaries typically represent several products, so you must work extra hard to motivate them to promote your product.

Ongoing training: Information is a key element in successful selling. When your sales force is in-house, you can provide ongoing training for new products and refine your sales techniques. Most intermediaries will not attend ongoing training sessions since they are not compensated for their time.

Easy access: Communication with your employees is usually easier than with an external sales force. When you make changes to your products or sales materials, you can relay this information to an internal sales team more quickly.

External Sales Force
Using an external sales team may have the following benefits:
The cost of sales is directly related to the actual sales achieved. Brokers and
agents are traditionally paid a percentage of the sale, so you can directly relate the cost of winning the order to the revenue generated. By comparison, an internal sales team can be very costly. In addition to base salaries, you must also cover health insurance, administrative costs (phone, office, materials, etc.), and transportation.

You can tap into a pre-existing distributor network. Intermediaries such as
wholesalers and brokers have established relationships with buyers and are
familiar with the way various retailers like to do business. This may allow you to distribute your product more quickly by focusing on who intermediaries offer your product to and how they sell it.

Some industries require you to use a traditional distribution channel. Certain large retailers require their vendors to be on specific computer software to electronically track sales and reorders on a daily basis. Some retailers will only purchase from approved vendors.

You can benefit from “human economies of scale.” It is often much more cost-efficient for a broker or agent to represent several products to buyers at the same time. Many intermediaries handle several product lines at once. This distributes the cost of travel and related sales costs among several companies.

You should consider the advantages of both types of sales efforts to decide which is best for your new company. Review your notes about your competitors; if necessary, do some additional research to find out how they set up their distribution. Chances are you may want to consider following their lead.

Setting Up a Distribution Channel
When choosing a distribution channel, the key question to answer is, “Where will my ideal customer expect to find my product or service?” If you are offering a product, take the following factors into consideration:
• What are the traditional distribution methods of your product?
• Is it something people will look for at a particular type of retailer?
• What is the nature of your product?
• Will the value of this product be obvious, or does it need explaining? Some products are “show and tell” items; they tend to be better received if someone can demonstrate their use.

If you are providing a service, consider the following questions:
• Will I sell my service, or will I hire someone else to do it for me?
• If I’m going to hire a salesperson, will it be more profitable to hire an outside firm or
• an employee?
• Will I offer my services at someone’s home or office, in my office, over the phone,
• or via the Internet?
• How will I deliver my services to my customers?
• What travel time and expenses will be required in providing my service?