Distribution refers to how you deliver your product to the customer. If you are in a service business, it may be the way you deliver yourself to the customer to perform the service. Some of the primary categories of sales and distribution channels are named below. You may use one, more than one or various combinations of sales and distribution methods. Additionally, different products from the same company may require different methods.
Your company sells directly to the customer or end user of the product. There is no agent between your company and the customer. Providing financial planning services to individuals is an example of direct sales. Catalog sales or sales over the Internet are also examples of this method.
Indirect Sales: Retail
Your company sells to a retailer whose salespeople then sell to the customer. Selling organically grown herbs to a local grocery store is an example of indirect sales.
Indirect Sales: Wholesale
Your company sells to a wholesaler or agent who sells products to retailers. The wholesaler most likely represents several companies. (It's more efficient for the retailer to have one source for many products instead of dealing with an unwieldy number of individuals.) Selling novelty pet accessories to wholesalers who resell to a variety of pet care stores, animal clinics and other retail outlets is an example of selling to wholesalers or agents. Trade shows and merchandise markets are locations where retailers order your product based on your display and promotion at the show. You can get schedules and names of these shows from trade publications available in most big libraries.
Indirect Sales: Multi-level Marketing
You sell both directly to customers and to other sales people you have recruited to sell products.
You determine which interface between your company and the prospective customer is appropriate depending upon your objectives:
|What are the characteristics of your target market and how large is the market for this product?||For a high-priced product with a small number of potential buyers, the direct sales approach with plenty of service is probably best. For a low-priced product that appeals to the mass market, like chewing gum, an indirect selling approach is fine as long as it is supported with advertising and effective placements in retail stores so customers can find it easily.|
|Where are the customers located?||Sales through a local retail outlet may be your best distribution method if you have a large number of customers located in your area. However, a small number of geographically dispersed buyers may require you to sell to an agent or wholesaler who, hopefully, will provide the needed individual attention. Industrial purchases are made directly from a manufacturer or manufacturer's representative in most cases.|
|How large are the orders?||You might segment your customer base by order size and sell directly to customers placing large orders and use an indirect sales method for small orders.|
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