Place refers to distribution or the methods and location you use for your products or services to be easily accessible to the target customers. Your product or service dictates how it should be distributed.
If you own a retail shop, for example, the distribution chain ends with you and you supply to your customers directly. If you own a factory, your options will be to either sell your products directly or sell them to retailers or vendors as your distribution strategy.
Direct selling can be a good starting point, especially if the product supply is limited or you only sell seasonal products. One advantage of selling your products directly is you get a more personal feel of the market because you interact directly with the customers so you can easily adapt to the changes. Another is that you control your product’s pricing and the methods on which it should be sold. Distribution methods may include, but are not limited to, door-to-door, retail, e-commerce, mail order, or on-site.
You need to have a retail interface with the target customers if you want to sell directly. You can sell either electronically or in person. If this requirement will not work for you, you might need to consider selling through a reseller or an intermediary.
Selling Through a Reseller
If you want to have wider distribution for your product, you can sell it through a third party, either a retailer or wholesaler, who will then resell the product to their customers. This distribution strategy also reduces the pressure of running a distribution system. Reseller sales also reduce the storage space required for product stocks. However, you will lose personal contact, and even company identity in some cases, with the customers since they will be talking now to your resellers. Some resellers may request that your product be sold under their own brand.
Intermediaries can also be specific about supply flow before they can handle your products for reselling. They would want the product available for distribution all year round. This can put a lot of stress on the production line, especially if you only produce seasonally. But if you can agree to that, you might consider selling through intermediaries as your distribution strategy.
Market coverage refers to how wide or varied you want your products to be distributed. This applies to either direct sales or through intermediaries. There are three types of market coverage that you may want to adopt.
This ensures the widest distribution possible for your product or service. You sell your products in as many locations or markets as possible. And oftentimes, you need to lower your prices. This is the method most commonly used by large businesses or manufacturers to reach customers nationwide or even globally. Examples of products effectively distributed using this distribution strategy are convenience products or things we buy regularly, like candy or chewing gum.
You may also want to sell only to a few select businesses or customers. This is called selective distribution and is the strategy commonly used for selling upscale products and is sold by resellers who deal only with high-quality products. It’s easier to establish consumer relationships using this distribution strategy as compared to intensive distribution.
This strategy restricts your product distribution to only one reseller. The reseller will have exclusive rights to sell your product or service, and in return, you may also be the sole supplier. This works more effectively with specialty products that you can promote as prestigious because you are the sole supplier and the intermediary is the sole reseller.
Other Factors to Consider
The product sales volume and its characteristics will influence what inventories you should maintain and also how the products should be transported. You may opt to ship in large volumes across countries or do it via retail to single individuals. If you’re into manufacturing, you need to carefully monitor the total costs by considering every factor required in production like the acquisition of the materials and the distribution strategy you choose to use.
Each of the distribution strategies has its own characteristics, advantages, and disadvantages. Choose one that best applies to your product and business.