Published August 2002

Distribution tweak can improve sales and savings

Modifying your distribution strategy can increase sales and reduce costs — this holds true for both consumer and business markets.

I started a four-part series in June — using the 4-P’s of marketing (product, price, place and promotion) — to demonstrate how “focus” can improve return on marketing investment.

This third installment deals with the “place” function. To catch up on the series, go to www.snohomishcountybusinessjournal.com and click on the “Archives” button.

Place (in marketing speak) refers to more than point-of-purchase; it encompasses distribution (delivery), location (space) and time utilities. This article concentrates on “channel” management as opposed to the logistics of “physical” distribution.

As a producer, your purpose is to get the right product to the right place at the right time. It doesn’t matter whether you sell through intermediaries or directly to the end-user, your distribution strategy should “focus” on three criteria: coverage, control and cost.

n Coverage. The closer your product is to your customer, the more you’ll sell. Just look at latte stands for an example of how proximity stimulates sales. Robert Woodruff, the late president of Coca-Cola, said: “Our policy is put Coke within an arms length of desire.”

If you use distributors, their competitors may be able to improve your coverage. Investigate other options. You may be able to expand your reach or reduce the cost of your existing footprint.

If you sell directly to the end-user, is your product/service accessible to the right people at the right time? Cultivating strategic alliances may increase your coverage (end-user access). Do you know the “internal (decision-making) channel” of your prospects?

n Control. You don’t want your channel partners contradicting your position in the marketplace. Factors to consider include timing, territory, inventory, pricing, presentation and promotion.

Are your intermediaries pro-actively pushing your products? How do they perform, and what can you do to improve their fulfillment? Ask them!

When selling direct, controlling information flow is just as important.

n Cost. You should evaluate your overall cost of distribution. Shorter channels are less expensive. However, a lengthier channel usually produces more sales. It may be less expensive to use an experienced wholesaler or broker than a direct approach.

Weigh the costs of supporting your own sales system vs. using distributors with more efficient infrastructure and existing customer base. Another consideration is the customer information your channel partners can provide.

The Internet has added a dynamic dimension to the function of distribution. It has leveled the playing field, allowing smaller companies to compete with larger ones. Using the Internet for sales, promotion and productivity can also provide a significant economy over traditional channels.

Remember, channel partners are also customers and should be treated as such to minimize conflict. If you cultivate those relationships based on maximizing your coverage and controlling and minimizing your cost, you’ll enjoy a greater return on marketing investment.

Next month’s column will conclude the series with tips on how to improve the results of promotion. This is the hottest topic of the four P’s, so be sure to check back.

Andrew Ballard, President of Marketing Solutions Inc. in Edmonds, develops brand leadership strategies for businesses and teaches strategic marketing through Edmonds Community College. He can be reached at 425-672-7218 or by e-mail to andrew@mktg-solutions.net.

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