Tips for Creating a Successful Distribution Model By YaNi Warning: This post is long enough to bore you.

If you are in distribution, go ah ead. If not, do not say I did not warn. To me distribution is part of marketing. It is more developed in b2b sector. Sti ll, it is a powerful element and a weapon to be carefully handled. Distribution in its core touches upon a number of issues within a company. These are strategy , choice of partners, prices, logistics, and, last but not least, control over e verything. STRATEGY Strategy usually dwells on who the company offers its product to. Here comes the already banal target The wrong choice of strategy and the wrong choice of targ et may be crucial and risky. Let s see an example: A manufacturer (M) works with a big distributor (D1) in a country. The D1 s reputa tion is that it is the biggest distributor in the said country. It sells to over 1000 retailers. M expects to sell a lot through D1. At the same time they were contacted by D2, who sells to only 200 retailers, and is more specialized in the M s domain. M refuses to work with D2 and starts with D1. In a year sales of M s product are extremely low. Through research shows D1 sells M s product to only two dozen clients (25 of 1000), whereas D2 could sell M s produc t to 150 clients of 200 they have. So, it is not the biggest that is the best to work with. Research, data collecti on and choice of strategy that s what is important. Thus, strategy will include: t arget market, target clients, distributors selling to the target, plan of coveri ng the territory. PARTNERS Strategy choice overlaps with the choice of partners: analysis of the client dat abase of the perspective partner in the country could show whether the partner s ells to the right clientele. At the same time it should be borne in mind that th e partner has also the right of choosing whether to work with you or not. PRICE A usual mistake causing sales drops is that there is huge difference between the recommended and retail price. If the recommended price is too low, distributors cannot profit from it as users perceive the product as of low quality. Distribu tors and dealers never lower their prices unless there is an emergency. The emer gency is usually caused by price wars in the local markets. But dumping is not t he way-out. To me the supplier is the one to form retail prices. If not, see this: Distributors (it is a widely spread fact that there could be more distributors o f the same product on a territory) start a price war. D1 dumps prices on the acc ount of its margin. It reduces the expected margin from 20% to, say, 3%, and seemi ngly wins the war! Hurrah! But when D1 sees logistics eats up this 3% and there is no reason to sell the product. So, logically D1 will stop buying the product from the supplier. Why on earth work with a product that does not bring in cash? Here the supplier is to lose as it loses a distributor.

One way for it is to announce higher retail prices. With that distributor will be satisfied and end users will not perceive the product as too cheap. we do. CONTROL As I told already. All in all. the ideal distribution model would look like this: If.. -Sorry. Availability of the product is also important. . -Do you have shirts? -Yes. I buy regularly shirts. Size L.LOGISTICS Logistics is important as never. In order to offer attractive prices for distributors the manufacturer is to decr ease logistic expenses. Once I get into a departm ent store with the sole intention to buy a blue shirt. as suppliers care about transport. A supplier is to: assure the goods arrive in time that s the product moves fast down the supply chai n and reaches the end user just in time. stock. at least. If there is demand. the supplier should control the price as well as the actions of the distributor or distributors. -I need a blue shirt for me. there should be availability. produ ct availability. One of the most important issues here is to see whether distributors do not trespass one another s territory and start dumping . PS: BTW. Why? See the following example th at happened to me: I am a normal 180 cm tall guy. one angle is cut off: disregarded. etc. we have no L-sized shirts! -Why? -They sell too fast! See the reply: They sell too fast! That s what availability of the product is. assure the necessary volumes of product are available. the model is cri ppled and will not function properly. I bought a shirt in another store. ignored.