INTRODUCTION

MARKETTING MIX

Marketing mix is a set of actions a business takes to build and market its product or

service to its customers.It helps to make sure that you are able to offer your customers

the right product, at the right time and at the right place for the right price.Whereas

traditionally the marketing mix was executed through the 4 Ps of marketing,

nowadays 3 more  additional tools have been added to the mix, making it the 7 Ps of

marketing. Businesses use a blend of these marketing mix elements to generate the

response they want from their audience.

Importance of Marketing Mix

There are several benefits of the marketing mix that makes it important to businesses;

 Helps understand what your product or service can offer to your customers

 Helps plan a successful product offering

 Helps with planning, developing and executing effective marketing strategies

 Helps businesses make use of their strengths and avoid unnecessary costs

 Helps be proactive in the face of risks

 Help determine whether your product or service is suitable for your customers

 Helps identify and understand the requirements of customers

 Helps learn when and how to promote your product or service to your customers

 What are the Elements of Marketing Mix

THE 4 PS OF MARKETING MIX

Product

Product is a good (such as music players, shoes etc.) or service (such as hotels,

airlines, etc.) that is offered as a solution to satisfy the needs of your customer.
When developing the product, you need to consider its life cycle and plan for different

challenges that may arise during the stages of it. Once the product reaches its final

stage (sales decline phase), it’s time to reinvent the item to win the demand of the

customers again.

Price

The next element of the marketing mix is the price your customer is willing to pay for

your product. This helps determine the profit you will be able to generate.

When setting a price for your product, consider how much you have spent on

producing it, the price ranges of your competitors, and the perceived product value.

Place

This is about the distribution center of the product and the methods used in

distributing it to the customer.

Wherever this is, it should be easily accessible to the customer. For example, if you

have a physical store, it should be located in a place that can be easily discovered by

the customer. If you own a website to market your product, make sure it is easily

navigable.

Promotion

Promotion refers to the methods a business uses to gain the attention of the customers

to their product. These includes sales promotions, customer service, public relations,

advertising etc.When creating your promotion strategy, consider the tactics used by

your competitors, the channels that are most effective in reaching your customers, and

whether they match the perceived value of your product. The AIDA model is a

principle widely used in marketing and advertising. It describes the stages an

individual goes through during the buying process to become a customer.

How to Develop a Marketing Mix

Define Your Goal and Set a Budget

Developing an effective marketing mix starts with setting the right goals. Establish

what you want to achieve with your marketing plan; is it to grow sales? Acquire more

customers? Build brand awareness?

Once you have set realistic and measurable goals, determine how much you are

willing to spend on achieving your objectives.

Study Your Target Customer

In order to build a product or service that your customers would want to buy, you

need to know who they are.

Find different segments in your target audience and create separate customer profiles

for each. Refer to these when you are developing your strategies.

Customer Profile Template (Click on the template to edit it online)

Identify Your Unique Selling Proposition

Clarify what your unique selling proposition is through customer surveys, interviews,

focus groups etc.

Here you will identify the benefits your product or service will bring to your

customer, and how you are better than anyone else in solving their problems.

Understand Your Competition

Carry out a competitor analysis to understand the different strategies and tactics used

by your competitors. This knowledge will be especially helpful when you are creating

your pricing strategy.  

Identify the Unique Features of Your Product

List down the unique qualities and the value of your product. You can build on these

when you are marketing it to your customers.

You can use the mind map below when you are identifying the unique features of

your product.

Create a Pricing Strategy

Using the competitor research you have done, build a pricing strategy. Make sure that

you have not overpriced or underpriced your product.

Choose Your Distribution Channels & Promotional Methods

Choose the channels you will be distributing your product through based on the type

of your product or service and your target customer.And select the promotional

techniques you want to choose based on your budget, and again the customer and

your product.

What is a Product Mix Strategy?

A successful product mix strategy enables a company to focus efforts and resources

on the products and product lines within its offerings that have the greatest potential

for growth, market share, and revenue.

A product mix is the total number of product lines and individual products or

services offered by a company. Additionally referred to as product

assortment or product portfolio. Product mixes vary from company to company. Some

have multiple product lines with lots of products in each line. But others are much

more limited.

A product mix strategy has four dimensions:

Width Total number of product lines a company offers.

Length Total number of products in a company’s product mix.

Depth Total number of product variations in a product line.

Consistency ___ Indicates how product lines relate to one another.

Key Product Mix Strategies

There are four key product mix strategies:

Expansion: A company increases the number of product lines or depth (i.e., product

variations) within lines.

Contraction: A company narrows its product mix to eliminate lower-performing

products or lines or to simplify remaining products or lines.

Change an Existing Product: A company improves a current product rather than

creating a completely new product.

Product Differentiation: Without modifying the product in any way, a

company positions it as a superior choice to a competitive product.

Additional product mix strategies include:

Deepening Depth: A company keeps existing lines but expands them.

Developing New Uses for Existing Products: A company finds and communicates

new uses for current products without disturbing lines or products.

Trading Up: A company adds a higher-cost product to an existing line to improve

brand image and increase demand for its lower-cost products.

Trading Down: A company adds a lower-cost product to an existing line of higher-

cost products.

PRODUCT LIFE CYCLE

A product life cycle is the length of time from a product first being introduced to

consumers until it is removed from the market. A product’s life cycle is usually

broken down into four stages; introduction, growth, maturity, and decline.

Product life cycles are used by management and marketing professionals to help

determine advertising schedules, price points, expansion to new product markets,

packaging redesigns, and more. These strategic methods of supporting a product are
known as product life cycle management. They can also help determine when newer

products are ready to push older ones from the market.

How Does it Work?

As mentioned above, there are four stages in a product’s life cycle - introduction,

growth, maturity, and decline – but before this a product needs to go through design,

research and development. Once a product is found to be feasible and potentially

profitable it can be produced, promoted and sent out to the market. It is at this point

that the product life cycle begins.

The various stages of a product’s life cycle determine how it is marketed to

consumers. Successfully introducing a product to the market should see a rise in

demand and popularity, pushing older products from the market. As the new product

becomes established, the marketing efforts lessen and the associated costs of

marketing and production drop. As the product moves from maturity to decline, so

demand wanes and the product can be removed from the market, possibly to be

replaced by a newer alternative.

Managing the four stages of the life cycle can help increase profitability and

maximise returns, while a failure to do so could see a product fail to meet its potential

and reduce its shelf life.

Writing in the Harvard Business Review in 1965, marketing professor Theodore

Levitt declared that the innovator had the most to lose as many new products fail at

the introductory stage of the product life cycle. These failures are particularly costly

as they come after investment has already been made in research, development and

production. Because of this, many businesses avoid genuine innovation in favour of

waiting for someone else to develop a successful product before cloning it.

Stages
There are four stages of a product’s life cycle, as follows:

1. Market Introduction and Development

This product life cycle stage involves developing a market strategy, usually through

an investment in advertising and marketing to make consumers aware of the product

and its benefits.

At this stage, sales tend to be slow as demand is created. This stage can take time to

move through, depending on the complexity of the product, how new and innovative

it is, how it suits customer needs and whether there is any competition in the

marketplace. A new product development that is suited to customer needs is more

likely to succeed, but there is plenty of evidence that products can fail at this point,

meaning that stage two is never reached.  For this reason, many companies prefer to

follow in the footsteps of an innovative pioneer, improving an existing product and

releasing their own version.

2. Market Growth

If a product successfully navigates through the market introduction it is ready to enter

the growth stage of the life cycle. This should see growing demand promote an

increase in production and the product becoming more widely available.

The steady growth of the market introduction and development stage now turns into a

sharp upturn as the product takes off. At this point competitors may enter the market

with their own versions of your product – either direct copies or with some

improvements. Branding becomes important to maintain your position in the

marketplace as the consumer is given a choice to go elsewhere. Product pricing and

availability in the marketplace become important factors to continue driving sales in

the face of increasing competition. At this point the life cycle moves to stage three;

market maturity.
3. Market Maturity

At this point a product is established in the marketplace and so the cost of producing

and marketing the existing product will decline. As the product life cycle reaches this

mature stage there are the beginnings of market saturation. Many consumers will now

have bought the product and competitors will be established, meaning that branding,

price and product differentiation becomes even more important to maintain a market

share. Retailers will not seek to promote your product as they may have done in stage

one, but will instead become stockists and order takers.

4. Market Decline

Eventually, as competition continues to rise, with other companies seeking to emulate

your success with additional product features or lower prices, so the life cycle will go

into decline. Decline can also be caused by new innovations that supersede your

existing product, such as horse-drawn carriages going out of fashion as the

automobile took over.

Many companies will begin to move onto different ventures as market saturation

means there is no longer any profit to be gained. Of course, some companies will

survive the decline and may continue to offer the product but production is likely to

be on a smaller scale and prices and profit margins may become depressed.

Consumers may also turn away from a product in favour of a new alternative,

although this can be reversed in some instances with styles and fashions coming back

into play to revive interest in an older product.

Product Life Cycle Strategy and Management

Having a properly managed product life cycle strategy can help extend the life cycle

of your product in the market.

The strategy begins right at the market introduction stage with setting of pricing.

Options include ‘price skimming,’ where the initial price is set high and then lowered

in order to ‘skim’ consumer groups as the market grows. Alternatively, you can opt

for price penetration, setting the price low to reach as much of the market as quickly

as possible before increasing the price once established.

Product advertising and packaging are equally important in order to appeal to the

target market. In addition, it is important to market your product to new demographics

in order to grow your revenue stream.

Products may also become redundant or need to be pivoted to meet changing

demands. An example of this is Netflix, who moved from a DVD rental delivery

model to subscription streaming.

Understanding the product life cycle allows you to keep reinventing and innovating

with an existing product (like the iPhone) to reinvigorate demand and elongate the

product’s market life.

Definition of pricing

Pricing is defined as the amount of money that you charge for your products, but

understanding it requires much more than that simple definition. Baked into your

pricing are indicators to your potential customers about how much you value your

brand, product, and customers. It's one of the first things that can push a customer

towards, or away from, buying your product. As such, it should be calculated with

certainty.

What are pricing strategies?

Pricing strategies refer to the processes and methodologies businesses use to set prices

for their products and services. If pricing is how much you charge for your products,
then product pricing strategy is how you determine what that amount should be. There

are different pricing strategies to choose from but some of the more common

ones include:

Value-based pricing

Competitive pricing

Price skimming

Cost-plus pricing

Penetration pricing

Economy pricing

Dynamic pricing

Pricing is an underutilized growth lever

Many companies focus on acquisition to grow their business, but studies have shown

that small variations in pricing can raise or lower revenue by 20-50%. Despite that,

even among Fortune 500 companies, fewer than 5% have functions dedicated to

setting the best price possible. There's a missed opportunity in the business world to

see immediate growth for relatively little effort. 

Because most businesses spend less than 10 hours per year thinking about pricing,

there's a lot of untapped growth potential in optimizing what you charge. In fact,

choosing the best pricing method is a more powerful growth lever than customer

acquisition. In some cases, it can be up to 7.5 times more powerful than acquisition. 

The importance of nailing your pricing strategy

Having an effective pricing strategy helps solidify your position by building trust with

your customers, as well as meeting your business goals. Let's compare and contrast

the messaging that a strong pricing strategy sends in relation to a weaker one.

A winning pricing strategy:

Portrays value

The word cheap has two meanings. It can mean a lower price, but it can also mean

poorly made. There's a reason people associate cheaply priced products with cheaply

made ones. Built into the higher price of a product is the assumption that it's of higher

value.

Convinces customers to buy 

A high price may convey value, but if that price is more than a potential customer is

willing to pay, it won't matter. A low price will seem cheap and get your product

passed over. The ideal price is one that convinces people to purchase your offering

over the similar products that your competitors have to offer.

Gives your customers confidence in your product 

If higher-priced products portray value and exclusivity, then the opposite follows as

well. Prices that are too low will make it seem as though your product isn't well made.

A weak pricing strategy:

 
Doesn't accurately portray the value of your product

If you believe you have a winning product, and you should if you are selling it, then

you need to convince customers of that. Setting prices too low sends the opposite

message.

Makes customers feel uncertain about buying

Just as the right price is one that customers will pull the trigger on quickly, a price

that's too high or too low will cause hesitation.

Targets the wrong customers

Some customers prefer value, and some prefer luxury. You have to price your product

to match the type of customer it is targeted towards.

Top 7 pricing strategies

Let's now take a closer look at the seven most common pricing strategies that were

outlined above. Click on any of the links below for a more in-depth guide to that

particular pricing strategy. 

Value-based pricing

With value-based pricing, you set your prices according to what consumers think your

product is worth. We're big fans of this pricing strategy for SaaS businesses.

Competitive pricing

When you use a competitive pricing strategy, you're setting your prices based on what

the competition is charging. This can be a good strategy in the right circumstances,

such as a business just starting out, but it doesn't leave a lot of room for growth.
Price skimming 

If you set your prices as high as the market will possibly tolerate and then lower them

over time, you'll be using the price skimming strategy. The goal is to skim the top off

the market and the lower prices to reach everyone else. With the right product it can

work, but you should be very cautious using it.

Cost-plus pricing 

This is one of the simplest pricing strategies. You just take the product production

cost and add a certain percentage to it. While simple, it is less than ideal for anything

but physical products.

Penetration pricing

In highly competitive markets, it can be hard for new companies to get a foothold.

One way some companies attempt to push new products is by offering prices that are

much lower than the competition. This is penetration pricing. While it may get you

customers and decent sales volume, you'll need a lot of them and you'll need them to

be very loyal to stick around when the price increases in the future.

Economy pricing 

This strategy is popular in the commodity goods sector. The goal is to price a product

cheaper than the competition and make the money back with increased volume. While

it's a good method to get people to buy your generic soda, it's not a great fit for SaaS

and subscription businesses.

Dynamic pricing 
In some industries, you can get away with constantly changing your prices to match

the current demand for the item. This doesn't work well for subscription and SaaS

business, because customers expect consistent monthly or yearly expenses.

What Is the Promotional Mix?

Your promotional mix refers to the specific combination of the tools, channels, and

processes you use to promote your offerings. It’s what you say, how you say it, who

you say it to, what channels you use to reach them, and how often you communicate.

Importance of Promotional Mix

Promotion makes up one of the four P’s in the marketing mix, alongside Product,

Price, and Place—and it’s arguably the most important. That’s because your

promotional strategy ties all of your other marketing activities together.

You might have an amazing product, the most profitable pricing strategy, and the best

possible location—but unless you’re sharing the right message with the right

audience, your marketing efforts will fall flat.

You can nail all the other P’s in your marketing mix—but a carefully crafted strategy

of the right promotional mix elements can make the difference between success and

failure. Without effective promotion, customers can’t learn about your product and

service offerings, and sales will be stifled.

The 5 Essential Promotional Mix Elements

Every market is different, with different factors affecting your promotional mix. The

biggest challenge for marketers? Finding the best possible mix of promotional

elements to maximize the results of their marketing efforts.

We’ll look at five of the tools and techniques you should use in an effective

promotional mix and a case study of companies employing these elements.

Advertising
Advertising is only as helpful as its ability to be seen. But with so many brands vying

for attention, campaigns lose effectiveness over time. Mailchimp‘s award-winning

2017 advertising campaign “Did You Mean Mailchimp?” raised awareness of the

email service provider through catchy “mistaken” versions of the software company’s

name, like “Mail Shrimp” or “Jail Blimp.”

Mailchimp focused much of their promotional mix on social media platforms and

even screened their short parody films in cinemas. The campaign paid off, bringing

in 988 million earned media impressions worth more than $3.5 million.

Public Relations

In public relations or publicity, companies share their message through existing

channels—most often the press—by doing or sharing something newsworthy, which

the channel then shares with their audience. Public relations tools and channels range

from more traditional press releases to guerrilla marketing campaigns, special events,

and sponsorships.

Publicity can be more cost-effective than other promotional mix elements because it

leverages existing brands and audiences. But there are downfalls to PR; it can be

difficult to judge whether campaigns are successful, and an industry-wide shift

toward paid influencers is driving up costs.

Mailchimp offers up another great example. They recently opened Small Mall, a

1980s-mall-themed pop-up shop within the Ponce City Market in Atlanta.

The store showcases products from local businesses and brands, from organic teas to

premium shoelaces—all of which use Mailchimp. The store gives Mailchimp a great

opportunity to leverage the existing audience from the holiday market while sharing

their message with the audiences of the brands they’re highlighting.

The announcement from MailChimp saw activity on social media, most likely from

its Atlanta fans. Our Content Exploration tool reported on engagement with the

announcement on Twitter and Reddit, below.

The media release also gained coverage from several Atlanta-based news outlets, such

as AJC, which shared MailChimp’s Instagram post.

Direct Marketing

Direct marketing is (much like it sounds) marketing directly to a person. By

communicating with a narrow group of potential customers, companies promote their

offerings through telephone marketing, snail mail, email, or catalogs and brochures.

Despite the abundance of offers from junk mail and telemarketers, direct marketing

remains popular: it gives companies a predictable and cost-effective way of reaching

their target markets.

An example of this can be seen in the popular promotional tactic of deploying email

messages to people who have interacted with a service.

In this case, MarketMuse sends an email to engage individuals who try out the

company’s content planning tool.

Sales Promotion

Sales promotions are the sledgehammers of the marketing world. A well-crafted sales

promotion can generate immediate traffic and boost your short-term sales. A sales

promotion is an incentive, such as a discount or coupon, intended to persuade

customers to make a purchase. However, promotions tend to quickly lose their

effectiveness, so avoid becoming dependent on them for driving sales. They’re best

used as a supplement to other more sustainable promotional activities. Here are a

couple examples:
This sales promotion example found on a professional education website illustrates

how sales often revolve around special times or events — in this case, the start of the

new year.

Consumer products companies rely heavily on sales promotions to drive business.

This is evident by the popularity of Groupon and other services that help get their

goods into consumers’ hands at sales prices.

Personal Selling

Companies hire salespeople to reach out directly to potential customers in order to

share information about products or services, answer any questions, and (hopefully)

close the sale.

Personal sales tend to be extremely effective because salespeople can easily adapt

their messaging to meet their prospects’ needs in real time. However, hiring and

training salespeople isn’t cheap, so it’s a promotional mix element most often used by

companies selling highly technical or customized solutions.

The Advent of Digital Marketing

While these five promotional mix elements—advertising, PR, promotions, direct

marketing, and personal selling—have been around for decades, the marketing world

is constantly evolving. Digital marketing lets companies target their potential

customers more easily, bypassing more traditional marketing channels and running

digital campaigns at a fraction of the cost.

Although digital marketing isn’t really a new promotional method—it’s simply a way

of leveraging new channels to deliver a message. As those channels become more

widely adopted, though, the costs are beginning to rise, leading companies back to

other time-tested promotional activities or prompting them to find other channels that

are on the rise but haven’t yet peaked.

How to Develop an Effective Promotional Mix for Your Company

An effective combination of promotional mix elements looks different for every

company and industry. There’s no silver bullet for finding the right promotional mix,

but with these steps, you’ll be better suited to finding the combination of tools,

channels, and processes that work best for you.

Together, we’ll build a theoretical promotional mix for a fictitious mid-size SEO

agency to illustrate how you can set up the most effective promotional mix elements

for your own company.

1. Consider Your Target Audience

First, create a detailed buyer persona for your ideal customer. Without a clear picture

of who you’re trying to reach, you’ll waste time, effort, and money marketing to the

wrong audience in the wrong channel.

Helpful stats to know about your target market: How old are they? What’s their job?

Their level of education? What kind of media do they consume?

For our fictitious agency, we’ve identified our ideal customer as owners and

marketing directors at fast-growing ecommerce stores.

Related reading: How to Do Market Research Better Than Your Competitors

2. Establish Clear Promotional Goals

Next, you’ll identify clear goals for your promotional efforts. Your goals act as a

guide for every decision relating to your promotional mix elements. Once you know

where you want to go, it’s easier to create your marketing plan to help you get there.

For most businesses, your goal will be to increase sales. Other common goals include

building awareness, establishing a reputation as a thought leader, or reducing

customer churn.
The most important thing is to make sure each goal is specific and measurable. Assign

specific KPIs to each goal so you can track your progress.

For our agency, our goal is to build awareness for a new service we’re launching. To

gauge success, we’ll measure two metrics: the number of visitors on our landing page

and the number of qualified leads generated.

Related reading: How to Define and Measure Marketing Objectives: A Start-to-

Finish Guide

3. Create a Promotional Budget

Next, know how much you can afford to spend on promotional mix elements.

Different activities and channels can vary widely in costs, so it’s important to avoid

overcommitting yourself and your organization.

Your budget should take into consideration four things: revenue, company age,

customer acquisition costs, and lifetime value. Generally, you should spend a portion

of the return you expect to receive from the campaign, and never more than you

expect. New companies may find they need to allocate a higher percentage to enable

rapid growth.

Let’s pretend our fictitious agency is young, and since productized services are quite

profitable, we can afford to invest more in promotion. We’ll invest $2,500 per month

in promotion to drum up interest, with the expectation that we’ll ramp down as we

acquire customers.

Related reading: Use This Marketing Budget Template to Track Every Marketing

Dollar

4. Choose Your Channels

Next, where will you deliver your message? Where is your target audience? The

promotional mix elements and channels you choose can make or break your

campaign, so it’s important to keep a few rules in mind:

Go where your audience is. If your audience is on LinkedIn, don’t market on

Instagram and TikTok.

Choose channels that match your desired message and format. For example,

according to Buffer, video performs best on Facebook, but written blog posts tend to

find more traction on Twitter.

Your messaging can (and should) vary with each channel. Shape every part of the

content—from subheadings to images and tone—to the interests of that channel’s

audience. For example, short, direct messages work best over email, but not as a

direct sales letter.

For our fictitious agency, launching a new productized service lends itself well to paid

advertising and direct outreach, so we’ll reach ecommerce store owners through a

combination of social media advertising and direct outreach.

Related reading: 6 Content Promotion Tactics (Plus How They Can Boost Your

SEO)

5. Define Your Marketing Message

The golden rule when it comes to messaging? Be specific. Vague and generic

messages are far less likely to resonate with audiences than specific communication

is. That’s why you defined your audience early on. Now, speak directly to them.

For our SEO agency example, our messaging will emphasize the cost and time

savings that ecommerce store owners will see after signing up for our new service.

Related reading: The Importance of Targeting in Marketing (And How to Include It

in Your Strategy)
6. Lay Out Your Promotional Mix

Split your budget between your chosen channels based on how well you expect those

channels to perform.

For our fictitious agency, we know we’re spending $2,500 per month. We’ll choose to

allocate 60% ($1,500 per month) toward social media advertising, and 40% ($1,000

per month) toward 15 hours of direct sales outreach to store owners.

7. Learn and Iterate on Your Plan

Finally, put your plan into action. Measure your success using your KPIs—did you

meet your original goals? Use what you learn to inform your promotional mix

analysis as well as your future marketing plans.

Let’s say, after a few months of promoting our fictitious SEO service, we’ve

discovered that direct sales are far more effective than social media. Moving forward,

we’ll reorganize our promotional mix elements to invest more in direct sales,

confident we’ll receive a higher return on investment (ROI).

What is a distribution strategy?

Distribution strategy is the method used to bring products, goods and services to

customers or end-users. You often gain repeat customers by ensuring an easy and

effective way to get your goods and services to people, depending on the item and its

distribution needs. Organizations consider which distribution strategy is best while

being cost-effective and increasing overall profitability. You can even use multiple or

overlapping distribution strategies to reach target audiences and meet company goals

and objectives. For example, a product might sell better online to one demographic

and via a mail-to-order catalog to another target audience group.

Consider basing distribution on your ideal customer, thinking about where and how

they buy products and what you can do to make purchasing your goods or services

easier. The item itself is often key to determining the right distribution strategy, type

and channel. For example, if your product is a high-end designer line of furniture,

buying directly from the manufacture may be worth the customer's time. Or if your

product is a routine, everyday item like a bottle of water, buying through convenient

and nearby shops may be more appealing to the customer.

When planning your distribution strategy, there are several factors to consider,

including:

Product type

Depending on the type of product or service you offer, your distribution strategy may

vary. For example, the distribution strategy for a luxury car brand may differ from

that of a paper towel manufacturer. Most consumer purchases get categorized into

these three groups:

Routine: A routine purchase is typically a low-cost item or service a customer chooses

quickly, like gum, soda and paper products

Limited: A limited purchase is a moderately priced item a customer spends more time

selecting than a routine purchase, like a refrigerator, couch or computer

Extensive: An extensive purchase is often an expensive item a customer intensively

thinks about before buying, like a vehicle, house or college education

Customer base

Another factor to consider is your user, or customer, base. Depending on where your

customers typically shop, your distribution strategy varies, and often advances in

technology influence distribution, too. For example, if your target customer base for

your paper towel product is a middle-aged woman buying at a grocery store, you may
choose to distribute to various brick-and-mortar storefronts, like grocery store chains

and warehouse companies. If your ideal customer base for your customizable

furniture is a high-tech affluent customer, distributing directly from the manufacturing

warehouse via online sales may work best. Types of shopping methods preferred by

consumers can include:

E-commerce websites

Direct mail ordering

Storefronts, booths and shops

Door-to-door sales

Warehouse and transportation logistics

The capabilities and costs associated with running a warehouse and delivery logistics

are another consideration when building a distribution strategy. For example, it is a

large financial investment to have a warehouse for storing goods, a fleet of

transportation vehicles like trucks and vans and personnel to staff the warehouse and

deliver the items. Depending on the storage and delivery needs for your product or

service, picking an alternative distribution strategy may lead to higher cost savings

and increased revenue.

What are the types of distribution strategies?

There are primarily two types of distribution strategies, known as direct and indirect,

and depending on the product or service, the two strategies offer different benefits and

cost savings to a company. Here's a definition of direct and indirect distribution

strategy:

Direct distribution strategy: Direct distribution is when manufacturers sell and send

their products directly to consumers without the use of other parties and entities. It
often requires having a warehouse to store products and a delivery process to get them

to customers.

Indirect distribution strategy: Indirect distribution strategy is when manufacturers use

intermediary businesses and entities to help logistically get products to customers. It's

often most helpful for large amounts of routine products and can create cost savings

for a company.

Within these two main types of distribution strategy are more specific options,

including:

Exclusive: Exclusive distribution is when a manufacturer picks a few sales outlets to

create a level of exclusivity for an item or brand, like luxury goods or exotic vehicles.

Intensive: Intensive distribution is when a manufacturer wants to penetrate the market

by selling its goods to as many sales outlets as possible to reach customers, most often

for affordable routine items like candy bars, household products and drink items.

Selective: Selective distribution is a mix of exclusive and intensive distribution,

giving you more locations to sell a product while still being choosy in which stores or

partnerships to sell within, like a high-end rug manufacturer selecting a specific retail

department store to reach more customers.

Dual: Dual distribution combines direct and selective distribution strategies to grow

market influence and also maintain direct sales with customers.

Reverse: Reverse distribution is often less common, where an item flows from the

customer back to a company, typically for recycling or refurbishing of goods, like

used computers or other electronics.

Read more: 7 Types of Distributors (Plus Considerations for Choosing One)

What are distribution channels?

A distribution channel refers to the path that services or products follow until they

reach their end-users and customers. The proper distribution channel depends on the

product, who it's serving and where it's going. For instance, a product may go from

the factory to a warehouse to the consumer. Or it may go from the factory to a

wholesaler to a retail storefront to the consumer. This series of events would be the

product's distribution channel.

Here are four primary distribution channels with explanations of how they work:

Wholesale

A wholesale distribution channel is when a wholesaler purchases items in bulk from a

manufacturer and then sells them to retailers later. This is often a good way to secure

products for less money because you place a large order. Wholesalers focus on the

storage and delivery of goods and act as a trader between the manufacturer and the

retailer who sells them, rarely interacting directly with the customer.

Retail

A retail distributor is often the place an item ends up before being purchased by a

customer. Retailers can get their product by buying from wholesalers or the

manufacturer directly, and they mark up the cost of an item to earn a profit. Retailers

are often thought of as actual storefront locations, like a supermarket or department

store, though with technological advancements, retailers are also online websites,

catalog companies or even phone-order businesses.

Franchisor

A franchise distribution channel is a unique way of distributing products and services.

A business owner pays to use company branding to gain sales through flat fees and

specific royalty amounts agreed upon in a contract. Organizations and manufacturers

with brand recognition and established customer bases can benefit from this
distribution channel without the everyday responsibilities of managing each location.

Some common examples of franchise distribution channels are well-known fast-food

restaurants, real estate offices and some healthcare companies. Franchising often

centers on these three types:

Product distribution franchising

Business format franchising

Social franchising

Read more: What Is a Franchise?

Distributor

A distributor gets and transports items from manufacturers to retailers and other

locations, and it's beneficial to use this method to save on the cost of having a

shipping site, staff and logistics operation. A distributor can also benefit by having

multiple clients that overlap, creating comprehensive product groupings that generate

more sales. For example, a distributor that has separate furniture, rug and lighting

manufacturers can create an all-in-one living room package deal for the customer to

buy that includes a sofa, chair, coffee and end tables and two lamps.