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Distribution Channels: The Definitive Guide

Marketing
Marketing

Distribution channels are some of the most important things in marketing.

Each marketing strategy is based on key elements that make it work, the classic 4Ps: product, promotion, price and placement. What we are interested in today, is the last one of them, the placement, which refers to distribution.

Distribution is important therefore but more important, especially at the beginning of one’s marketing journey, is the choice they make in distribution channels.

What are they and how we can use them? These are the main questions I plan to ask with this article.

What do I mean by channels of distribution? What are distribution channels?

According to Investopedia, “A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers, distributors, and even the Internet.”

What about marketing distribution channels?

Well, let’s adapt the above channels of distribution definition to our main theme of today:

A marketing distribution channel can therefore be defined as the path or the route through which services and goods travel from the producer or the seller to the actual client/user. To this end, you can implement B2B distribution and of course, B2C distribution.

The first refers to the path the goods of services travel from the producer to another company (maybe the reseller or distributor) while the second one refers to a direct path from the producer to the client.

What are the three types of distribution?

distribution channel

Of course, the B2B Vs. B2C type of distribution cannot be enough when it comes to marketing. We need to expand on these two limitative types and dig further into the process. Thus, we can talk about three main types of distribution that can help us better understand and adapt to the market.

Here are the best distribution channels examples you can use in your marketing process:

1. Indirect distribution

If you are playing on the digital market only, indirect distribution is probably the last model you could think about when it comes to delivering something of value to the end user. Why? Because indirect distribution involves a series of intermediaries between the producer and the client. When at least one intermediar lies between you and the client, issues about increasing costs may appear as well as issues related to the way the product or service is actually delivered.

Big producers, however, may not have a choice in this area. They need the intermediaries in order to sell their goods all around the world. In most of the cases, the same rule applies also to the marketing strategies where big companies need to work with intermediaries (marketing agencies) in order to be effective and address dozens of markets with different rules, behaviors and languages.

Example:

Think about your favorite mobile app. Where do you get it? Is it directly from the producer? Rarely. Most of the times, you get it from the official store, be it Apple Store or Google’s PlayStore. This is the easiest to understand example of indirect distribution.

Of course, on whole other levels, the same thing applies to companies like Coca Cola, Red Bull and so on.

Indirect marketing/distribution:

  • Traditional: storefront display, outdoor display. Most of the producers choose to advertise their produce inside the stores they use as an intermediary and even on their own stores, indoor and outdoor. It’s a form of indirect marketing because you are using other’s space in order to show your produce.
  • Digital: Advertising is one of the most popular forms of indirect marketing. It’s indirect because you are renting space on websites and social media channels that do not belong to you as opposed to the direct marketing which we’ll see later, uses your own frameworks.
  • Reseller strategy for services or products. This strategy implies a middle/external/third-party seller for your products or service and it is applied by hosting companies, software development companies and services companies as well.

A good example here is the partner reseller program from EMarketer.

reseller partner strategy

2. Direct distribution

The direct distribution channel implies that the company sells directly to the customer, without intermediaries. A modern example of a direct distribution channel is the eCommerce website.It is a better choice compared to the indirect channel because the company has the opportunity to select when, how and in which way the product or service reaches the end consumer. Also, it is easier to create marketing strategies, effective marketing strategies, when you know not only the product but also the route it takes from you to the user.

When it comes to marketing, direct distribution means the same thing. It means that you deliver the message directly to the customers, without the need of an external channel.

Example:

The best direct distribution marketing channels in this case is the newsletter. Why? Well, you use your own platform, your own mailinig server and a pool of customers that are already registered on your website. Here’s an example from Unsplash:

Unsplash content distribution

3. Selective distribution

Big companies, especially companies involved in the fashion industry choose to select their distribution channels rigorously.They deliver to a limited number of outlets and only to exclusive retailers in order to make sure their brands are handled by professionally instructed personnel.

Example:

Almost every company involved in the fashion industry choose to deliver their goods on selective markets.

What are the 5 channels of distribution?

Some people define distribution by the channels the products or services travel from the producer to the user. There is no effective distinction between the types of distribution channels we’ve listed above and the channels of distribution some marketers like to call these types. However, you may find some distinction when it comes to the number of channels, where, besides the already discussed three types, there are two other types or subtypes that are part of this process.

Thus, we can expand our initial list to the following 5 channels of distribution:

  1. Direct distribution
  2. Indirect distribution
  3. Selective distribution
  4. Dual distribution
  5. Reverse channels

 

A. Dual distribution

There is a wide variety of marketing distribution channels and marketing arrangements and strategies that fit the description of a dual distribution channel. However, we can summarize the concept as a strategy used for delivering the goods or services on more than one channel in order for them to reach the end user. In other words, you can combine direct distribution with indirect distribution and a whole lot of offline and digital channels for each of these options.

A good example of a dual distribution is the franchize option. In this case, a company may choose to deliver directly and at the same time, resell the distribution rights to a third company.

Example:

McDonalds

A good example in this case is McDonalds. They have their own channels of distributions for foods and marketing messages but they use the franchise option as well, especially on foreign markets where they did not penetrate or did not want to penetrate on their own, until now.

B. Reverse channels

Reverse channels represent a new idea into the marketing profession, an idea that was made possible and made popular by the new advancements in technology and the way society use them. If you are at this point in reading the article, you may already noticed that all these above described channels follow a specific pattern.

The flow goes from producer to intermediaries or not and up to the end user.

Reverse channels, however, come with a new concept, one that make a reverse flow possible and actually effective for some companies and types of goods and services.

Products and services may go from end user back to intermediaries or beneficiaries or producers through resales or recycling.

Here’s a great graphic that clearly describes this type of a channel:

channel flow

Conclusion

Distribution is essential for a company regardless of the market it relies upon. In order for a business to be effective, goods or services need to be delivered to the end user through specific channels which ensure the constant, professional flow of these goods.

A marketer needs to know these channels and to select the proper ones depending on the type of goods he or she markets for and make sure they make the proper marketing decisions based on the technical aspects of the selected channels and the proper delivery methods specific for each of them.

What specific channels of distribution are you using and why did you make that choice?

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Robert Katai

Content Marketing Strategist

"Content isn’t king. Usefulness is. Robert does this in the online marketing and social media space with ease."

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