Once a startup is ready to commercialize its product, you must determine how the product will reach its target customer. You can choose to sell directly or build distribution channels.
Distribution (or place) refers to an organization, or set of organizations, that is involved in the process of making a product or service available for use or consumption by a consumer or business user. It is one of the four main elements of the marketing mix (the other three are product, pricing, and promotion).
Distribution is necessary for getting your company’s product into your customers’ hands. A smart distribution strategy is necessary for success and can be a source of competitive advantage. Dell and Amazon are examples of companies that benefited from a well-developed distribution strategy.
Distribution is about more than finding a channel to the customer. It is important to find a distribution channel that makes it convenient for the buyer to purchase and consume the product. Convenience is a customer-centric view of distribution and marketing.
Product distribution relies on combining three different channels (which can be independent or joined):
For each channel, you can choose either a direct (in-house) channel or a third-party indirect (outside) channel, or a combination of both. Many high-tech companies have an inside sales force and employ other distribution channels to reach different customer groups.
Selecting a distribution channel can directly impact a product’s success. There are five key factors to consider:
When selecting a distribution channel, you want to ensure that you can develop and sustain relationships with customers (for example, economic buyers, technical buyers, end users). You need to reach these customers so they can purchase your products. Two key criteria can help you to focus your selection:
When selecting a distribution channel, the complexity of product and marketing should be proportional. If the product is relatively easy to use, then it should be relatively easy to buy (for example, selling books and DVDs online). Conversely, if the product is relatively complex to install, then it will be relatively difficult to support (for example, selling supply chain management software solutions through direct sales).
Problems occur when the marketing and the solution are not balanced:
Before choosing a distribution channel, a company should determine how to balance push and pull marketing:
The distribution channel promotes and sells your product to consumers. This is common for products where brand loyalty is low—the consumer makes the choice to purchase the product in the store.
The product is advertised and promoted directly to consumers, who then go to the distribution channel to purchase your product. This is common for products where brand loyalty is high—the consumer chooses to purchase the product before going to the store.
Choosing between push and pull marketing will affect other parts of your marketing strategy, including:
Viardot, E. (2004). Successful Marketing Strategy for High Tech Firms. Boston: Artech House.
Wiefels, P. (2002). The Chasm Companion. New York: Harper Business.