Distribution Strategy

Published by MBA Skool Team, Last Updated: May 15, 2020

What is Distribution Strategy?

Distribution Strategy is a strategy or a plan to make a product or a service available to the target customers through its supply chain. Distribution strategy designs the entire approach for availability of the offering starting taking inputs from what the company communicated in marketing campaigns to what target audience is to be served. A company can decide whether it wants to serve the product and service through their own channels or partner with other companies to use their distribution channels to do the same.

Some companies can use their own exclusive stores for their own products or can use available retail chains to sell their products. It can be combination of both. Many companies these days also use online exclusive channels to sell their products or services.

Importance of Distribution Strategy

Distribution Strategy is precisely the strategy deployed by a company to make sure the product/service can reach the maximum potential customers at minimal or optimal distribution costs. A good distribution strategy can maximize your revenue and profits but a bad and unplanned distribution strategy can lead not only to losses but also helping the competitors get the advantage through the opportunity in the market which you created.

Types of Distribution Strategy

Overall there are 3 major distribution strategies

1. Exclusive Distribution : Exclusive stories to sell products leads to more control. Example, Luis Vuitton Stores

2. Intensive Distribution : Maximizing outlets to maximize sales. Example, Coca Cola

3. Selective Distribution : Carefully choosing multiple channels and partners. Example, Adidas, Nike

The above 3 distribution strategies are the most used but a typical strategy may differ for a particular product or a company. Many companies use online as well as offline strategies together to optimize sales e.g. Apple iPhone.

In many situations one or more distribution channels can be used, for example (there are many more forms apart from these)

1. Manufacturer -> end customer

2. Manufacture -> agent -> end customer

3. Manufacturer -> retailer -> end customer

4. Manufacturer -> wholesaler -> retailer -> end customer

5. Manufacturer -> reseller -> retailer -> end customer

6. Manufacturer -> franchisor -> franchisee -> end customer

Distribution strategy should be optimized and updated regularly as per the market parameters through demand analysis and supply analysis so that it can keep up with the current market scenarios and does what it is intended to do i.e. make product reach to potential customers. Push or pull marketing strategies would both not work if a company's distribution strategy is not in place.

Factors affecting Distribution Strategy

Distribution Strategy depends upon following parameters too:

1. Location of business

2. Location of target market

3. Reaching the target market

4. Warehousing

5. Transportation and logistics

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 6 categories.

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