Product managers focus on solving problems, strategizing on pricing, crafting roadmaps and business plans, working with sales teams, creating user personas and buyer personas and completing a dozen other important tasks.
A distribution strategy is a blueprint for how your company delivers its products to customers. It determines where, when, and how those products reach their final destination.
And, it’s often an underappreciated product management task.
What is Distribution Strategy?
A distribution strategy is a comprehensive method of delivering products to customers or end-users. It involves understanding the channels where customers can purchase your product and the logistics and processes of those channels.
Distribution strategy commonly centers around sales—which is important—but we teach that this work involves more than sales.
We believe that sales is just one component of a much bigger picture, and distribution strategy involves answering three questions.
- How does your market prefer to purchase your product?
- How do they prefer to receive your product?
- How do they prefer to use your product?
When the distribution strategy begins with these questions, it reverses the strategy from an inside-out approach to an outside-in approach (focusing on market preferences). So, does the market want to purchase on your website or do they want a more hands-on experience with a salesperson?
This quick guide outlines some distribution strategy methods and provides helpful examples.
Direct Distribution
The producer and the customer interact directly in a direct distribution channel (there are no intermediaries). Typically, this means direct sales via a website, physical stores or a dedicated sales team. The biggest advantages of this strategy are control over costs, customer service and promotion opportunities.
For example, if your product is task management software like Asana, customers might purchase their account or subscription by visiting the company website.
Alternatively, some saas companies might sell mobile apps; in that case, they might use the Apple Store or the Play Store on android to distribute the product
Indirect Distribution
This distribution strategy utilizes partners(sometimes called value-added resellers) to sell your products. There is an intermediary between your company and the buyer. These partners might also bundle it with some additional products or services.
In this approach, the buyer usually sees your partner as the sales team, not your company. As a result, you have less control of price, promotions and customer service. In return, partners might make it possible for a company to sell to difficult-to-reach segments or a bigger market.
Another form of indirect distribution is when you work with an integrator. For example, companies like NVIDIA manufactures graphics cards for computers. Buyers might not even be aware that they’ve purchased a graphics card from this company only that they bought a dell laptop.
Indirect distribution can be further divided into three categories: exclusive, intensive or selective.
1. Exclusive Distribution Strategy Example
The product manufacturer agrees to give one distributor the right to sell the product in a specific region. Usually, this method is preferred for luxury goods. Only having a few distributors protects brand equity by keeping the right amount of supply and demand in a specific area.
An example of exclusive distribution would be if a luxury brand like Apple chose only to offer its newest Apple Watch at Best Buy locations. The reduced availability would likely increase the product’s value to the target buyers.
Another example could be a popular celebrity launching a new podcast that is only available on Spotify premium. This might not affect brand equity in the same way limited distributors affect retail luxury goods, but it does limit availability.
2. Intensive Distribution Strategy Example
Opposite to exclusive distribution, intensive distribution is the “be everywhere” approach. Big brands like Coca-Cola or generic products like ibuprofen are available in as many locations as possible, from grocery stores to gas stations, and online, ready to be shipped.
The benefits of this strategy is it can increase brand awareness and can help the product become an alternative to similar options in the marketplace.
Podcasts often use an intensive distribution strategy. In addition to having a podcast available on a company-owned website, the RSS feed is often submitted to other platforms like Apple Podcasts, Google Podcasts, Stitcher, Spotify, etc.
3. Selective Distribution Strategy Example
Selective distribution is a strategy where the company carefully chooses its distribution channels. The company will only distribute its product through the most profitable and efficient channels.
In this way, selective distribution can also be considered as an extension of the exclusive product distribution strategy. However, unlike exclusive product distribution where the manufacturer restricts itself to just one channel of distribution such as direct sales or retail sales; selective product management allows a manufacturer to expand their reach by using multiple channels of distribution simultaneously (i.e., wholesale and retail).
Distribution Strategies as Disruption
Improving the Status Quo: This means making a better product (or service) at a lower price than your competitors while maintaining quality.
Some of the biggest market disruptors in the last 20 years weren’t delivering innovative products. Instead, they were delivering familiar products (like books and movies) in new ways.
For example, Amazon has revolutionized retail by offering products at lower prices than traditional retailers, who charge more because they have higher overhead costs due to physical stores.
In addition to low prices on all kinds of goods, Amazon has also offered free shipping for years now—a major advantage over other online retailers like Walmart or Best Buy.
Netflix disrupted the biggest players in the movie rental business by mailing DVDs and then creating streaming services.
Obviously, these two companies have grown tremendously by expanding into new markets and providing additional delivery options, but they face growing competition now that other companies are adopting similar distribution strategies.
Learn More About Distribution Strategy in The Course: Focus
Focus shows you how to find opportunities in your market’s problems, score them objectively and identify where your company’s strengths intersect with market values.
Then we show you how to use that knowledge and market data to successfully and credibly sell your strategies internally.
