Distribution is one of the key elements to build a viable business model. Indeed, Distribution enables a product to be available to a potential customer base; it can be direct or indirect, and it can leverage on several channels for growth. Finding the right distribution mix also means balancing between owned and non-owned channels.
Distribution is a key asset
If you’re trying to digitalize your business or to build a digital business, it might be easy to get lost in the plethora of platforms and available channels.
How do you make an order for that?
Business distribution (being able to match customers with your product) is a vital asset. Without distribution the business will always be fragile.
But how do you build a strong distribution strategy?
Getting lost in the plethora of digital channels
There isn’t a single way to build a distribution strategy, and in many cases, it will depend on factors like what channels might be more suited for your product, what channels enable faster growth, and those distribution channels are also stable over time.
Lastly, distribution is also a matter of choice. Indeed, some companies (also based on their vision and culture) prefer certain distribution channels over others.
So how do you find the right mix?
We need to look at two key elements.
The key elements of a distribution strategy
When building up a distribution strategy, there are many factors to take into account. For the sake of this guide we’ll look at two primary, major factors, that affect a business over time:
- Control: how much do you own that distribution channel?
- Growth: what kind of growth does the channel unlock?
Let’s look at them.
Control: Owned vs. non-owned distribution channels
When building up a business from scratch, chances are, none will know you. There is no customer base. There is no product recognition. So how do you unlock growth?
Usually, companies tap into existing distribution networks, where they have none, or little control over how the product will be delivered to customers.
This might dilute the customer experience. However, it will enable the first traction of growth. As the business grows and it acquires its customer base, the same company might start investing on its own platform, thus asserting more control over how the product gets distributed.
For instance, if you take a company like Apple; it leverages both a direct (controlled) distribution strategy where it sells its products via its stores. And an indirect (partially controlled thanks to Apple’s branding power) distribution strategy.
While some businesses thrive in the long term without building a mix between controlled (owned) distribution and non-controlled distribution by solely relying on one or the other.
A solid distribution strategy needs to leverage both for several reasons:
- Diversify the product distribution
- Enhance and amplify the product
- Scale customer base by maintaining a good customer experience
Growth type: Organic, paid, and viral channels
- Organic: this kind of growth is built over a long period of time, and it’s bottom-up. As more customers join, they give slow but less noisy feedback on the product.
- Paid: in a paid growth strategy the company allocates resources to push its products in the hands of potential customers. In this case, the budget allocated for growth is primarily used to distribute the existing product to as many potential customers as possible.
- Viral: in a viral growth strategy (usually the less expensive but also the riskier) a brand leverages the features of its product to push it in the hands of as many users as possible, independently from the fact that those will convert in paying customers. As a classic example, think of a freemium strategy.
Distribution mix matrix
From the balance between a controlled and non-controlled channel and the growth strategy (organic, paid and viral), we can find the right mix.
A solid distribution strategy will leverage both controlled and non-controlled channels. And at the same time, those who are organic, paid, and viral.
Some examples below.
This is a viral strategy as it is usually inexpensive. At the same time, you’re not changing the underlying characteristics of the product.
While you’re working on the perception of the product you want to make sure also to develop the core parts of it in line with its new perceived value.
Which leads us to a product-driven word of mouth strategy.
Product-driven word of mouth
In a product-driven word of mouth strategy, you iterate on the core features of the product to make it more appealing to a wider customer base. As those features will gain traction through word mouth that will also make your brand known.
With this strategy the product will evolve to fit the market needs. Therefore, you can push it further also at PR level, as a solid product, can scale in terms of attention and users’ base without too much risk.
Beware though, as many people get to know your product the more your product will need to evolve.
Search engine optimization (rank your pages on Google organic results) is an organic growth strategy, which do not control. While you can structure content to be picked up by Google’s algorithm, a change in those core algorithms might cause your website to lose traffic (and customers) over night.
As you build up an organic audience via search engine optimization, building an email list from the contacts that reach you organically, is a great way to move from a channel where you have little control, to another where you have more control.
- Distribution is a core asset of any business. That is why it’s important to find the right mix to build a solid business.
- While building up a distribution strategy we can take into account the amount of control you have on that channel, and the growth strategy adopted (organic, paid, viral).
- As the business grows, you can develop a distribution steered toward more control, and less dependent on channels you do not control.
- Distribution as a Vital Business Element: Distribution plays a crucial role in building a viable business model. It involves making products available to potential customers through various channels, either direct or indirect, and finding the right balance between owned and non-owned channels.
- Digital Channels and Marketing: Digital channels are an essential part of a distribution strategy for modern businesses. They include organic channels like SEO, SMO, and email marketing, as well as paid channels like SEM, SMM, and display advertising.
- Controlled vs. Non-Controlled Distribution Channels: Companies often start by tapping into existing distribution networks to gain traction and reach customers. As they grow and establish their customer base, they may invest in their own platforms to have more control over product distribution.
- Growth Strategies: Businesses can adopt different growth strategies, such as organic growth (slow but steady), paid growth (allocating resources for distribution), and viral growth (leveraging product features to attract users).
- Distribution Mix Matrix: The right distribution strategy involves a balance of controlled and non-controlled channels, along with organic, paid, and viral growth strategies. Moving towards more controlled channels and solidifying the product are essential as the business evolves.
- Examples of Distribution Strategies: Examples of distribution strategies include media-driven PR (viral), product-driven word of mouth (organic), SEO (organic but not fully controlled), and building an email list (transition to more controlled channel).
- Importance of Finding the Right Mix: A well-developed distribution strategy is a core asset of any business. Finding the right mix ensures a solid and sustainable business model.
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