Distribution Channels

How do you sell to your end-users? Do you use a direct sales team?
Resellers? A catalog or website?

Distribution channels are the pathways that companies use to

sell their products to end-users. B2B companies can sell through a
single channel or through multiple channels that may include
 Direct/sales team: One or more sales teams that you employ directly.
You may use multiple teams that specialize in different products or
customer segments.
 Direct/internet: Selling through your own e-commerce website.
 Direct/catalog: Selling through your own catalog.
 Wholesaler/distributor: A company that buys products in bulk from
many manufacturers and then re-sells smaller volumes to resellers or
retailers.
 Value-added reseller (VAR): A VAR works with end-users to provide
custom solutions that may include multiple products and services from
different manufacturers.
 Consultant: A consultant develops relationships with companies and
provides either specific or very broad services; they may recommend a
manufacturer’s product or simply purchase it to deliver a solution for
the customer.
 Dealer: A company or person who buys inventory from either a
manufacturer or distributor, then re-sells to an end-user.
 Retail: Retailers sell directly to end-users via a physical store, website
or catalog.
 Sales agent/manufacturer’s rep: You can outsource your sales
function to a company that sells different manufacturers’ products to a
group of similar customers in a specific territory.
Distribution is one of the classic “4 Ps” of marketing (product, promotion,
price, placement a.k.a. distribution). It’s a key element in your entire
marketing strategy — it helps you expand your reach and grow revenue.

Here are three distribution examples:

SELL THROUGH A
DIRECT TO END SELL THROUGH A
VAR (VALUE-
USERS DEALER NETWORK
ADDED RESELLER)
You have a sales team You have two markets You sell a product to a
that sells directly to and two distribution company who bundles
Fortune 100 channels. You sell a it with services or other
companies. You have a product through a products and re-sells it.
second product line for geographical network That company is called
small businesses. of dealers who sell to a Value Added Reseller
Instead of using your end-users in their areas. (VAR) because it adds
sales team, you sell this The dealers may value to your product.
line directly to end- service the product as A VAR may work with
users through your well. Your dealers are an end-user to
website and marketing essentially your determine the right
campaigns. customers, and you products and
have a strong program configurations, then
to train and support implement a system
them with marketing that includes your
campaigns and product.
materials.
To create a good distribution program, focus on the needs of your end-
users.

 If they need personalized service, you can utilize a local dealer

network or reseller program to provide that service.
 If your users prefer to buy online, you can create an e-commerce
website and fulfillment system and sell direct; you can also sell to
another online retailer or a distributor to offer your product on their
own sites.
 You can build your own specialized sales team to prospect and close
deals directly with customers.
Wholesalers, resellers, retailers, consultants and agents already have
resources and relationships to quickly bring your product to market. If you
sell through these groups instead of (or in addition to) selling direct, treat
the entire channel as a group of customers – and they are, since they’re
buying your product and re-selling it. Understand their needs and deliver
strong marketing programs; you’ll maximize everyone’s revenue in the
process.

Best Case Neutral Case Worst Case

You’ve used one or You’re using one or You probably aren’t
more distribution more distribution hitting your revenue
channels to grow your channels with average goals because your
revenue and market success. You may not distribution strategy is
share more quickly have as many channel in trouble. With your
than you would have partners as you’d like, current system, you
otherwise. Your end- but your current system may not be effectively
users get the is working moderately reaching your end-
information and service well. You devote users; your prospects
they need before and resources to the probably aren’t getting
after the sale. If you program, but you the information and
reach your end-user wonder whether you’d service they need to
through wholesalers, be better off building buy your product. Your
VARs or other channel an alternative current system may
partners, you’ve distribution method — also be difficult to
created many one that could help you manage. For example,
successful marketing grow more channel members may
programs to drive aggressively than you not sell at your
revenue through your are now. suggested price; they
channel and you’re don’t follow up on
committed to their leads you deliver; they
success. don’t service the
product very well and
you’re taking calls
from angry customers.

Key concepts & steps

Before you begin
You can evaluate a new distribution channel or improve
your channel marketing / management at any time. It’s
especially important to think about distribution when
you’re going after a new customer segment, releasing a
new product, or looking for ways to aggressively grow your business.
Evaluate how your end-users need to buy
Your distribution strategy should deliver the information and service your
prospects need. For each customer segment, consider

 How and where they prefer to buy

 Whether they need personalized education and training
 Whether they need additional products or services to be used
alongside yours
 Whether your product needs to be customized or installed
 Whether your product needs to be serviced
Match end-user needs to a distribution strategy
 If your end-users need a great deal of information and service, your
company can deliver it directly through a sales force. You can also build
a channel of qualified resellers, consultants or resellers. The size of the
market and your price will probably dictate which scenario is best.
 If the buying process is fairly straightforward, you can sell direct via a
website/catalog or perhaps through a wholesale/retail structure. You
may also use an inbound telemarketing group or a field sales team.
 If you need complete control over your product’s delivery and service,
adding a channel probably isn’t right for you.
Identify natural partners
If you want to grow beyond the direct model, look for companies that have
relationships with your end-users. If consultants, wholesalers or retailers
already reach your customer base, they’re natural partners.

Build your channel

If you’re setting up a distribution channel with one or more partners, treat
it as a sales process:

 Approach the potential channel partner and “sell” the value of the
partnership
 Establish goals, service requirements and reporting requirements
 Deliver inventory (if necessary) and sales/support materials
 Train the partner
 Run promotions and programs to support the partner and help them
increase sales
Minimize pricing conflicts
If you use multiple channels, carefully map out the price for each step in
your channel and include a fair profit for each type of partner. Then
compare the price that the end-user will pay; if a customer can buy from
one channel at a lower price than another, your partners will rightfully have
concerns. Pricing conflict is common but it can jeopardize your entire
strategy, so do your best to map out the price at each step and develop the
best solution possible.

Drive revenue through the channel

Service your channel partners as you’d service your best customers and
work with them to drive revenue. For example, provide them with
marketing funds or materials to promote your products; run campaigns to
generate leads and forward them to your partners.

What’s next?

As you’re creating a new channel you’ll need a pricing

strategy and sales process. When your channel is up and
running, you can start launching marketing
campaigns to channel partners and end-users.