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What are channels of distribution? It is the system where customers are provided access to an organization's products or services. Distribution is all about getting your product/service to the right people at the right time with special consideration for profit and effectiveness. Successful marketing does not end when a business has developed a product/service and has found its appropriate target audience with a view to selling it at the 'right' price.
The next issue that needs to be faced is how they are going to distribute and sell this product/service to these people- the consumers.
When a product/service is purchased by a consumer, it may have been bought directly from the business, or it may have been through a number of intermediaries (wholesaler, retailer, etc) these are known as distribution channels. Small businesses need to acknowledge the different types of distribution channels to utilize sales potential. After reading the article, you may learn that you could increase sales or profit by using a different distribution channel to the one that you currently use.
Distribution channels are influenced largely by the type and size of the business and so some of the channels explained may not be feasible for your particular business. Consequently, you may take note that these channels could be adopted in the future to accommodate for any changes and to help your business grow.
In this very article it showed how Dell computer has successfully used their channels of distribution strategy to be the 'best' in the market in terms of profitability and potential external growth. Let me start with background of the company and explain you how successfully they have created their channels of distribution program.
Dell, Inc., formerly known as Dell Computer Corporation, designs, develops, manufactures, markets, services and supports a range of computer systems, including enterprise systems (servers, storage and networking products and workstations), notebook computer systems, desktop computer systems and software and peripherals. The Company is generally managed on a geographic basis the Americas, Europe and Asia Pacific-Japan.
Dell Computer built a strong position in PCs by replacing traditional distribution with telephone-based sales and ordering. Dell entered the PC industry at a time when most companies sold through small, specialized, high-cost dealers which provided customers with support on both how to purchase and how to use computers. This high-cost channel was quickly obsolete and most PC suppliers switched to large, mega store retail chains (CompUSA, Computer City, etc.)
While the other suppliers were struggling with retail channel evolution, Dell took a radically different path by finding a means to sell products which normally required both significant customer assistance and local stocking without a dealer or distributor network. Dell created a new channel option by bringing new technology to traditional roles played by the distribution channel. Dell takes orders over the telephone, it allows purchasers to customize products to their own needs, it assembles products largely to order, and it achieves rapid delivery. The combination provides a high degree of customer service at a previously unattainable cost structure. With this distribution change as a major element of its strategy, Dell grew to a profitable $7.8 billion business at the time when many larger computer companies were giving up on the PC market.
What is the importance of product and place in the development of marketing strategy? Product and place is like heart and soul for any organization to be successful in the market. These are two of the most important ingredients which is necessary for any recipe. Dell has a successful concept of making computers, desktop, laptop, etc. and decided to sell them directly to the consumer (one-on-one) base, not many organization would adopt their concepts and strategies, but Dell did had great foundation and strong business model to adopt it and the 'fact' is in front of us, as they are the best in the business.
In a nut shell, Dell shows how a company can meet most of the same end customer needs as its competitors through a radically different distribution approach. As enabling technologies (telephone communications, call centers, shipping logistics, etc.) evolve, more suppliers will supplant traditional sales and distribution approaches and, therefore, gain competitive advantage. However, simply copying a model which has worked once is not a guaranteed path to success. No other "mail order" computer company has managed to match Dell's growth in sales and profits. Dell built a strong overall business model and established its position before others had a chance to copy the model
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