Evaluating the distribution channels

Evaluating the distribution channels
Panagiotis Koutoudis
by Panagiotis Koutoudis

Many small time entrepreneurs believe that brainstorming, developing and launching a product is the toughest part of any business and marketing comes next. What they completely ignore or overlook is evaluating the distribution channels to get their product from the manufacturing facility to the end user or from their office computers to the end user if it's a service.

It's About Profitability Or Bankruptcy

So what determines if your business is going to make a profit or go bankrupt? While there are many factors, including the product itself, your distribution channels are one of the most important factors that makes or break a business. Selling a product to the end user is very simple. Everyone has to get their piece of cake but the end user should feel that he is getting enough of it for the money he paid.

Distribution Costs

When you choose a highly effective distribution channel that can push your product beyond boundaries, the distribution costs associated with their services is likely going to be very high, usually for the reason that they do a better job than anyone else. Some small-time distribution channels give the providers the larger slice of cheese but they may not sell a lot of cheese end of the day. Simply put, it is up to you to decide whether you want to make smaller margins but sell a lot of cheese or make higher margins but sell lesser.

“There are many factors to consider when selecting the appropriate distribution channel for a given product or service.”

This all looks quite simple in theory but the reality is complex and making a win-win decision is difficult for first-timers. A large distributor, despite their high commission structure may not distribute your product simply because 'he can't see' a potential for it. The situation will end up in such a way that your commissions no longer are anything to write home about yet you will find yourself struggling to convince the distributor.

The second scenario, where someone pays you an attractive commission may still not be able to push your product to the mass market because his distribution skills are not substantial. Anything below ‘outstanding’ is no longer considered good because of the intense competition in our market.

Sometimes The Answer Is Not A Single Channel

It is not necessary that evaluating the distribution channels means you should wind up with a single source to distribute your products. Sometimes it is imperative to use more than one source to distribute your products to widen the market reach.

Maintaining Control is as important as distribution

As the service provider/manufacturer, it is important for you to maintain control over your products/services. You want to have a control on who gets your product and who don't get your product.

Our Solution

Finding the right distribution channel is hard but with iGoStartup's startup tools; you can assess various options and evaluate the pros and cons of each one before making a decision.