What are the steps involved in distribution channel strategy?
Distribution channel strategy is derived from corporate as well as marketing strategy.
There are certain steps in developing suitable distribution channel strategy:
- Defining customer service levels
- Distribution objectives and steps
- Structure of network required
- Policy and procedure to be followed
- Key performance indicators
- Critical success factors
Customer service levels are defined by the nature of the industry, the products competition and market shares. Affordability has also been found to decide the level of service. The customer service levels should match competition and it is further believed that customer expectations as such have no limits.
Distribution objectives are influenced by customer expectations and the objectives define the extent of time, place and possession utility which any customer can expect from a distribution network. The operating manuals are found to define the policy and implementation guidelines.
Policy guidelines include code of conduct for channel members, system of redressal of complaints, conditional subsidies and the power to handle institutional business. Key performance indicators actually indicate the effectiveness of a distribution channel.
They are several indicators of effectiveness that have been detailed below:
- Consistent achievement of distribution targets
- Achievement of market shares
- Achievement of profitability
- Zero complaints from customers
- No stock returns
- Ability to handle emergencies
- Balanced sales achievement during a period
- Market coverage with ready stocks
- Minimizing losses due to stock outs
- Minimizing damages to products
