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Distribution Models

CONTENTS

What is a distribution model?

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Distribution model definition

A distribution model outlines how goods make their way from the manufacturer to a consumer outlet. 

Before customers can start buying and using your products, you need to figure out how you will get your product from the factory to the stores. Product teams use consumer research to decide which distribution model will be most suitable for each product. 

Distribution models can help guide product management strategies. The distribution model you use can shape your research efforts, dictate how you build the product and push future updates, and influence the product’s onboarding strategy.

Common questions when choosing a distribution model are:

  • Should we sell directly to the customer or through a reseller?

  • Should we automate the buying process or use a sales team?

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Examples of distribution models

There are many product distribution models, each suited to different situations. 

Direct-to-customer using an assisted sales process

This model is the most typical distribution model we see, especially in the B2B world. It involves a sales team who will cold call potential customers and respond to leads generated by marketing campaigns.

Direct-to-customer using an automated purchasing process

This model has become increasingly common as the demand for online sales outlets has increased. Rather than having a sales team handling the sales process, this distribution model is fully automated using sophisticated software. This model is great for companies that produce software because customers can download the product instantly.

Resale through authorized dealers

This distribution model allows manufacturers to outsource their sales efforts and increase reach while controlling how a product is sold. 

Resale open to all resellers

This model is great for manufacturers that want to outsource their sales efforts and maximize reach. By pushing the product through as many resellers as possible, they can quickly saturate the market to effectively compete against similar products. 

How to choose your product's distribution channel

One of the main deciding factors when choosing a distribution model is the type of customer you’re targeting. 

If you’re selling B2B software, you can use a fully automated direct-to-consumer distribution model. That’s because you can automate the entire product delivery process.

If you’re selling a unique physical product, you may be better off using a resale distribution through authorized dealers. This allows consumers to view the product before buying, while still controlling how your product is marketed and sold to customers.

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General FAQ

What is a distribution model?
A product distribution model is the process of getting a product from the manufacturer to the customer.
How do you choose the right distribution model for your product?
Choosing the right product distribution model depends on your target audience and how you want customers to perceive your business. Some models offer high market saturation at the expense of control over the product, while others offer a more controlled process for niche markets.
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