How Your Products and Customers Meet
There are many factors to consider in the area of sales and distribution. You need to have a well-thought-out plan of conducting the sale and delivering (“distributing”) your product to the customer. Think through answers to the following questions for starters.
- Is your sales approach highly persuasive and emotional? Or, is it informational and low-keyed? See The Sales Process – Selling “101″ for more information.What is the average length of the sales cycle? See The Sales Process – Selling “101″ for more information.
- How many products can you produce in what time frame?
- How many products can you store, or what is your inventory capacity? Use sales forecasts to decide what your inventory levels should be in order to meet customer demands.
- How often will you “turn” or replenish your inventory? How does this compare with the standards in your industry?
- What are the cyclical fluctuations or seasonal changes that affect the demand for or production of your products? For example, if you produce Christmas decorations, how will you manage peak production and sales periods as well as slow periods?
- Describe your distribution channel. In other words, how will your products be delivered or distributed to the customers?
- For relatively small sales, such as selling your paintings through a local gallery, the distribution method is such a routine part of the sales contact that it requires only a small amount of thought and description. (In this scenario, the painting is displayed and stored at the gallery, the sales approach is probably low-pressure and informational, and the painting is given to the customer at the time of the sale.) At other times, such as when an order is taken over the Internet and the product is mailed, more and planning description of the entire approach is in order.
Types of Sales Transactions
Some of the major categories of sales and distribution channels are named below. You may use one, more than one or various combinations of sales and distribution methods. Additionally, different products from the same company may require different methods.
- Direct Sales – Your company sells directly to the customer or end user of the product. There is no agent between your company and the customer. Providing financial planning services to individuals is an example of direct sales. Catalog sales or sales over the Internet are also examples of this method.
- Indirect Sales: Retail – Your company sells to a retailer whose salespeople then sell to the customer. Selling organically grown herbs to a local grocery store is an example of indirect sales.
- Indirect Sales: Wholesale – Your company sells to a wholesaler or agent who sells products to retailers. The wholesaler most likely represents several companies. (It’s more efficient for the retailer to have one source for many products instead of dealing with an unwieldy number of individuals.) Selling novelty pet accessories to wholesalers who resell to a variety of pet care stores, animal clinics and other retail outlets is an example of selling to wholesalers or agents.
- Indirect Sales: Multi-level Marketing – You sell both directly to customers and to other sales people you have recruited to sell products. Amway® is one of the more recognized examples of this method.
You will determine which interface between your company and the prospective customer is appropriate depending upon your objectives.
- What are the characteristics of your target market and how large is the market for this product?
- For example, for a high-priced product with a small number of potential buyers, the direct sales approach with plenty of service is probably best. For a low-priced product that appeals to the mass market, like chewing gum, an indirect selling approach is fine as long as it is supported with advertising and effective placements in retail stores so customers can find it easily.
- Where are the customers located? Sales through a local retail outlet may be your best distribution method if you have a large number of customers located in your area. However, a small number of geographically dispersed buyers may require you to sell to an agent or wholesaler who, hopefully, will provide the needed individual attention. Industrial purchases are made directly from a manufacturer or manufacturer’s representative in most cases.
- How large are the orders? You might segment your customer base by order size and sell directly to customers placing large orders and use an indirect sales method for small orders.
Product Availability
At first glance, you might think this is a no-brainer; the more convenient and available the product is, the better. This isn’t always true, though. Often, it’s better to be more selective, even exclusive, about sales locations for your product. Take every opportunity to think strategically!
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