Selecting Distribution Partners
The effectiveness of any marketing/distribution channel depends on the success of the intermediaries.
Selecting these intermediaries is often the result of a 4-step process.
Create Partner Criteria
An intermediary must compliment a manufacturer’s goals, objectives, and strategies.
For example, to maintain their prestige status, Ferrari may demand that potential dealerships meet eligibility requirements including minimum square footage, repair facilities and financial status.
Locate possible Partners
In the case of Ferrari, dealers often contact the manufacturer requesting dealership status. For the rest of us, trade shows, ads in trade journals, and sales people are often the best sources for leads.
Evaluate those Partners
Once a list of potentials is compiled, it is up to a manager, a committee, or the board of directors to decide which partners to select.
Again, the deciding factor should be based on the company’s goals and objectives.
For example, say that 2 Bay Area dealerships are being considered by Ferrari to be “San Francisco Ferrari”; one is a Porsche dealer in Mill Valley, and the other sells Oldsmobiles by pier 39. It is most likely that San Francisco Ferrari will be in Mill Valley.
Recruit the best Partners
But why should Mill Valley Porsche become Mill Valley Ferrari? Since automotive dealerships typically buy inventory from the factory, the cost in maintaining an inventory of cars that sell for $80,000.00 to $1,000,000.00 each is daunting, if not prohibitive. Ferrari must be able to prove that sufficient demand exists in that marketplace.
Logistical concerns, such as Transport, Storage, and Inventory Control can take up half of any good size marketing budget. Proper planning is crucial. Generally, there are 6 components to keep track of.
This component involves accepting orders, verification of payment, and forwarding orders to the warehouse or distribution center.Customer Service
This is often the component that is widely advertised. Most direct interaction with customers happens here. Satisfied customers = more future sales.
This component involves deciding how much inventory to store where. Keeping track of Shrinkage and finding ways to minimize it falls into this area. Losses can be caused by a wide variety of factors such as theft, damage during transit, damage at the warehouse, or just plain lost inventory.
Packaging is most often considered a product element, but the proper packaging can make a product easier to transport and minimize breakage.
This component determines the size, style, location and, number of facilities required to store a given product.
Transportation, as implied, involves moving the inventory around between facilities. Often, this is the single most expensive component to consider, and the possibilities are seemingly endless.
Freight can be moved via Road, Rail, Water or Air. The vehicles can be company owned, or owned by a third party. There are a variety of transport services to choose from.
Trucks and Airplanes are typically fast and expensive. Ships and trains are slow and less expensive. Usually, some combination of methods is the most cost effective (and not always the cheapest) overall.