This stage of the business planning process will help you define where you will sell your products and services and how to manage the process of selling and distributing the products. When you think about the products or services you offer, or plan to offer, decide on whether they are an item that your customer will search for, or is it an item of convenience – whether they will want access to it immediately.

To help highlight the importance of choosing an appropriate distribution strategy, let’s take an example of two different products – batteries and picture frames.

  • Batteries are found in most shops. It is an item that people will buy from almost anywhere as it is a convenience item – that is, they need it now.
  • Picture frames are something that a customer might spend a while searching for, to match the picture. They are prepared to go out of their way to a specialty store to find the right one.

If you were selling batteries, you would choose to adopt a strategy that placed your products in front of your customer in these convenience outlets. On the other hand, the picture frames seller is not as concerned with this type of placement. Their challenge is to convince the customer to visit their outlet to make the purchase.

Continuing with the example, batteries are mass distributed through service stations, supermarkets, hardware stores, even in video stores – anywhere that people go to shop. Picture frames are distributed through photographic stores, department stores, and specialty stores.

Most products fall into the category of a convenience item or a specialty item. If your service or product is a “Need It Now’ item, then as a general rule it is one of convenience. If it is more specific, then it is a specialty item, and your customer will more likely travel to make the purchase if need be.

Getting your product to your customer

If you have a product that is information based, it can be delivered via the Internet and the mail order process. If you have a digital product completely, such as software, then your distribution method will remain the same.

Here is what Steve decided on for distributing his products to his customers:

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Distribution Methods

As I have a number of product lines that are both fresh and a commodity good and some that are a specialty good, I have a number of distribution options. I will continue distributing goods direct to my customers via my home delivery service, and customers can purchase my products direct from Top Shelf Groceries.

I will also set up an online store on my website, to allow orders to be processed, filled and sent to the customer in the same way as the deliveries are sent at the moment.

As my customer base grows on a geographic basis, I will research and use a delivery company to help with my orders. My profit margins do not allow for an expansion of my business into my own distribution network yet. By outsourcing this task,

I can save myself time and money at the moment.

I will monitor their performance on a monthly basis, by contacting my customers and enquiring about their product quality and level of satisfaction.

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As another option for your business, you can also distribute your product into other business’ outlets. If the product you are selling is compatible with the outlet, and the outlet doesn’t detract from the image of your brand, then this is a great option of increasing the awareness of your brand / product / service, without the extra expense of establishing another outlet.

For Steve, he could consider a strategy that saw him develop his own products under his own brand, and then distribute these products through other outlets. For example, liquor stores (if it were an entree item for dinner parties) or other convenience stores.

If you plan on selling via other outlets, what will be your method of delivery? Write into your strategy your shipping plans, especially if you plan on outsourcing this part of the process to a shipping company to help you do it.

Some advantages for using any outsourcing agent for an aspect of the business is that you reduce your expenses and free up your time to pursue more needy tasks. Disadvantages are that you have less control over the tasks outsourced, and you run a greater risk of exposing the business to flaws (dependant on another organization).

To successfully manage an outsourced function of your organization, remain in contact and monitor their performance. If it does not meet your standards, then act accordingly, and solve the issue, either with the service agent, or find another company.

Operational

It is important for you to remain on top of your business, and to plan for the management of your activities – or the operational side of the business. This section will refer to how you manage the paperwork and invoicing, maintain equipment (machinery, computers, etc), and how you will staff the business.

Below is a list of questions that you need to address and include in your business plans. This section will be referred to by other members of your company, so they are aware of the plans you have to manage certain tasks.

  1. How will you manage the finances? Will you use a bookkeeper in-house, or will you outsource the task?
  2. How often will you update or service your electronic equipment? Who will manage this – an IT company, or an in-house staff member?
  3. Do you have machinery that needs regularly maintenance? How often should this be done, and by whom?
  4. Do you have product that needs quality control (such as Top Shelf Groceries and their food products)? How will you manage this process?

This list is not exhaustive, and this part of the plan does not need to be too detailed. Depending on the size of your business, you will most likely have other documents that outline these activities in further detail. However it is important to include this information within the overall business plan. Potential investors, banks, other business partners and even your staff will need to know what you plan on doing with respect to these areas of the organization. By having it written down in the plan, they can access the information immediately.

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