Selecting a Distribution Channel Checklist

Selecting and managing your distribution channels is a key component of your marketing mix, and integral to the successful
operations of your organisation. It is all very well to have a fantastic product with a well-recognised brand, clever promotion and
a price your customers will pay; if they cant get a hold of it then your efforts are worthless

Purpose of the Engaging

Intermediaries Checklist
The purpose of this information is to assist you in obtaining
an optimal result when you engage an intermediary.
Choosing the right distribution channel for your business is
critical, and ensuring that you understand the process and
have a documented agreement will assist in the
development of a mutually beneficial relationship. The
checklist is designed to prompt you with questions and
hints that should be considered when engaging
intermediaries.
The first decision to make is whether to attempt to handle
the whole distribution internally (ie conducting all activities
to do with selling, distribution, transportation, storage etc),
or to allocate these duties to intermediaries. Remember
that you can take away the middle man but you cant take
away his/her function, and if you dont have the skills,
resources or time to spend on distribution, then outsource it
to the experts.
Deciding to use intermediaries will determine to a large
extent, where you will focus your marketing activities. For
example, you may decide to focus your advertising, sales
promotion and pricing strategies at generating trade
interest and demand for your products, or you may focus
these activities on consumers. Most organisations use a
combination of both, with the balance laying more one way
than the other.

Advantages and disadvantages of

using intermediaries

In general, the longer the chain between provider and

consumer, the less communication between the two
and the higher the purchase price of the product to the
consumer.

Engaging intermediaries allows you less control over

delivery to your customers, but also allows you to focus
on your core competencies.

Having intermediaries can present opportunities for you

to share promotional costs.

Depending on what you negotiate with the intermediary

and which type of intermediary you engage, you can
pass on the worry of storage, adjusting stock quantities,
establishing sales office in various geographical
locations, and bearing the cost of add-on services.

A major disadvantage of using intermediaries,

particularly agents who dont take title to your goods, is
that you are reliant on their enthusiasm and knowledge
of the market.

KEY SELECTION ISSUES and REVIEW ISSUES

10.

Analyse the nature of your product, market, and the activities of your competitors.
Determine which type(s) of intermediaries you need:
Wholesaler
Distributor
Agent
Retailer
Determine intermediaries available ask competitors, look in directories (general such as Yellow Pages, and Trade Directories
and magazines) etc.
Arrange meetings with short-listed potential intermediaries.
Before the meeting with potential intermediaries, consider and document your decisions on the following:
The information you require from your intermediaries, how much and how often
Whether you want regular meetings with your intermediaries
What your distributors will expect from you in terms of promotional literature and support
Set a budget for distributor support activities in your business
Outline what promotional activities will be directed towards intermediaries
How will you evaluate the performance of your intermediaries what tangible results do you expect?
Document and provide information to potential intermediaries on:
The background of your company
Details of your product
Details of your target market (where is it geographically located, where will it be located in the future, is it growing, what is its
size currently)
Customer requirements and buying behaviour.
Points to be discussed and/or negotiated in meeting potential intermediaries:
Stock holding, handling, stock levels, stocktakes Where will inventory be held? By whom? When does title pass to the
intermediary?
Who will do the proactive selling?
Who will deal with local inquiries that you generate?
Will the distributor generate their own leads?
Who will prepare quotations/proposals?
Work out insurance details
Work out sales expectations, budgets, agreed targets
Agree on and document a description of representative duties
Advertising and promotion ensure responsibility and protection of the interests of your business, who pays?
Transportation who is responsible and who pays (is the part of the service provided by the intermediary?)
Territories; consider:
State and national boundaries exclusive or non-exclusive rights?
Who services national accounts as distinct from local accounts?
Are national accounts part of local territory or will you have to find other intermediaries if you want to export interstate?
Is commission paid or credits given?
Who will provide arbitration in the case of disputes?
Payment and settlement terms who invoices, who collects debts?
Follow up service and warranties whose responsibility is this? (Consider product liability, distributor liability)
Who will have access to documentation such as financial figures and the customer database?
Pricing structure and controls check the Trade Practices Act
Will you need an agreement with the intermediary to be industry specific?
Will you provide consideration for distributorship eg cost of distributor to take up distribution?
Agree on and document how you will wind up proceedings (eg consideration of stock disposals, returns, credit, time frames,
use of name, further use of name etc)
Consider the contractual arrangements intermediaries may have to ask on behalf of your business
The agreement should specify clearly the intent of both parties and if possible be open-ended to allow each party to move a
little, re-negotiate and/or walk away within the guidelines established.
Evaluate alternative potential intermediaries, based on their presentation to you of their skills and expertise.
Make a choice.
Negotiate terms, document the agreement and have it checked by a legal representative, and have it signed by both parties
once satisfied.
Provide what you promised

11.

Monitor and evaluate activities.

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No responsibility for any loss or damage howsoever caused by reliance on any of the information or advice provided by or on behalf of the State of South Australia or the providers of this
service or damage arising from acts or omissions made is accepted by the State of South Australia, the providers of this service or their officers, servants or agents.

Department of Trade and

Economic Development

GPO Box 1264

ADELAIDE SA 5001

T +61 8 8303 2400 or

1800 188 018 (freecall)

F +61 8 8303 2410

E [email protected]

ABN 83 524 915 929

N/A

Completed

Activities you should consider in selecting intermediaries to assist you in distributing

your product:

Above all, support and work with your intermediaries in achieving

your objectives, and monitor their progress on a regular basis.
Your role in managing your distribution channels and
communicating with them is paramount to the success of your
distribution strategy. A strong relationship with your distributors will
ensure that you get great sales, and good feedback from the
marketplace.

Selecting a Distribution Channel for

Your Product
Types of intermediaries
The type of distribution channel required for your business is
dependent on:

The nature of your product (is it fragile/sensitive to

heat/cold/movement and requires specialist transportation or
storage?)

Your target market (where do your customers like to purchase

similar products from, what are their expectations?)

The nature of the market place (there may firmly-entrenched

distribution channels with well-defined territories)

How your typical customer prefers to purchase.

For example, if your customers expect a high level of customer

service which you cant or dont want to provide yourself, you will
probably need to engage an agent or distributor who can provide
this for you, rather than a wholesaler. Alternatively, if the nature of
the market is such that all major players use agents and that this is
a long established tradition, you may have to follow suit.
Wholesalers: Merchants who take title to goods (purchase) and
then on-sell them, generally to retailers, adding a distribution
margin.

Possible expectations of your intermediaries

Product and company training

Brochures, corporate literature, fliers etc
Sales presentation kits
Website and links
Point of sale material
Publicity and sponsorship
Trade or consumer advertising
Trade shows/exhibition attendance (may be joint attendance)
Corporate gifts
Product videos
Joint meetings with customers.

Promotional strategies to consider when using

intermediaries

Sales promotions such as cash discounts and increased

margins for dealers
Direct mail to dealers with special offers and/or free gifts
Dealer competitions
Merchandising and dealer point of sale material
Salespeople incentives, bonuses etc
Trade advertising
Trade exhibitions.

Evaluation of intermediaries

Sales volume and value

Number of sales visits
Generation of leads
Referrals
Repeat business
Number of trade exhibitions attended.

Distributors: Similar to wholesalers, except that distributors add

value to the product in the form of sales support and service. They
take title to goods and on-sell them, adding a distribution margin.
Agents: Agents do not take title to goods (ie purchase them), but
act as the manufacturers representative sales force. They provide
sales support and service and usually work in business to
business markets, often specialising in particular industries. They
are usually remunerated on a commission basis.
Retailers: Retailers are involved in physically making a product or
service available for sale to end users. They take title to goods and
on-sell them to consumers, adding a margin.

Types of information you may require

Number of contacts with customers

Number of sales visits made
Number of quotations or proposals submitted
General market feedback
Competitor activity
Any problems encountered
Sales pending
Suggestions for improving your market mix
Sales lost
Discounts given and reasons for this.

No responsibility for any loss or damage howsoever caused by reliance on any of the information or advice provided by or on behalf of the State of South Australia or the providers of this
service or damage arising from acts or omissions made is accepted by the State of South Australia, the providers of this service or their officers, servants or agents.

Department of Trade and

Economic Development

GPO Box 1264

ADELAIDE SA 5001

T +61 8 8303 2400 or

1800 188 018 (freecall)

F +61 8 8303 2410

E [email protected]

ABN 83 524 915 929