Distribution, also known as market coverage, is a series of processes to persuade retailers to stock and sell a company's products. It is a collaborative activity between the company and distributors (or upstream and downstream distributors) to rapidly open a market in the short term, serving as a crucial foundation for a quick market launch. Distribution facilitates rapid product listing, establishes stable sales outlets, and creates a ripple effect where one point drives a line, and one line drives an area. Typically, distribution actions have three characteristics: short duration (a specific market's distribution can usually be completed within three months), high speed (requiring concentrated advantages in manpower, materials, and finances for efficient and rapid market development), and multiple methods (utilizing a combination of personal selling, trials, poster posting, gifts, and other approaches).
Distribution work often includes the following: company sales personnel and distributor staff jointly visit wholesalers and retailers in the target area, actively introducing the company's (or distributor's) situation and product features; posting advertisements; selling products; distributing promotional gifts; and surveying competitors' situations.
I. Master the "Three Stages" of Distribution
Distribution in a regional market can be divided into three stages: preliminary preparation, mid-term implementation, and post-service.
In the preliminary preparation stage, the company should: First, grasp the characteristics of the wholesale and retail markets in the target area, including information on wholesale-retail price differences, payment methods, and consumption trends. Second, hold discussions with distributors in the area, negotiating factors such as product varieties, specifications, quantities, prices, and channel selection based on the company's overall guidelines for the target market. Third, determine promotional gifts based on company needs and the specific conditions of the target market, including which products to use as gifts, their varieties, specifications, quantities, and the "promotion ratio" (the ratio of gifts to products). Fourth, formulate distribution plans for the overall market and sub-markets, as well as a supply scheduling plan (supply can be dispatched from distributor warehouses, company warehouses, or a combination of both). Fifth, select and train capable distribution personnel; the selection, training, and coaching of these personnel are crucial to the success of market coverage. The company should choose individuals with rich market experience, strong market development capabilities, and comprehensive selling skills to drive distribution in various regional markets. Sixth, before distribution, company sales personnel and distributors should carefully study and analyze potential difficulties during implementation and discuss countermeasures. Seventh, before executing distribution, pre-design forms such as the "Distribution Checklist" and "Market Survey Tracking Form," which should include customer name, address, contact person's name, phone number, business nature, purchase details, time of second visit, and notes.
In the mid-term implementation stage, distribution personnel should seize favorable opportunities to conduct product sales, gift distribution, and advertisement posting, fully utilizing their selling skills to persuade customers to accept the company's products, and promptly and accurately fill out the "Distribution Checklist." During implementation, three key points need attention: First, sales personnel should learn how to handle customer rejections. They often encounter refusals like "We don't need it; we already have similar products" or "The price is too high; it won't sell." To address these, they should prepare countermeasures in advance and skillfully use promotional gifts as an effective tool to win customer agreement. Second, the "distribution rate" is not necessarily the higher the better; instead, appropriate retail outlets should be selected based on product grade and nature. Distribution should emphasize both breadth and moderation; selected points should be evenly distributed to facilitate consumer shopping nearby. Third, handle the relationship between "distribution rate" and "distribution volume." The volume per individual retailer is not necessarily the higher the better. If the volume is too large, products may accumulate on shelves, giving distributors the impression of slow sales, which can actually hinder product sales.
In the post-service stage, the following should be done: First, have sales personnel write a written summary of the market coverage implementation. Second, ask sales personnel to schedule phone calls and content based on the "Distribution Checklist," arrange second visits and second deliveries, as well as third visits and third deliveries, and have them carefully fill out the "Market Survey Tracking Form." Third, repeatedly discuss areas with poor distribution results, re-evaluate distribution strategies and methods, and determine whether to "supplement distribution," "re-distribute," or adopt other measures. Fourth, fulfill commercial commitments promptly and properly handle commercial disputes.
II. Follow the "Three Principles" of Distribution
Typically, distribution work should follow these three principles:
The first principle is "Expenses self-borne, gross profit to them." That is, various expenses during distribution (including road tolls, bridge tolls, fuel, parking, meals, beverages, etc.) can be borne by the company, while all gross profit generated from sales goes to the distributor.
The second principle is "Money and accounts to them, risk to them." That is, the distributor collects payment, credit sales require distributor consent, the "payment receipt" is kept by the distributor, and the risk of payment after distribution is borne by the distributor.
The third principle is "Unified pricing, consistent ratios." Sales personnel implement a unified distribution price, maintaining price differences among second-tier wholesalers, third-tier wholesalers, large and medium retail stores, and small and medium retail stores, as well as consistency in the promotion ratio.
III. Three Key Points in Distribution Management
- Appropriate Goals
Before distribution, sales supervisors (mainly regional sales supervisors) should formulate detailed distribution goals and plans so that sales personnel have guidelines to follow; they should also establish criteria for post-evaluation. When setting distribution goals, the "SMART" principle can be referenced.
S—SPECIFIC: Distribution goals should not be vague but must be specific and clear. For example, "A certain product only goes through supermarkets, chain stores, and large wholesalers, not other channel forms."
M—MEASURABLE: For example, "Distribute to 200 supermarkets, achieving a 100% distribution rate in specialty food stores." Instead of setting unmeasurable standards like "most" or "a large amount."
A—ACHIEVABLE: For example, if a region has only three sales personnel but requires covering 500 outlets within half a month, this may be an unrealistic distribution goal.
R—RESULT-ORIENTED: That is, use distribution goals to determine reward standards and guide distribution behavior. For example, during the first distribution, the focus is on "distribution coverage" rather than sales volume, and the main evaluation criterion is the number of transactions (number of customers).
T—TIMETABLE: For example, "Complete 100% distribution in chain supermarkets by July 30." Specific time limits must be clear.
- Policies in Place
To motivate distributors' enthusiasm for distribution, companies often need to formulate "distribution reward" policies. When formulating these policies, the following points should be noted:
First, formulate comprehensive distribution policies. Incomplete policies may allow customers to exploit loopholes. For example, the "Buy one case, get one bottle free" promotion aims to incentivize retailers and increase distribution rates, but some retailers may stock up excessively to earn gift benefits, deviating from the company's original intention and increasing promotion costs unnecessarily. Some companies adopt two different policies (e.g., "Retail stores get one bottle free per case, wholesale markets get one case free per 100 cases") which may cause dissatisfaction among large customers. Therefore, improper policy formulation can turn good things into bad. The best approach is to implement a unified standard, using "purchase thresholds" to define activity targets. For example, if the intention is to target wholesalers, set a minimum purchase of 5 cases; conversely, if targeting retailers, set a maximum purchase of 10 cases.
Second, choose gifts carefully. For example, if the distribution targets include wholesalers, to prevent them from discounting and dumping, gifts should be items that cannot be exchanged for cash.
Third, avoid creating an impression of low pricing. When offering preferential prices to retailers during distribution, precise communication is essential to avoid creating a misconception of "low price," which could hinder the distributor's future sales.
Fourth, increase control over distributors. Most distribution reward policies are executed through distributors, which may lead to a problem: distributors may embezzle promotional gifts, and rewards may not reach customers. To address this, we can take measures such as: increasing the reward amount for distributor cooperation; placing gifts directly inside product packaging; sending letters to each customer informing them of the promotion details; and so on.
- Timely Follow-up
To ensure distribution goals are achieved, companies should check the distribution status. In fact, knowing only numbers like the number of customers and the quantity of new products distributed is far from sufficient; sales personnel also need to go to the market to check the display of new products. The main reason is that in actual sales activities, the following phenomena often occur: the store has ordered, but the goods have not yet been delivered; or the order has been delivered but not yet displayed; or the order has been displayed but placed in a corner or on the bottom shelf; or various display materials created to attract customers are not used because sales personnel "fear trouble" (wasting resources and affecting distribution effectiveness); and so on. In fact, if customers cannot see the product, distribution has little meaning. Therefore, sales personnel must promptly check the distribution status: Have the products been displayed on the shelves? How many rows, columns, or places? Are they placed in ideal positions? ...
Specifically, follow-up on distribution includes the following aspects:
● Has the number of distribution outlets reached the predetermined target? ● Has large-scale display in department stores and chain supermarkets been achieved? ● Do store owners have any complaints about the company's products or delivery service? ● What is the awareness and reputation of the product and brand? Have consumers received free samples or promotional samples? ● Have the predetermined sales targets been met? Not completed or exceeded? What are the reasons? ● Are there any stockouts or product overstock situations?
When conducting distribution surveys, special attention should be paid to soliciting opinions from consumers and store owners (including purchasing personnel, on-site staff, and store owners). Since consumers may make purchase decisions due to advertising, gifts, or curiosity, sales personnel should try to gather information from them: Why did they buy? What are their trial experiences? Will they repurchase? What are the product's strengths and weaknesses? And so on.
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