MGH Distributors
distributorship business model

Product Distributorship Business Model and Its Types

Table of content

What Is a Product Distribution Strategy?

Product Distribution Models

  1. Model for Product Sales
  2. Product Referral Model
  3. Product Placement Model
  4. Product Auction or Bidding Model
  5. Product Licensing, Franchising, and Co-Branding Models
  6. Product Rental, Leasing, and Time-Sharing Models (marketplace)

How Distribution Models Change Product Management

  1. User Research
  2. Validation and Velocity
  3. Competition
  4. Go to market
  5. Post-Launch Optimization

How Do Product Management Models Affect Product Distribution?

  1. Your approach to building and updating the product
  2. Your onboarding strategy and tools
  3. How you go about doing research and validating

What Does a Product Distribution Strategy Look Like?

Step1: Learn about the purchasing habits of your target market

Step 2: Research your competitors

Step 3: Estimate the cost of each distribution strategy

Step 4: Think about how each strategy will affect product development

Step 5: Keep in mind the reputation of your brand

Three of the most important distribution models in the global market are intensive, selective, and exclusive.

1) Intensive Distribution

2) Selective Distribution

3) Exclusive Distribution

Summary

What Is a Product Distribution Strategy?

Let’s develop a product distribution strategy before reviewing the many kinds of product distributorship business models. Based on research, a product team will decide which method makes the most tactical sense to deliver its products to clients. Myanmar Golden Heart’s strategies and procedures for carrying out this plan are all included in the product distributorship business model.

A product team will need to consider the following issues when deciding on its product distribution strategy:

Should we work with resellers or sell straight to customers?

Or should we use a sales team or automate the purchasing process if we sell directly?

Should we provide our software as an online download or a client-side install?

Product Distribution Models

The most typical models for product distributorship business model are as follows:

 

1. Model for Product Sales

Sales of the product to the end user make up this distributed business model. The product manager sells the item directly or through an intermediary product manager, like a distributor or dealer. The interaction between distribution product management and other product managers in charge of product service and support (product service product managers).

2. Product Referral Model

In product referral product management, word-of-mouth generates product sales. A product manager sells the product to end users. These product managers typically operate within a network of colleagues. They receive recommendations from people who have successfully used the product on their own initiative or in cooperation with other product managers (such as dealers).

3. Product Placement Model

When product sales are generated by product managers placing products on retail store shelves. This model of product distribution is utilized (see product manager, product supply chain management). The product placement paradigm can be useful in installing a product into retail locations while it is still in the development stage. In this scenario, a product manager gets consent to place their product before product launch.

Alternatively, product placement can take place thereafter. In which case product managers ask store managers or product brokers for permission to display their products on the shelves of retail establishments. In Myanmar Golden Heart, for this product distributed business model, product positioning is not used.

4. Product Auction or Bidding Model

Product managers design product packages that are very appealing to product buyers in product auctions or product bidding. There are many different markets and product categories where product auctioning might be applied. Both real-time online auctions and more conventional product auctions, in which participants drop off their bids at the store or place phone bids, are options for auction models.

5. Product Licensing, Franchising, and Co-Branding Models

When a product that product managers desire to sell can be sold under an existing product brand name and product logo. They employ the product licensing model of product distribution. Manufacturers frequently employ product line extensions to license their products.

When distributing items through product distributed business models that are already well-established in the market, the model of product franchising is applied. Product managers utilize this form of distribution when a distribution of product takes place through a franchise to increase consumer awareness of the product and its market presence. Myanmar Golden Heart utilizes co-branding as a method of product distribution. Combining their own brand name for the product with those of other businesses, either through licensing or franchising arrangements.

6. Product Rental, Leasing, and Time-Sharing Models (marketplace)

In a product rental or leasing business, a product is either rented to customers at the time of initial purchase or leased over time. For durable goods and capital equipment utilized in the production of a product. Product managers choose to use product renting or product leasing. The management of product rentals may be delegated to product rental businesses or handled directly by the manufacturer. For product managers who wish to make their products available to customers without building inventory. Product rentals can be a successful product distribution model.

Product leasing is similar to product renting in that it gives clients extended access to durable goods or capital equipment in exchange for recurrent payments made over time. When they need to finance their products, product managers turn to product leasing. When a product manager’s clients can understand that keeping a product longer will save them money, product leasing is most effective.

How Distribution Models Change Product Management

In 2022 and beyond, several product distributors in marketing strategies may alter product management in this way.

 

1. User Research

You may think of user research as a population census when it comes to internal products. You simply need to concentrate on the hiring organization because there is only one customer. Because you’re working with an audience of users that are completely captive, user research for internal products is fascinating.

Furthermore, since these users are your coworkers at the office. You must learn how to communicate with them both as stakeholders and consumers. It’s interesting to note that internal product management frequently places considerably less emphasis on personas or ethnographic research and much more emphasis on processes and tasks at hand. Since everyone works for the same company, you already have a solid understanding of the values, mental models, and objectives of your users.

2. Validation and Velocity

You have very little error margin when it comes to internal products and B2B products. Both internal and B2B products frequently alter workflows that affect how work is done. In other words, if your product isn’t working well, you’re damaging your consumers’ capacity to make money. However, the majority of B2C items don’t bring in money for the consumer. After all, the majority of consumers aren’t relying on Facebook, Instagram, or Amazon to run their businesses. Because of the high tolerance for error, you can ship swiftly without suffering too many consequences. Bugs in B2C products are typically relatively forgivable because they rarely result in a cost to the customer.

3. Competition

Internal products hardly ever face any opposition. Internal products are usually company-perfect in terms of product/market fit and are focused on the particular problems that the organization faces. It is challenging to replace an internal product with an external solution. Since the former serves only one organization and can be tailored to the precise requirements of the latter. External solutions must address problems for a wide range of users.

4. Go to Market

You must take change management into account while delivering a B2B or internal solution. Because the feature you’re developing will have an impact on how people operate, you’ll need to retrain them on how to utilize your product. To genuinely gain product adoption, you must interact with change champions within your targeted organizations. UX design alone won’t be enough to promote adoption.

5. Post-Launch Optimization

Because your entire organization will be taught on the product, you cannot A/B test internal products. Therefore, if you do an A/B test, your company’s operations will become inconsistent. Keep in mind that processes are how businesses maintain their competitive advantages. As a result, irregular practices reduce the competitiveness of your company.

How Do Product Management Models Affect Product Distribution?

The product distribution model your business chooses may have an impact on a number of decisions you make as a product manager. Myanmar Golden Heart provides you a few instances:

 

1. Your approach to building and updating the product

Will you sell a web app or a downloaded piece of software that your consumer must install if you’re making a digital product like software? These selections will serve as a guide for your team’s decisions on the product’s development and frequency of updates. (You can alter an installed product on your clients’ desktops or servers less frequently than you can push live updates to a web app.)

2. Your onboarding strategy and tools

You may anticipate your sales reps, sales engineers, and post-sale account managers to handle a lot of the training and onboarding for your customers if you want to sell your product through an assisted sales process. However, if you intend to sell through an automated process that requires little to no direct interaction between your staff and clients before they make a purchase, you’ll need to develop onboarding resources that let users drive their own learning.

3. How you go about doing research and validating

Your target market will include a sizable number of potential clients for consumer goods like fitness equipment. You’ll want to do a tonne of study on the industry. Examine industry trends, recent shifts in consumer preferences for fitness products, and successful products. You should seek out a product idea that has a wide market.

However, you will adopt a different strategy if you intend to develop a complex, expensive product for clients in the large company market. Given the tiny size of your target market, you should spend as much time as you can directly conversing with customers and end users at those businesses. And remember that at a business organization, your user persona and buyer persona will frequently.

What Does a Product Distribution Strategy Look Like?

We mention the steps you should take when developing your team’s product distribution in the marketing plan below –

 

Step1: Learn about the purchasing habits of your target market

If you’re selling a digital productivity tool to a huge company, you need to find out how those potential customers—like a Chief Technology Officer or Vice President of Operations—find new solutions for their organizations.

Step 2: Research your competitors.

If you’re unsure of the finest technique to distribute your goods, observe how your rivals are currently doing it; their methods may inspire or provide you with suggestions for your own business. You might learn from your analysis of the competitors that they’re using a poor method for distributing their goods. You’ll learn some useful business intelligence in any scenario.

Step 3: Estimate the cost of each distribution strategy.

When making your choice, the price of your product sales approach will be a key factor. If an assisted sales force seems to be the most profitable route but is now too expensive, you can choose to establish a limited resale channel and partner with only reliable, knowledgeable resellers.

Step 4: Think about how each strategy will affect product development.

As was previously mentioned, the distribution in the marketing model for your product will have an impact on the choices your product team makes regarding the product’s development and research. When selecting a product distribution strategy, you should keep in mind any special plans you have for product development.

Step 5: Keep in mind the reputation of your brand.

Your reseller’s treatment of your customers will have an impact on how they view your brand and company when you sell through a resale channel. Additionally, if there are too many merchants competing with one another for the same clients in the same locations, this could result in price erosion and other issues that could damage the value of your brand.

Therefore, you must consider how your product distribution plan may help (or hurt) your brand’s reputation in the marketplace. For more information, you can reach out to Myanmar Golden Heart.

Three of the most important distribution models in the global market are intensive, selective, and exclusive.

The level of intensity chosen will depend on factors including the manufacturing capacity, the size of the target market, pricing and advertising policies, and the amount of product service the end-user needs. It symbolizes the level of global accessibility that the marketer has chosen for a certain product.

1) Intensive Distribution:

Intensive distribution works to provide market saturation by utilizing all available channels. In cases where buyers have a wide selection of acceptable brands to choose from, intensive distribution is typically necessary. To put it another way, if a brand isn’t available, a client will just choose another.

This option covers all potential channels that the product distribution could take. This is especially helpful for goods like soft drinks where distribution is crucial to success. Here, soft drink companies distribute their products across a variety of locations to guarantee the customer’s simple availability.

As a result, a wide range of soft drink stalls, kiosks, sweetmarts, tea shops, and other facilities as well as restaurants and five-star hotels sell these brands. An outlet for soft drinks can be wherever that the customer is likely to visit.

2) Selective Distribution:

With selective distribution, a producer sells goods through a few stores in a certain region. This method has the advantage that the producer can select the most suitable or effective outlets and concentrate effort (such as training) on them. When customers are willing to “shop about,” or when they have a preference for a certain brand or price and will look for the outlets that supply, selective distribution works best.

This variant represents a midway ground in distribution. The company chooses a few locations to distribute its goods here. This alternative aids in concentrating the marketing efforts of manufacturing companies on a select few outlets rather than spreading them out over numerous insignificant ones.

It also makes it possible for the company to build strong working relationships with channel participants. At a lower cost than intense distribution, selective distribution can assist the maker in achieving optimal market coverage and greater control. This approach is known to be used by both new and established businesses and Myanmar Golden Heart is already using it.

3) Exclusive Distribution:

Exclusive distribution is a particularly strict form of selective distribution, involving the employment of just one wholesaler, retailer, or distributor in a given region. It is considered that a company is utilizing an exclusive distribution strategy when it distributes its brand through just one or two big shops that deal in it exclusively rather than all rival brands. This is a typical distribution strategy for products and companies with high standards of prestige.

Designer clothing, large home equipment, and even automobiles are common examples. The manufacturer intends to have control over the intermediary’s pricing, promotions, credit inventory, and service rules by offering exclusive distribution rights. The company also anticipates benefiting from such aggressive selling practices by such outlets.

Summary

A specific product’s distribution strategy has a big impact on how that product is created. No matter what kind of product manager you are now, it’s beneficial to comprehend how various product distribution models function. After all, these can provide you ideas for how to make your own product more successful. They may act as early indicators that a different product distribution plan could be a better fit for you. We hope we have cleared all your doubts and if you have any questions you can simply reach out to Myanmar Golden Heart.

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