How to Match Small Business Customers to Your Distribution Channels - dummies

How to Match Small Business Customers to Your Distribution Channels

By Barbara Findlay Schenck

Every business plan includes a distribution section that details how you plan to get your small business products and services into the hands of your customers. Developing a good distribution system blends knowledge about your small business customer with knowledge of how that person ended up with your product (that’s what distribution is about). It’s often a surprisingly roundabout route.

To demonstrate, take a look at how visitors might arrive at a local museum. Suppose that 50,000 visitors walk through the turnstiles every year. Suppose that 10,000 of those visitors are school groups, 5,000 are tour groups, and 5,000 are pre-purchased tickets through local motels and hotels.

In addition, 5,000 are pre-purchased tickets through the websites of the museum and the regional visitor bureau, 5,000 are tickets distributed by partner businesses as part of special promotional programs, and 20,000 are either museum members or independent visitors.

Based on these numbers, the museum is distributing its tickets through the following channels:

  • Educators (possibly influenced by curriculum directors)

  • Tour companies (possibly influenced by state or local travel bureaus)

  • Lodging establishment front desks (probably influenced by hotel and motel marketing departments)

  • The Internet (possibly influenced by state or local travel bureaus)

  • Partner businesses (influenced by museum networking)

  • The museum entrance gate (influenced by museum marketing efforts)

By allocating guest counts and revenues to each of the channels, the museum would arrive at the distribution analysis shown in this table. By studying the findings, the museum can determine which channels are most profitable and which are most likely to respond positively to increased marketing efforts.

Channel Distribution Analysis
Distribution Channel Ticket Revenue Number of Guests/
Percent of Total
Sales Revenue/
Percent of Total
Educators $5.00 10,000/20% $50,000/16%
Tour companies $6.00 5,000/10% $30,000/10%
Motels/hotels $6.50 5,000/10% $32,500/11%
Museum website $8.00 3,000/6% $24,000/8%
Visitor bureau website $6.50 2,000/4% $13,000/4%
Museum entry gate
Museum members $3.00 5,000/10% $15,000/5%
Independent visitors $8.00 15,000/30% $120,000/39%
Partnering businesses $4.00 5,000/10% $20,000/7%

Create your own channel analysis, providing your business with information about how customers reach your business and the levels of sales activity that each channel generates. Put your findings to work with these steps:

  1. Track sales changes by distribution channel.

    If one distribution channel starts declining radically, give that channel more marketing attention or enhance another channel to replace the revenue loss.

  2. Compare percentage of sales to percentage of revenue from each channel.

    Channels that deliver lower-than-average income per unit should involve a lower-than-average marketing investment or deliver some alternative benefit to your business. For example, in the case of the museum, the tickets distributed through partnering businesses deliver lower-than-average revenue and likely require a substantial marketing investment. Yet they have an alternative benefit — they introduce new people to the museum and therefore cultivate membership sales, donations, and word-of-mouth support.

  3. Communicate with the decision makers in each distribution channel.

    When you know your channels, you know whom to contact with special promotional offers. For example, if school groups arrive at a museum because the museum is on an approved list at the state’s education office, that office is the decision point, and it’s where the museum would want to direct marketing efforts. If school groups arrive because art or history teachers make the choice, the museum would want to get information to those art or history teachers.

As part of your channel analysis, consider whether your small business can reach and serve prospective customers through new distribution channels, whether that means introducing online sales, off-premise purchase locations, new promotional partnerships, or other means of reaching those who fit your target customer profile but who don’t currently buy from your business.