All products may be distributed either directly or indirectly through two distribution channels, each of which is visited by your firm’s commercial team.
•Direct distribution. This distribution channel provides full control of the selling process but typically involves high fixed selling expenses and often prohibitively high costs for serving small accounts. Direct distribution is likely to be the most appropriate way to sell and distribute Trigol products, especially during the early years of this market.
•Technical specialists. These distributors make an important proportion of their sales from Squazol-type products and provide specialized services. They usually carry a broad product line for each category, including the most expensive and/or high-performance products. Because of their high level of technological expertise, specialty stores are likely to play an important role for Trigol products.
•General line distributors. These distributors handle a wide variety of merchandise and may have a department carrying Squazols. They operate on a low-price, high-volume basis and try to minimize overheads. As a consequence, the level of service offered is lower than that of the two other channels. The depth of each product line is usually restricted to a few units. They often distribute the cheaper, low-performance products. Their lack of technical expertise and the low level of service may well prevent them from distributing Trigols.
It is estimated that there are 3,000 technical specialists and 2,000 general line distributors, all of whom can potentially distribute the various Squazol and Trigol products.
Differences between margins obtained by the distributors in each of the two channels are mainly due to differences in the service level and the quantities purchased. These margins, expressed as a percentage of the customer price, are approximately constant across products for a given channel type. Their values are 40% for Technical specialists and 30% for General line distributors.
Customers in each segment exhibit a buying preference across the channels. Fully penetrating a given segment involves building the appropriate distribution mix for your products.