3.2. Marketing & Sales

Distribution policy

Distribution policy describes the way or process of "distributing" products and services to customers. It is about an optimal distribution strategy that generates high customer satisfaction. The goal of an entrepreneur must be to deliver his products and services "just in time", i.e. at the right time, at the right place, to the customer.   

In distribution, a distinction is made between two ways of distributing goods.

a) Purchase of goods:

Purchasing goods is about how you yourself can buy your products and services from the manufacturer or wholesaler, locally or worldwide, on demand - on demand as fast as or whenever possible - or with long delivery times, packaged or loose, with customs duty or without, with taxes or without, etc.. The decisive factor is which goods, in which quality, with which delivery time, at which purchase price and overall at which conditions can be purchased. In the global price war, it is a question of the best purchasing conditions and ultimately the lowest production costs. In competition, the customers decide where and from whom you buy the goods.

It is necessary to check where certain goods are available at the lowest price, how purchasing and transport to one's own company can be organised, what possibilities there would be to get the goods directly to the customer so that, for example, an intermediate warehouse would become superfluous. Example: A book producer and trader who can organise sales on demand only needs to produce on demand. 

b) Sale of goods:

The sale of goods describes the path of the goods to the customer. In a coffee shop, the customer is served at his or her seat or "... to go". The sale of goods is to be organised in the way the customer wants. It is important to examine how the sale and transport of goods or products from one's own company to the customer can best be organised. When the customer comes into the shop, he wants to be addressed and served in a very specific way. If the goods are to be delivered free to the customer's home, certain logistics are required. If the goods are ordered via the Internet, questions of packaging, payment, complaints, transport damage, insurance, etc. must be defined.  

The business plan shall describe the ways, means and costs. It must be described: By whom? To whom? By what means? How are the products to be produced, packaged and transported? How should they be presented to the customer? What does the retail shop or warehouse need to look like? What capacities are needed? Does the company need its own sales force? How should the sales process actually be designed in e-commerce? Is there an enterprise resource planning system with all the functions or is ordering by mail and paying by invoice sufficient for the time being? What are the distribution costs?

In distribution, it is important to recognise the trade levels and define how the paths in between can be effectively designed. Depending on the stage of development of a product (product life cycle) or the entire company, the sales strategies must be adapted to this. Logistics plays an important role in this. Many industrial companies in the automotive industry partly do without their own warehouses because the goods can and must be delivered "just in time" by truck. In this context, questions of location must be answered as well as the physical distribution of goods in real terms.

Trade margin:
The trade margin lies between the purchase of goods and the sale of goods. It describes the difference between the cost price and the selling price of the goods. The larger the margin is for the company, the more likely it is to make a profit on the sale of the goods.

In commercial costing, it is necessary to calculate (a) a "mark-up margin" based on the costs of purchasing goods, which b) covers the company's costs of action (personnel, premises, material costs, etc.) and which c) includes a profit contribution.

The mark-up margin is usually calculated as a percentage mark-up (30%, 100% or X) on the purchase of goods. It is to be calculated from the real expenses of the company. The mark-up margin is a reference value for pricing.

In commercial practice there are various forms of calculation, which are presented in Module 8.

Distribution policy is about:

• Purchase and sale
• Distribution system
• Sales organisation
• Logistics
• Import, Export
• Packing
• Shipping
• Merchandise management system
• Service
• Distribution strategy