Stage Three: Analyzing Distribution Channel

There are plenty of options for getting your product to your customer. Deciding which ones to use will have an impact on pricing, profit margins, servicing, and timing. There are plenty of options available, and in choosing yours you may need to consider what your goals are and how many layers of people are involved.

In a product that is typically used by an individual purchasing in a retail store, the product can go from your production facility to a wholesaler, and then to smaller distributors to be sold to a retailer. Each step in the process has to produce a profit, just as it does when you sell a service. In a complex system, you may be surprised at how many people are involved. The flow below is common:

At each stop on the chain, the participant does something that adds value to the product (packages, labels, or advertises, for example) and earns a profit.