While it goes without saying that this is a vital consideration for large enterprises, it is no less critical for small businesses and especially recently-launched firms that are establishing themselves in an industry and marketplace. To that end, here are the 3 key reasons why market research is essential for choosing the optimal distribution channels, which may include (but are not limited to) wholesalers, e-commerce websites, consultants, affiliate networks, channel partners, dealers, retailers and the list goes on.
As the book Blue Ocean Strategy highlighted for a whole new generation of business owners and executives, the key to long-term growth and profitability is not just serving a known customer base, but evaluating whether it makes sense to go outside traditional customer types and buyer personas to build new relationships.
For example, family lawyers who are facing cut-throat competition to reach prospective clients may find that developing referral relationships with therapists, vocational counselors and financial planners may ultimately prove to be extremely profitable – since these professional groups often work with people who need the services of a family lawyer.
Market research identifies these potential partners (whether formal or informal), and creates a clear map on how they can be integrated into an effective and profitable distribution channel mix.
One of the biggest cost centers that businesses must carefully monitor and control is distribution. Indeed, for some products and services, it is not uncommon for distribution costs to exceed 50 percent of the selling price.
Market research enables businesses to take a step back, and obtain a clear, objective and data-driven picture of their true distribution channel costs, and just as importantly, potential savings that can be generated by adding or substituting specific channels.
For example, many professional services firms spend thousands of dollars a year advertising in catalogs, directories, the Yellow Pages, and so on. However, market research might (and likely would) reveal that there are far more effective and efficient ways to reach prospective clients, such as through online marketing, affiliate relationships, partnering with consultants, and so on.
In addition to being a major cost center (as noted above), distribution also plays a large role in customer satisfaction; or in some cases, customer unhappiness.
For example, many electronic retailers heard from online customers that they dislike having to pay for shipping and/or wait for their package to arrive. However, through market research they learned that many of these customers would have no problem making their purchase online, and then easily picking it up by heading to a designated area of a retail store. Instead of having to wait days and potentially pay for shipping (i.e. if their purchase did not meet a minimum free shipping threshold), customers could get what they want – and retailers could avoid losing a sale to the competition entirely because of the distribution channel, and not because of the product or price.
This is just one example of how market research closes the loop between distribution and customer satisfaction, and why it is so valuable when it comes to turning interested prospects into loyal fans.
To learn more about how market research helps your business determine the optimal distribution channel mix, contact the Communications For Research team today. Our co-CEO Colson Steber will learn more about your business and help you determine a market research goal including lowering distribution costs, finding profitable relationships or balancing distribution and customer satisfaction. Then he can create a market research plan, give you a quote and more.
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