Distribution Strategy the Product Will

Distribution Strategy The product will be distributed from our warehouses to the contractors. The contractors will install our product in the new homes. The distribution will be done by truck, on a per-order basis. There are a couple of reasons for this. The first is that trucks can carry heavy goods at a relatively low price. They can go to remote sites -- some new housing developments will not even have completed roads when delivery is made. The use of a centralized warehouse is essential.

The packages are put together using parts from different suppliers. They are assembled at the same warehouse facility that will serve as the shipping point. This facility will be centrally located on the Eastern seaboard. When we expand beyond this geographic area, we will likely build other warehouses to help reduce shipping times. In addition, the use of trucks is efficient because most orders will be for entire new developments. This will allow barriers for multiple units to be distributed in a single truckload. 2.

The company at this point derives little value from its distribution method. The assumption that shipping entire truckloads will be possible is just that -- an assumption. The reality could be individual sales that make for inefficient distribution. Discounts for early payment are standard in the industry, and so they will be used by our firm as well. The terms will not be unusual -- 2/10 n/30 would be common. There will, however, be volume discounts that are given to entice larger contractors.

Being able to ship entire truckloads will save the company a significant amount of money and some of that will be passed onto the high volume buyers. The discount will be offered on a sliding scale -- the more barriers are purchased the greater the discount. In any one area, no exclusive distribution rights will be given. The primary objective of the company during the launch and growth phases is to increase the market share. The best way to do this is to open sales to all customers.

No territorial rights will be given. The volume discount will apply to all contractors and homeowners who qualify. Compensation for the company's sales representatives will be commission based, with a small salary. The salary is necessary to ensure that the sales people are willing to work for a new firm -- a guaranteed salary can entice them from their current positions. The commission element, however, will likely comprise most of the compensation for the sales people.

We want to entice them to pursue the biggest contractors and clients possible so that we can build market share and production capacity as quickly as possible. Commission sales acts as an incentive for the sales reps to seek out the largest customers, as they will provide the best return on investment for the salespersons' effort. 3. There will only be one distribution channel initially. This channel, to the contractors through direct distribution, is going to be the most important for the business.

These customers are the largest potential customers and the ones most willing to work with our company. There will not be a channel specifically geared to the individual homeowner, because of the difficulties in installing the barrier in an existing building, and the fact that the barrier needs to be installed by a professional in order to be under warranty. We have explored some options for distributing to the single customer market, but none have proven to be viable.

At present, therefore, the only significant distribution channel will be direct distribution to contractors who have formed a business relationship with our sales representatives. We control the channel -- but for access to the customers we have a team of sales representatives. These will preferably be people who are already involved in the industry and have good contacts. It is important to realize that by distributing through one channel to one specific target customer group, we are vulnerable.

This business model does not feature much diversification, and so it is critical that the largest of our potential customers be captured. There is the risk that if we cannot capture the largest potential customers, we will not be able to generate enough volume from the remaining potential customers. In addition, all of our competitors will be targeting these same customers using the same sales methods and the same distribution channels. Only the product itself is a means of differentiation and only the product is a source of competitive advantage.

The support of trucking companies will be required in order to assist with the distribution function. We will not have the volume initially to host.