The Hidden Cost of Misusing Distribution

Using the wrong distribution channel for a product is not just ineffective; it is incredibly wasteful and creates a situation where no one wins. The hidden cost arises from a fundamental mismatch between the services the channel is built to provide and the services the customer actually needs.

A Vicious Cycle of Waste:

1. The Mismatch: A product is forced through a channel that is not designed for it (e.g., selling a large, complex system that doesn't need overnight delivery through a distributor who specializes in exactly that).
2. The Customer Pays for Unneeded Services: The price of the product is inflated to cover the distributor's margin, which pays for services (like extensive local inventory) that the customer gets little or no utility from.
3. The Customer is Denied Needed Services: The margin dollars that are wasted on unneeded distribution services are not available to be spent on services the customer does need, such as direct technical support or application engineering.
4. The Distributor is Unhappy: Even with a high margin, the distributor may feel exploited because the margin is still inadequate to profitably provide the mismatched services for that specific product.

This misuse of distribution leads to a situation where the customer gets less service and pays more for it, the distributor is unprofitable and unhappy, and the manufacturer wastes a huge amount of money and effort supporting a channel that cannot do the job. This is a direct result of not recognizing that Sales and Distribution Channels are Specialized, Not Generic.