Topic 2: Marketing Channel Strategy Pick a product for one of the three distribu
ID: 372242 • Letter: T
Question
Topic 2: Marketing Channel Strategy
Pick a product for one of the three distribution strategies (intensive, selective, or exclusive). Note your product and the distribution strategy, and then discuss why you feel the distribution strategy is most appropriate for that product based on the factors listed above in the week's readings.
For example, Lexus automobiles are distributed selectively. Customers tend to be upper middle class who want an affordable (as they define it) luxury car that is highly dependable. Because of the service component, dealerships need to be all-inclusive for services needed for a Lexus and be as close to their target market as possible, e.g., upscale neighborhoods. But because Lexus is a car dealership, it can't be directly located in an upscale neighborhood. The car dealer needs to be able to serve a geographic area that is easy to reach and where customers are willing to drive, and the best choice may be locations visible from highways driven by upscale members of the target market as they drive between home, work, and errands. A Lexus dealership wants to be located near competitive offerings to ensure the target market considers Lexus. It also makes it easy to shop the competition and to increase the value of the brand by being associated with like products.
Do the same type of description for each of the three distribution strategies with a product of your choice.
Explanation / Answer
There are three important types of distribution strategies as discussed in the given case. These are Intensive, Selective and Exclusive distribution. The level of availability of a particular product as decided by the manufacturer or marketer marks the key difference between the three types of distribution strategies. The level of availability mainly depends upon the following factors:
Let us understand each type of distribution strategy in detail:
1) Intensive Distribution:
Intensive distribution is the most basic form of distribution strategy. It is mainly applied for the products that are used on a day-to-day basis by the customers. These include retail products like groceries, soft drinks, cigarettes, etc. While using intensive distribution strategy, marketers try to fully cover the market by using all the possible and available sales avenues. Here, the overall sales of the product depends upon the number of outlets in which the product is available. For a product that is available everywhere, a customer will not look for a particular store to buy the product. For example, if a coca-cola drink is not available in one store, he will simply go to another near by store to look for the availability and will make the purchase.
Therefore, for a company that is employing intensive distribution strategy will try to have as many customer touch points in a geographical area as possible. This is because the availability of the product is a major parameter in the success of the brand.
2) Selective Distribution:
Selective distribution is been already discussed in the case. In this type of distribution strategy, a manufacturer uses very limited number of sales outlets in a particular geographical area. Selective distribution strategy work for products for which customers are willing to shop around i.e. they will search for the outlets that supply those products. By having less sales points in one market, manufacturers are able to focus better in terms of training of the staff, careful selection of products to be sold and making available the best performing products in their best performing outlets. Unlike the intensive distribution strategy, manufacturers choose to sell their products through limited outlets against having multiple outlets that provides marginal profits.
For example, a domestic appliance company will choose to have limited distributors and retailers in a particular geographical area. It does not make marketing and operational sense for them to have large number of outlets selling their products. With limited retailers to serve, manufacturer can provide them better training and service.
3) Exclusive Distribution:
Third form of distribution strategy is exclusive distribution. Exclusive distribution is similar to selective distribution but is a more extreme form of it. Instead of having limited outlets in a geographical area, manufactures choose to have only one wholesaler, one distributor or one retailer in a specific geographical location. These sellers are often called exclusive dealers. Exclusive dealers do not sell any of the competing brands and are mostly involved in the products and the brands that have high prestigious value in the minds of the customers.
High-end luxury car showrooms like Bentley, Mercedes, Audi, BMW and exclusive designer wears like Zara, Gucci, Victoria Secret are all examples of exclusive distribution. Unlike Intensive and Selective distribution, here only one or two exclusive outlets are available of these brands in a particular geographical area.