There are different types of distribution that can be used by supplier to get their products closer to consumers. The chosen level of distribution chosen generally depends on different factors such as the production capacity, the size of the target market, pricing and promotion policies as well as the seasonal requirement of the product by the end user. Here are the general differences between Exclusive, Intensive and Selective distribution.
What is Exclusive Distribution?
Exclusive Distribution is an agreement between a distributor and a manufacturer, whereby the manufacturer or supplier authorizes only one distributor to carry out distribution of goods and services within a definite region. The distributor thereof becomes the sole authorized seller of the manufacturer’s specific products. Also the agreement may be such that the distributor will exclusively sell the manufacturer’s products and not those of competitors.
In this kind of distribution arrangement, the work of the distributor is to engage wholesalers and retailers in order to sell the products to end users. The number of distributors to be engaged in this arrangement depends on the purpose and goals of the manufacturer.
Industries or companies that enter into exclusive distribution are High-tech companies, women’s clothing manufacturer, Automakers and major appliances manufacturers. They usually enter into agreement with a handful of distributors in a given region as a way of reaching customers and dealing with their complaints and other queries effectively as they arise. Example of such companies include: Apple, Samsung, Lamborghini, Gucci, Coca Cola, BMW and Mercedes.
Advantages of Exclusive Distribution
- Helps the firm to easily keep focus on the performance of their product in the market.
- The manufacturer or supplier is able to easily get real customer feedback on time and take necessary action possible.
- The goods and services easily reach the retailer and wholesaler on time, a factor that enhances effective distribution.
- The supplier or manufacturer transfers the risks associated with the good or service to the distributor.
- Market penetration becomes easy for the manufacturer or supplier.
- Retailers and wholesalers are able to provide valuable information to the customer on the behalf of the manufacture.
Disadvantages of Exclusive Distribution
- The manufacturing or production business that chooses this mode of distribution will only be successful if the exclusive distributor is trustworthy.
- Exclusive distribution especially where the product is new to market creates some form of dependency on the part of the manufacture. The manufacturer becomes dependent on a given number of distributors without which her products won’t reach the market.
- The problem of choosing the right distributor may arise. Especially where the product brand is new, there is usually a problem of getting, a good distributor who is well aligned with the brand and is aggressive in regard to the sale and marketing of the brand.
- The manufacturer loses control over the message that is being conveyed to the final consumers.
What is Intensive Distribution?
Intensive distribution is whereby the manufacturers make use of more than one channel to distribute their products and reach the target audience or customers. This policy is used when the manufacturers make a decision to distribute their products through as many mats as possible. The intension of this method is usually to make the manufacturer’s product brand available in abundance and distributed over a large geographical area and that end-users (customers) are not faced with any kind of shortage.
The products distributed through intensive distribution method are those that are generally used on a daily basis and those which do not require extensive brand awareness. The product brand is usually marketed in such way that consumers are likely to encounter the brand at every possible place of their shopping.
Examples of products that have been a successfully sold through intensive distribution include:
- Coca Cola Company
Advantages of Intensive Distribution
- Product awareness is able to be achieved in the market within a short period of time.
- The manufacturer or supplier is able to increase, production, sales and earnings simultaneously because the products are distributed through many retail outlets and given that they are regularly used, they are sold quickly.
- Through intensive distribution there is greater marketing efficiency because the manufacturer is able to know where the product is being used and where it is not; and through these the manufacturer or supplier is able to change her marketing technique to improve sells.
- Through intensive distribution and effective advertising, the manufacturer’s product is able to gain the customer loyalty.
- Intensive distribution over a period of time makes the product to become an important part of the consumer’s life irrespective of whether the consumer uses the product or not.
Disadvantages of Intensive Distribution
- Huge number of product sell usually result to huge profits, however intensive distribution will always have huge distribution expenses.
- It is difficult on the part of the manufacturer to manage retailers due to a huge number of retail outlets.
- Intensive distribution also creates some form of dependence on the part of the manufacturer to the middlemen because the distribution has to follow all channels that is, manufacturer to wholesaler to retailer to consumer.
- The cases of high priced products may arise should the manufacturer decide to use intensive distribution method because products have to follow the entire distribution channel.
What is Selective Distribution?
Selective Distribution is a distribution approach where selective and few outlets are chosen through which the product is made available to the customers on the basis of a company specific set of rules. In many cases, furniture, television and home appliances are distributed through this method.
Selective distribution can to some extend limit the competition in a market especially where there is an agreement between the producer and retailer. The agreement usually places restrictions on the distributors to sell only to other approved distributors or directly to the ultimate consumer, influencing the prevalence of a product on the market.
On the part of the supplier, he or she might insist on certain criteria to be met before one is appointed as a distributor. The criteria may include: service provision requirements, distributor sales personnel training or specific presentation of products, among many others.
Advantages of Selective Distribution
- The supplier is able to get the right feedback on performance of a certain brand in the market.
- The supplier is able to understand how distributors handle their products and customers.
- The supplier is able to main the brand image of the product through imposition of requirements to the distributors.
- Selective distribution is able to enhance good market coverage.
- There is reduced cost of distribution when compared to intensive distribution method.
Disadvantages of Selective Distribution
- Poorly conceived or ineffectively carried-out marketing campaigns may cheapen or lessen the image of a product or brand within a market.
- Cases of dependency on the part of the manufacturer may arise. The manufacturer may develop a tendency of depending on a few distributors to get their brands close to consumers.
- It may also be expensive method of distribution. Extensive market research resources are required to allocate information on specific market segments.