10. Distribution Arrangement

Types of distribution arrangement


Intensive - Intensive Distribution takes place when suppliers sell through as many retailers as possible. This arrangement usually maximizes suppliers' sales, and it enables retailers to offer many brands and product versions.

Exclusive - Exclusive distribution is a situation where suppliers and distributors enter into an exclusive agreement that only allows the named distributor to sell a specific product. For example, Apple had an exclusive distribution deal with AT&T to provide the iPhone to consumers.

Selective - Selective distribution is a type of product distribution that lies between intensive distribution and exclusive distribution, and in which only a few retail outlets cover a specific geographical are. Considered more suitable for high-end items such as 'designer' or prestige goods.

Integrated marketing - Integrated marketing is a strategy aimed at unifying different marketing methods such as mass marketing, one-to-one marketing, and direct marketing. Its objective is to complement and reinforce the market impact of each method, and to employ the market data generated by these efforts in product development, pricing, distribution, customer service, etc.




Why is the choice of distribution channel so important?
- Consumers may need easy access to a firm's products to allow them to see and try them before they but, to make purchasing easy and to allow for the return of goods.
- Manufacturers need outlets for their products that give as wide a market coverage as possible, but with the desired image of the product appropriately promoted.
- Retailers will sell producers' goods but will demand a mark-up to cover their costs and make a profit, so, if price is very important, using few or no intermediaries would be an advantage.




What issues must be considered when choosing a distribution channel?

- Nature of market : Choice of suitable channel of distribution also depends on the nature of market. Location a buying habits of buyers are also analyzed.
- Nature of product : Nature of product has influence on the selection of a channel or distribution. In the case of industrial goods like machinery and equipment. The manufacturer sells directly to industrial user, but in the case of tools, sales take place through middlemen.
- Distribution expenses : If the producer makes direct selling, he will have to spend on distribution. So, if the product gets good response from the dealers, a producer prefers to sell through them to reduce his distribution expenses.
- Mutual cooperation : Choice of channel of distribution depends on the mutual cooperation between the manufacturer and the dealers.




What are some of the things you must consider about selecting a channel partner?

- The type of channel you choose will depend on what it is you are selling. If you are selling a software product, system, or chip that can be held in inventory, then you will want a partner who can stock your product for ready distribution. If your end customers are businesses, then you will want a distributor who focuses on B to B sales. If your end customers are consumers, then your channel will be stores such as web-based retailers.