Transcript DISTRIBUTION INTENSITY DECISIONS

DISTRIBUTION INTENSITY
DECISIONS
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Distribution options—
what is realistically
feasible?
Life cycle effects
Maintaining channel
service output
standards
Making selective
distribution mutually
attractive and secure
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Constraints on Distribution
Opportunities
Product Type
Distribution Options
Major brand standard
convenience good
Intense distribution (limiting distribution would
mean forfeiting brand status)
Upscale brand
convenience good
Intense distribution possible but not appropriate;
selective preferred
Minor brand
convenience good
National regional intense distribution unrealistic;
local or “invited” national distribution
Major brand shopping
good
Moderately intense distribution (e.g., TVs in
discount store)
Premium brand
shopping good
Moderately intense distribution inappropriate;
selective distribution
Minor brand shopping
good
National moderately intense distribution unrealistic;
local or “invited” national distribution
Niche brand
Selective distribution
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Product Life Cycles
Intro
Growth Maturity Decline
Unit sales
Unit
sales
Profits
(0)
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Profits
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Distribution Options Over
Brand/Product Life Cycle
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Brand/ product
category lifecycle stage
Options—no additional
brand leverage
Introduction
Infomercials, direct,
Distribution outlets
piggy-backing, “invited” carrying other brand
members
Growth
Increasing number of
product appropriate
distributors
Maturity/decline
Product category/brand specific evolutionary
pressures—e.g., toward low-price/low-service;
exclusivity; “parallel” distribution
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Options—with brand
leverage
Distribution outlets
carrying other brand
members, other
product appropriate
channels
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Brief Review
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Full service retailers tend dislike intensive
distribution
Low service channel members can “free ride” on
full service sellers
Manufacturers may be tempted toward intensive
distribution—appropriate only for some; may be
profitable in the short run
Market balance suggests a need for diversity in
product categories where intensive distribution is
appropriate
Service requirements differ by product category
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Full Service Retailer Termination of Brand
“Straying” Into Intensive Distribution
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Overt—explicit termination of brand
Category termination if no suitable
replacement brand is found
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Product life cycle issues
Category “boundary” issues
“Covert”—channel member officially carries
product but maintains little inventory and
may attempt to “convert” orders to preferred
substitute
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Maintaining Channel Member
Service Performance
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Contractual
requirements
(incentive for
channel member to
agree?)
“Pull” strategy—
customers “demand”
product
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Limit market
coverage
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Geographic
Customer type
Retail price
maintenance
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Legally mandated in
some countries
Requires power in
U.S.
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Creating Downstream
Exclusivity
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Cosmetic differentiations to product
sold by different retailers
Model or size variations between
channels (e.g., Costco only selling large
size)
Allowing retailer to apply own label to
product (assumes that “private” label is
as valuable)
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Making Exclusivity Enticing
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Mutual dependence
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Cost savings to manufacturer
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Investment in relationship
Long term contracts
Larger quantities to one buyer
Training expenses lower under reduced turnover
Joint brand identity (e.g., high end cosmetics
in upscale department stores)
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