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DISTRIBUTION INTENSITY DECISIONS

DISTRIBUTION INTENSITY DECISIONS. Distribution options—what is realistically feasible? Life cycle effects Maintaining channel service output standards Making selective distribution mutually attractive and secure. Constraints on Distribution Opportunities. Product Life Cycles. Intro. Growth.

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DISTRIBUTION INTENSITY DECISIONS

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  1. DISTRIBUTION INTENSITY DECISIONS • Distribution options—what is realistically feasible? • Life cycle effects • Maintaining channel service output standards • Making selective distribution mutually attractive and secure

  2. Constraints on Distribution Opportunities

  3. Product Life Cycles Intro Growth Decline Maturity Unit sales Unit sales Profits (0) Profits

  4. Distribution Options Over Brand/Product Life Cycle

  5. Brief Review • 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

  6. Full Service Retailer Termination of Brand “Straying” Into Intensive Distribution • Overt—explicit termination of brand • Category termination if no suitable replacement brand is found • 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

  7. Contractual requirements (incentive for channel member to agree?) “Pull” strategy—customers “demand” product Limit market coverage Geographic Customer type Retail price maintenance Legally mandated in some countries Requires power in U.S. Maintaining Channel Member Service Performance

  8. Creating Downstream Exclusivity • 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)

  9. Making Exclusivity Enticing • Mutual dependence • Investment in relationship • Long term contracts • Cost savings to manufacturer • 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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