Businesses can choose from a number of different types of distribution strategy according to their products and services.
Distribution an important element in the marketing mix. It’s the process of making products and services available for businesses or consumers. Because of this, the distribution should be aligned with a company’s overall goals and strategic vision, especially since you want to reach out to the right people.
Typically, the top management is responsible for selecting the right distribution strategy as this decision is likely to affect overall operations.
How to Select a Distribution Strategy
Before coming up with a distribution system, marketers must determine the most appropriate distribution channel.
Marketers must focus on a number of factors such as:
- Type of product
- Geographic location
- Overall vision and mission of the company
- The target market of the product
Once all these areas have been investigated thoroughly, only then can a company devise an appropriate distribution strategy.
What Is Distribution Channel?
A distribution channel comprises of a list of intermediaries that deliver goods and services to the end consumer. Distribution channels in marketing can be broken down into two main types: direct and indirect.
Direct channels allow consumers to purchase goods from manufactures whereas indirect channels push consumers to purchase goods from retailers or wholesalers.
Typical intermediaries in the world of distribution include:
- Wholesalers – Wholesalers mainly deal with other merchants, businesses, and retailers and sell products for resale purposes.
- Retailers – Retailers directly sell products to people – the public. Retail outlets include independent stores, hypermarts and regular stores.
- Agents – Unlike the others, agents are hired to facilitate exchange. They simply bridge the gap between buyers and sellers and are paid via commission.
- Jobbers – This intermediary acts as a special type of wholesaler but typically operates on a small scale.
Types of Distribution Strategy
Coming back to our main subject, the following is a list of the different types of distribution strategy:
1. Intensive Distribution
Intensive distribution, also known as mass distribution is intended for mass-marketing products. Basically, companies opt for this strategy when they want to ensure widespread availability of products.
This distribution strategy works well for consumer durable and FMCG products. Take your favorite brand of chewing gum for example. The product is probably available everywhere you go from drugstores to gas stations – you name it.
Intensive distribution strategy is typically adopted by companies to make products widely available hence products are stocked in a large number of outlets. It’s also an excellent way to boost product awareness. However, because of its incredibly large reach, intensive distribution strategy might not be the most budget-friendly choice for all companies.
2. Extensive Distribution
Extensive distribution strategy is an excellent choice for companies that are comfortable with using multiple channels to reach out to their customers.
It’s often used by companies that want to target as many consumers as possible to achieve maximum market penetration. The main purpose of an extensive distribution strategy is to make consumers aware of a certain product line or product. This is practically the opposite of selective distribution.
Some big brands such as the Coca-Cola Company and Cadbury.
3. Selective Distribution
Selective distribution strategy is perhaps one of the most popular strategies used by high-end brands. It is typically used by brands that want to open up a handful of outlets in particular geographical location.
While this may seem like it would restrict or hamper sales, it helps companies target best-performing outlets. This, in turn, allows companies to spend more time and effort towards training facilities and improving quality.
In turn, all this helps create a more personalized shopping experience for consumers which directly contributes to better sales.
Most luxury goods manufacturers opt for selective distribution such as Dolce & Gabbana.
4. Exclusive Distribution
Now, this strategy truly is exclusive in essence. Exclusive distribution strategy is used by the most – you guessed it, exclusive and prestigious brands out there. Using this strategy, the company aims to maintain maximum control over retailers.
In exclusive distribution, the seller grants selling rights to a single retailer. The most obvious advantage of exclusive distribution is that when professionals focus all their energies on a concentrated area, they are likely to reap better results.
Top examples include designer clothing brands, automobile companies and luxury watch brands such as Rolex.
5. Inclusive Distribution
Inclusive distribution is a type of distribution strategy that is typically used by low-income FMGC companies to target low-income micro enterprises.
While inclusive distribution has a potential to reap brilliant results, it involves an extensive process. For instance, companies will have to start by conducting thorough market research. After that, they might have to figure out a way to adapt their business model in accordance with area’s social and cultural values.
Types of Distribution Strategy: Conclusion
For maximum success, companies must conduct thorough research to determine what types of distribution strategy would be best for them.
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In today’s competitive landscape, the inability to gain a firm foothold in the market is one of the biggest challenges companies face. As a result, intensive distribution can be a valuable tool for businesses to take their business to new heights.
This article will explore what intensive distribution is and why it’s essential for your company. We’ll also cover some of the most common strategies companies are trying to get ahead through intensive distribution and an example of how these strategies have been implemented successfully in real life!
Intensive distribution definition
Intensive distribution is a strategy that manufacturing businesses use to improve their supply chain and inventory management. It involves shipping products to many retail locations in a brief period. This allows retailers to keep a smaller inventory on hand while still meeting the demands of their customers.
Excessive supply creates brand awareness and helps promote the product, resulting in increased market share. It has proven to be an effective strategy for achieving a boost in annual revenues, and sales vary significantly from one year to the next.
Importance
Nowadays, retail landscapes are changing at an unprecedented rate. In addition, the way consumers buy has changed dramatically. These changes have created a need for a flexible, responsive supply chain that can react quickly to market demands. Companies that don’t have this adjustable supply chain will find themselves stuck with excess inventory, costing them a lot of money. Intensive distribution is the answer to this problem.
Implementation
There are many different ways that this marketing strategy can grow your business. One way is through market segmentation. By focusing on your target market, you can create a supply chain tailored specifically for those markets. This will help you react quickly to changes in demand and keep your inventory costs low. Intensive distribution can also be used to improve customer service. By bringing the products closer to the customers, you can reduce delivery times and provide a better customer experience.
Intensive Distribution Case Study
In 2009, Hasbro decided to use intensive distribution to improve sales of their board game, Monopoly. The company wanted to increase sales by 20%.
The toy manufacturer shipped the product to an additional 14% more stores in different locations throughout North America to achieve this goal. They also increased marketing spending for television, print, and other digital media campaigns.
In 2010, Hasbro’s revenue from Monopoly went up by 27%. This was due to the increased distribution and marketing efforts. As a result, the toy company increased sales without increasing production or inventory.
Application of this marketing strategy
Popular products that use the intensive distribution strategy are soft drinks, smartphones, cars, and clothing. All of these products are available in various retail outlets, making it easy for consumers to purchase.
However, the success of their distribution strategies cannot be determined by a retail location alone. The strategy behind each product placed in all the possible outlets also impacts its sales and overall revenue.
Here are some examples:
Apple’s iPhone is available in all sorts of locations, such as significant cellphone carriers, big box stores, and even some convenience stores. This variety of distribution options means that there’s an iPhone for everyone, no matter where they are or what they’re looking for.
Another great example is Nike. You can find their sneakers in sporting goods stores, department stores, and online. Not only does this allow consumers to find the sneakers they want, but it also gives Nike exposure in a variety of locations that wouldn’t necessarily be considered solely athletic wear.
The hybrid car Ford is another successful product with an intensive distribution strategy. The vehicles are available at several different dealerships across the country and at some larger retail stores, such as Walmart and Target. This mix allows people interested in hybrid cars to find them easily, no matter where they live or shop.
Coca-Cola provides an excellent example for intensive distribution in the beverage category. It is available practically everywhere you turn, from convenience stores to gas stations to major grocery chains and even in a drug store. This ubiquity helps ensure that everyone who wants a Coke can get one without too much trouble.
Benefits
Minimize inventory and operating costs
One of the advantages of intensive distribution is that it helps to minimize inventory and operating costs. By having a smaller inventory, businesses can save on storing and maintaining products. Additionally, companies can reduce time and money spent on transportation by streamlining the supply chain.
Maximize customer satisfaction
Intensive distribution can help companies maximize customer satisfaction by ensuring a quick and responsive supply chain. This can help to keep customers happy by ensuring that they get the products they want when they want them. In addition, it can also help to improve the company’s bottom line by reducing inventory costs.
Eliminate out-of-stocks and lost sales
The intensive distribution also helps eliminate out-of-stocks, lost sales, and customer dissatisfaction. In addition, it allows for the quick and easy replenishment of products so that customers can always find what they are looking for. This, in turn, results in increased customer loyalty and better long-term profitability.
This strategy might help increase marketing efforts, leading to improved inventory turnover rates and reducing the inventory needed to support a business. In addition, by consolidating shipments and making better use of transportation and storage resources, companies can save money while still providing their customers with the products they want.
Intensive distribution is an integral part of any successful business. By understanding its advantages and implementing a strategy that works for your company, you can improve your bottom line and create a more efficient supply chain.
Drawbacks
Operate on thin margins
This marketing strategy forces companies to operate on thin margins. This can be tough, especially if demand drops or costs go up. Small businesses would struggle to maintain profitability in this type of situation. Therefore, only big companies with a solid financial position could use this strategy.
Requires strong channels of distribution
One of the disadvantages of implementing an intensive distribution strategy increases manufacturers’ costs. Manufacturers need to pay more for their products to place their desired quantity on retailers to implement this strategy. Additionally, the products need to be stored in a warehouse and shipped to the retailers. This can be costly for the manufacturer, so it’s essential to have a strong distribution channel.
Final Thoughts
Effective & efficient distribution has never been more critical. As the retail landscape changes and customers have more choices than ever before, it is vital to distribute your product on time across different channels. It would help if you had an intensive distribution strategy for online and offline sales models to do so successfully.
Hopefully, this guide helped you understand the importance of intensive distribution, why it matters and provide some insight into implementing an effective strategy for your business.
Related: Selective Distribution