September 12, 2018 293
September 12, 2018 293
The moment an entrepreneur decides on his product and its target markets, the next thing to do is to decide on the intensity of his market coverage.
This intensity of distribution will depend on the type of product and the necessary effort the consumers will want to expand in order to buy the items.
There are three major methods in practical use for distributing products in the market.
This type of distribution operates when a manufacturer selects only one outlet in a target market to distribute its product. If more outlets are to be used, then such products are normally differentiated.
It is used to distribute mainly specialty items like jewelry, cars, fashion clothing etc. Exclusive distribution helps to enhance the prestige of a product and allows higher markups for the item. There is usually a contractual agreement between the manufacturers and the retailers of most of the items distributed by this method.
The method is resorted to when a manufacturer wishes to have full control over the manner its products are handled in a target market.
Promotion is jointly carried out by both the manufacturers and retailers. A manufacturer using exclusive distribution method will reduce its selling expenses. He has better feedback on the performance of his product in the market which will aid him in his planning and control functions. The method also protects the producer against the activities of competitors in the target market.
Exclusive distribution is always accompanied by contractual agreements between the producer and the retailer for the distribution of the products.
The main types of contractual agreements include the followings:
This is a form of contractual agreement between the producers and the wholesalers whereby the wholesaler will be the only outlet to carry the manufacturer’s product and no other wholesaler can be used in the market. If the manufacturers wish to use another wholesaler, he has to differentiate the product. With this method, the wholesaler determines the terms and conditions of sale of the product. The wholesaler controls the distribution because of his knowledge of the market or because of his strong financial standing.
This is an agreement between manufacturers that have a strong product, with a retailer whereby the retailer is allowed to carry only the manufacturer’s brand of the product. This allows the manufacturer to have full control of the distribution of its product. The manufacturer dictates the terms and conditions of sale of his products.
This is an agreement between the manufacturer and the retailer where the manufacturer can only sell to only one retailer in a given target market. If he wishes to use other retailers then he must differentiate the product. This method of distribution is used where the retailer is very strong financially and territorially in the target market.
Normally, the manufacturer will use the method so as to tap the know-how and the financial standing of the retailer in the given market. It is also a method employed by small producers that have not set up their own marketing departments. It is also used when a manufacturer wishes to enter a new market. The retailer usually controls the distribution of the products and he often determines the terms and conditions of sale for such products.
2. Intensive Distribution (Blanket Distribution)
With this method of distribution, manufacturers aim at using many or all the available outlets carrying that item in a target market. Intensive distribution policy requires the use of more than one channel to reach all the customers in a target market. The use of wholesalers is usually involved in the distribution system. This method is often used to distribute convenience items.
Convenience items are standardized products that are mass produced like soap, notebooks, blades, cigarettes, newspapers, pins, petrol etc. They are product items that consumers wish to expend little efforts at obtaining. They are bought frequently and in small units. Usually, the ready availability and convenience of the purchase of these products are more important than the nature of the outlets.
The promotion of such items is normally done by the manufacturers because retailers and wholesalers carrying such items are many and some of them will not be willing to spend their money to promote such items. This is because the benefits of such activity cannot be limited to them alone.
In addition, retailers carry very many brands of such items and will not want to select certain brands to promote. So this method of distribution is especially suited for convenience goods. Retailers invariably control the distribution of these items because they can decide on which items they will want to carry.
This is used by manufacturers of shopping goods. They select a few usually closely located outlets in a target market to distribute their products. Consumers are willing to shop around to compare the product features before making their purchases. Most durable consumer goods as shoes, clothing, electrical and electronic items, etc fall into this category. The shopping goods are more costly than convenience items.
The outlets used are usually located close together to afford consumers the opportunity of accessibility. The outlets selected at a giving target market are those with good reputations. New manufacturing companies seeking to enter into a new market often adopt this method of distribution.
Promotion of such goods is normally carried out by the retailers because the sale of such items depends on the outlet’s reputation. Some of the outlets infract have their own brand names for such items.
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