Intensive Distribution: This strategy aims to place products in as many outlets as possible. It is essential for convenience goods (like snacks or soft drinks) where availability is the primary driver of purchase and brand switching is high if the product is out of stock.
Selective Distribution: Producers use more than one, but fewer than all, available intermediaries. This is common for 'shopping goods' like electronics or appliances, where consumers expect some level of sales support and the producer wants to maintain a specific brand image.
Exclusive Distribution: Only one outlet is granted the right to sell the product in a specific geographic territory. This is used for luxury or highly specialized goods to maintain extreme brand prestige, ensure high-quality service, and allow for high profit margins.
| Feature | Intensive | Selective | Exclusive |
|---|---|---|---|
| Objective | Mass market coverage | Moderate coverage | Prestige and control |
| Product Type | Convenience goods | Shopping goods | Specialty/Luxury goods |
| Intermediaries | Many | Few | One per area |
| Example | Soft drinks | Television sets | Luxury automobiles |
Logistics Management: This involves planning, implementing, and controlling the physical flow of materials and final goods. The goal is to meet customer requirements at a profit by managing the trade-off between service level and total cost.
Key Components: Logistics includes order processing (speed and accuracy), warehousing (storage and distribution centers), inventory management (balancing stockouts vs. carrying costs), and transportation (selecting modes like rail, truck, air, or sea).
Total Cost Approach: Managers must evaluate the system as a whole rather than optimizing individual components. For example, using expensive air freight might be justified if it significantly reduces inventory carrying costs and improves customer satisfaction.
Analyze Product Characteristics: When asked to choose a distribution strategy, always start with the product type. Perishable goods require short, fast channels; complex technical goods require direct channels for expert demonstration; and low-cost convenience goods require intensive, multi-level channels.
Identify Channel Conflict: Look for scenarios where a manufacturer starts selling online at a lower price than its retail partners. This is a classic 'vertical channel conflict' that requires management through clear pricing policies or product differentiation.
The Logistics Trade-off: In calculation or analysis questions, remember that minimizing one cost (like transportation) often increases another (like inventory). Always look for the Total Logistics Cost solution: where is transportation, is fixed warehouse cost, is variable warehouse cost, and is the cost of lost sales due to delays.
