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CHANNEL STRUCTURE AND DISTRIBUTION
INTENSITY
Channel structure
A description of the channel structure summarizes:

 The types of members that are in the channel
 The number of members of each type that coexists in the market ( intensity)
 The number of distinct channels that coexist in the market

What determines the channel structure?

 Customer demand customers regarding service outputs (a result of
segmentation)
 What types of intermediaries exist in a given market
 What types of intermediaries will perform channel flows the most efficiently
 Which specific intermediary to use

EXCLUSIVE DISTRIBUTION: . everywhere. more searching for goods  Higher margins/profits for intermediaries  Less effort by intermediaries needed  Higher channel power for suppliers Selective distribution pays attention to very specific geographical locations regarding the availability of a specific product. SELECTIVE DISTRIBUTION:  Lower market coverage. gas stations. An example would be high end clothing (such as Dolce and Gabbana products are sold at Neiman Marcus and not at Walmart or JC Penneys). These products can be found in almost every place a person shops (grocery stores.Mapping from flows to be performed to appropriate intermediary choices Distribution intensity Should the product be available to everyone. every time? INTENSIVE DISTRIBUTION:  Higher product availability  Higher market coverage (amplia cobertura de mercat)  Intense competition among intermediaries. Examples of products which use intensive distribution are Coke. These are also the type of product a person can buy both at home and abroad. Companies who want to maintain a specific quality store for their product will use selective distribution. etc. most major cigarettes brands (like Marlboro). Pepsi. and major brewing companies (like Budweiser).). lower prices. supermarkets. lower margins Intensive distribution (also called Mass Distribution) is where a company supplies their product to all markets (essentially they are found everywhere).

requires high investment in mkt communication. An example of a product which falls under exclusive distribution is high-end luxury vehicles. For example. Companies are far more selective with where their product can be purchased at. Rolls Royce vehicles are exclusively distributed. Rolls Royce only has 33 dealerships in the United States (5 in California) What do intermediaries want? Lower distribution intensity  Less competition  Higher margins A limited number of product categories  Shelf space is limited  Goal: to maximize profits/cm Brands with high equity Being paid for services rendered  Free-rider problems How to sustain distribution intensity? Impose contractual commitments – manufacturer demands certain standard of conduct Invest in a pull strategy to build brand equity – consumers expect to find the brand in every store. an extreme modification of selective distribution.price floors prevent excessive competition among retailers. essentially.Exclusive distribution is. Resale price maintenance ( RPM). How much selectivity? The nature of product category: Convenience goods – intensive distribution Shopping goods – Intermediate degree of selectivity Specialty goods – High degree of selectivity or exclusive distribution Brand strategy: Product quality level and price levels Product scarcity and shortages (new car model of prestigious brands) Niche markets and brands Bargaining for influence over channel members Limit market coverage (use selective distribution): . Exclusive distribution uses one distributor for entire regions.

the downstream channel member’s considerations For the Downstream Channel Member Limiting brand assortment is currency Fever brand = more money Downstream Channel Members use the money to “pay” the supplier for limiting the number of competitors who can carry the brand in the Channel Member’s trading area providing desired brands that fit the Channel Member’s strategy wording closely to help the Channel Member achieve competitive advantage making Channel-Member-specific investments into:  new products  new markets . increased channel control Manufacturer-specific investment – limited distribution Dependence balancing –trading territory exclusivity for category exclusivity Selective coverage – the manufacturer’s considerations For the Manufacturer Limited coverage is currency More selectivity = more money Manufacturers use the money to “pay” the Channel Members for:  limiting its own coverage of brand in product category (gaining exclusive dealing is very expensive)  supporting premium positioning of the brand  finding a narrow target market  coordinating more closely with the manufacturer  making-supplier specific investments  new products  new markets  differentiated marketing strategy requiring downstream implementation  accepting limited direct selling by manufacturer  accepting the risk of becoming dependent on a strong brand Manufacturers need to “pay more” when:  the product category is important to the Channel Member  the product category is intensely competitive Category selectivity. better working relationships.Enables targeting desired channel members.

 differentiated Channel Member strategy requiring supplier cooperation accepting the risk of becoming dependent on a strong Channel Member Downstream Channel Members need to “pay more” when: the trading area is important to the supplier the trading area is intensely competitive .