Intensity of Market Coverage
A company must determine the distribution market coverage intensity a product should get, what number and kinds of a channel in which the product will be sold. This will depend on the nature of a product, target market, and availability of other competing products. Three major Market coverage strategies include intensive, selective, and exclusive distribution.
Intensive Distribution: A company uses all available distribution outlets for making its product available to consumers. This system does not offer any control of distribution outlets. These products are generally low-cost convenience products such as bread, soft drinks, chewing gum, tea, laundry soaps and detergents, toothpaste, toilet soaps, and petrol and diesel etc. These products are used routinely and on an ongoing basis and require no post-sale service. To meet consumer demand efficiently, intensive distribution is necessary and companies use all available distribution channels that offer deep market penetration in every geographic area. This is necessary because availability is important and may generally have a direct relationship to sales because there is no brand loyalty, consumers want to buy immediately in the nearest location where they live and do not devote any time to search, they buy whichever brand is easily and conveniently available, substitution and brand switching is common. Consumer product companies such as HLL, P&G, ITC, and Nirma etc. use intensive distribution. HLL objective for its Lifebuoy bathing soap is to make it available to 80 per cent of the Indian rural markets. Companies producing fertilizers and insecticides have to ensure intensive distribution to make products available within few kilometers to farmers living in rural India. Such companies use C&F agents, distributors, wholesalers, sub-wholesalers, retailers and village shops. Speedy availability is critically important in market coverage intensity.
Selective Distribution: Companies use selective distribution, which means using more than a few and less than all available outlets in a market area to distribute products. This offers some degree of control at a relatively less cost than intensive distribution. High-involvement products such as consumer durable items that include TV, washing machine, refrigerators, stereo systems, PCs for home and personal use, branded clothing, and sportswear etc., use selective distribution. These products are infrequently purchased, are more expensive than convenience products, and consumers are willing to devote time in searching various retail outlets to compare product price, features, design, and style etc. Selective distribution is suitable when a product requires post-sale service from the outlet, such as PCs, Printers, Cell phones, and air conditioners etc. Selective distribution is also suitable when product differentiation at the outlet level is important. Some companies use company owned showrooms such as Raymonds, Titan watches, Vimal fabrics, and Bata shoes etc. Many firms producing industrial products, such as hand-tools use selective distribution.
Exclusive Distribution: This type of distribution means using one or very limited few outlets. Allen J. Magrath writes that exclusive distribution offers producer tighter image control. The producer can also maintain control over dealer’s sales and service activities. It is called exclusive because it involves exclusive dealing arrangement and often includes exclusive territorial agreements and the intermediary does not handle any other competitors’ products. The manufacturer hopes the resellers would be more committed to selling the product and providing excellent customer service, carry complete inventory, send their personnel for training, and participate in promotional activities. This type of arrangement is quite suitable for products, which are infrequently purchased and consumed over a long period of time. Products suitable for exclusive distribution include expensive cars, branded jewelry, high-priced wristwatches, designer dresses, exclusive perfumes and expensive fashion products. Porsche, Christian Dior products, Rolex watches, Professional Nikon cameras, and French perfumes etc., are sold through exclusive dealers. Both parties benefit from exclusive distribution and this system is often used as an incentive to dealers when only a limited target market is available. It requires closer ties between the producer and the dealer.