Distribution Decisions

Target Market Issues

A distribution system is only effective if customers can obtain the product.  Consequently, a key decision in setting up a channel arrangement is for the marketer to choose the approach that reaches customers in the most effective way possible.  The most important decision with regard to reaching the target market is to determine the level of distribution coverage needed to effectively meet customer’s needs.  Distribution coverage is measured in terms of the intensity by which the product is made available.  For the most part, distribution coverage decisions are of most concern to consumer products companies, though there are many industrial products that also must decide how much coverage to give their products. 

As we will see the marketer must take into consideration many factors when choosing the right level of distribution coverage.  However, all marketers should understand that distribution creates costs to the organization.  Some of these expenses can be passed along to customers (e.g., shipping costs) but others cannot (e.g., need for additional salespeople to handle more distributors).  Thus, the process for determining the right level of distribution coverage often comes down to an analysis of the benefits (e.g., more sales) versus the cost associated with gain the benefits.

There are three main levels of distribution coverage - mass coverage, selective and exclusive. 

• Mass Coverage - The mass coverage (also known as intensive distribution) strategy attempts to distribute products widely in nearly all locations in which that type of product is sold.  This level of distribution is only feasible for relatively low priced products that appeal to very large target markets (e.g., see consumer convenience products).  A product such as Coca-Cola is a classic example since it is available in a wide variety of locations including grocery stores, convenience stores, vending machines, hotels and many, many more.  With such a large number of locations selling the product the cost of distribution is extremely high and must be offset with very high sales volume.
• Selective Coverage - Under selective coverage the marketer deliberately seeks to limit the locations in which this type of product is sold.  To the non-marketer it may seem strange for a marketer to not want to distribute their product in every possible location.  However, the logic of this strategy is tied to the size and nature of the product’s target market.  Products with selective coverage appeal to smaller, more focused target markets (e.g., see consumer shopping products) compared to the size of target markets for mass marketed products.  Consequently, because the market size is smaller, the number of locations needed to support the distribution of the product is fewer. 
• Exclusive Coverage - Some high-end products target very narrow markets that have a relatively small number of customers.  These customers are often characterized as “discriminating” in their taste for products and seek to satisfy some of their needs with high-quality, though expensive products.  Additionally, many buyers of high-end products require a high level of customer service from the channel member from whom they purchase.  These characteristics of the target market may lead the marketer to sell their products through a very select or exclusive group of resellers.  Another type of exclusive distribution may not involve high-end products but rather products only available in selected locations such as company-owned stores.  While these products may or may not be higher priced compared to competitive products, the fact these are only available in company outlets give exclusivity to the distribution.

We conclude this section by noting that while the three distribution coverage options just discussed serve as a useful guide for envisioning how distribution intensity works, the advent of the Internet has brought into question the effectiveness of these schemes.  For all intents and purposes all products available for purchase over the Internet are distributed in the same way - mass coverage.  So a better way to look at the three levels is to consider these as options for distribution coverage of products that are physically purchased by a customer (i.e., walk-in to purchase).