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Understanding Distribution Strategies: Intensive, Selective, and Exclusive Distribution

11 May 2023

Selecting the most effective form of indirect distribution from: Intensive, Selective, and Exclusive Distribution


Introduction:

Businesses employ different distribution strategies to effectively reach target markets and deliver products or services to consumers.

When deciding how products (or services) will reach customers, a business has two broad options:

  • Direct Distribution: Direct distribution is simply explained as selling direct to customers without the assistance of a third party. In B2B marketing a firm (for example) an engineering firm, architectural firm, law firm or any professional services firm is engaging directly with customers. Firms that make physical products, for example a kitchen builder, outdoor furniture manufacturer etc, could also sell direct to end users. Find out more about direct distribution.
  • Indirect distribution: It is also possible to engage with other organizations that buy products or services from the original provider and then sell it to their customers. That's termed Indirect Distribution. Find out more about Indirect Distribution.


The key feature of indirect distribution is the service or product originator (the organization that makes it) is not DIRECTLY dealing with the final customer (end-user). The customer relationship is owned by the distributor. Thus, the product originator is dealing indirectly with their market.


Three key approaches in indirect distribution are intensive distribution, selective distribution, and exclusive distribution. In this article, we will explore and clarify the distinctions between these strategies and their impact on the marketing mix, particularly the "Place" element.


Intensive Distribution: On every street corner



Intensive distribution is a distribution strategy aimed at achieving widespread market coverage by placing products or services in as many outlets as possible. This approach involves partnering with numerous intermediaries, retailers, or distributors across various geographic locations or market segments. Intensive distribution is commonly used for fast-moving consumer goods or products with high demand and low price points, such as everyday consumables found in supermarkets or convenience stores. The objective is to maximize availability and accessibility, ensuring widespread customer reach and convenience. Read more about intensive distribution.


Selective Distribution: Using specialists in a product category



Selective distribution is a strategic approach that involves carefully selecting a limited number of intermediaries or retailers to distribute products or services. This strategy focuses on partnering with intermediaries who meet specific criteria, such as market expertise, reputation, or alignment with the brand's values and positioning. The aim is to achieve both market coverage and brand control. Selective distribution is often employed for products with moderate demand and price points, where maintaining brand image, exclusivity, and customer experience is crucial. It allows businesses to work closely with chosen partners, ensuring consistent brand representation, targeted market penetration, and enhanced customer support. Read more about selective distribution.

Selective distribution typically leverages the retail distributor's market and product knowledge. Put simply, in the case of Repco (pictured above) the person behind the counter is likley to be a car enthusiast and can advise the customer on product selection and application. They will have domain knowledge. Further, the potential buyer is conditioned to thinking that a store like Repco is likley to have a far greater range of automotive products and therefore that would be their first choice when seeking an automotive part or product. Makes sense.


Exclusive Distribution: When only the best will do



Exclusive distribution is a distribution strategy that grants exclusive rights to a single intermediary or retailer within a specific geographic area or market segment. Under exclusive distribution, businesses choose a sole partner to distribute their products or services, providing them with an exclusive advantage over competitors. This strategy is commonly utilized for luxury goods, high-end products, or niche markets, where maintaining a sense of exclusivity, control, and superior customer experience is paramount. Exclusive distribution enables businesses to tightly manage the brand image, maintain scarcity and prestige, and cultivate a deep and loyal customer base. Read more about exclusive distribution.


Summary:

In summary, the three distribution strategies - intensive, selective, and exclusive - differ in their approaches to market coverage, partner selection, and brand control:

  • Intensive distribution focuses on widespread market coverage through partnering with numerous intermediaries, aiming for maximum geographic reach, availability and convenience. Consumer staples for example, customers expect they can buy milk, bread, meat, soft drinks, or petrol, within a few kilometers of their home.
  • Selective distribution emphasizes careful selection of a limited number of intermediaries, ensuring both market coverage and brand control, particularly for products with moderate demand. However, selective distribution focuses on working with distributors who specialize in particular product categories. Examples would be paint, automotive products, pharmaceuticals, white goods, consumer electronics, and camera equipment.
  • Exclusive distribution grants exclusive rights to a single intermediary, offering a heightened level of control, exclusivity, and customer experience, often associated with luxury goods or niche markets.

Understanding these distinctions empowers businesses to make informed decisions about the most suitable distribution strategy based on their product characteristics, target markets, and brand objectives, ultimately enhancing their overall marketing efforts and business success.



By Justin Wearne

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