BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 1 DISTRIBUTION INTENSITY DECISIONS Distribution options— what is realistically feasible? Life cycle effects Maintaining channel service output standards Making selective distribution mutually attractive and secure

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 2 Constraints on Distribution Opportunities Product TypeDistribution Options Major brand standard convenience good Intense distribution (limiting distribution would mean forfeiting brand status) Upscale brand convenience good Intense distribution possible but not appropriate; selective preferred Minor brand convenience good National regional intense distribution unrealistic; local or “invited” national distribution Major brand shopping good Moderately intense distribution (e.g., TVs in discount store) Premium brand shopping good Moderately intense distribution inappropriate; selective distribution Minor brand shopping good National moderately intense distribution unrealistic; local or “invited” national distribution Niche brandSelective distribution

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 3 Product Life Cycles Intro Growth Maturity Decline Profits Unit sales Profits (0)

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 4 Distribution Options Over Brand/Product Life Cycle Brand/ product category lifecycle stage Options—no additional brand leverage Options—with brand leverage IntroductionInfomercials, direct, piggy-backing, “invited” Distribution outlets carrying other brand members GrowthIncreasing number of product appropriate distributors Distribution outlets carrying other brand members, other product appropriate channels Maturity/declineProduct category/brand specific evolutionary pressures—e.g., toward low-price/low-service; exclusivity; “parallel” distribution

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 5 Brief Review Full service retailers tend dislike intensive distribution Low service channel members can “free ride” on full service sellers Manufacturers may be tempted toward intensive distribution—appropriate only for some; may be profitable in the short run Market balance suggests a need for diversity in product categories where intensive distribution is appropriate Service requirements differ by product category

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 6 Full Service Retailer Termination of Brand “Straying” Into Intensive Distribution Overt—explicit termination of brand Category termination if no suitable replacement brand is found Product life cycle issues Category “boundary” issues “Covert”—channel member officially carries product but maintains little inventory and may attempt to “convert” orders to preferred substitute

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 7 Maintaining Channel Member Service Performance Contractual requirements (incentive for channel member to agree?) “Pull” strategy— customers “demand” product Limit market coverage Geographic Customer type Retail price maintenance Legally mandated in some countries Requires power in U.S.

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 8 Creating Downstream Exclusivity Cosmetic differentiations to product sold by different retailers Model or size variations between channels (e.g., Costco only selling large size) Allowing retailer to apply own label to product (assumes that “private” label is as valuable)

BSAD 113 DISTRIBUTION INTENSITY Lars Perner, Instructor 9 Making Exclusivity Enticing Mutual dependence Investment in relationship Long term contracts Cost savings to manufacturer Larger quantities to one buyer Training expenses lower under reduced turnover Joint brand identity (e.g., high end cosmetics in upscale department stores)