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What are the 3 different types of marketing coverage: Also known as intensity of distribution

Intensive distribution As many outlets as possible Convenience goods

Selective distribution More than one, but not all Shopping goods
outlets
Exclusive distribution One outlet per market area Specialty goods (luxury)

1) Intensive distribution: A firm tries to place its products or services in as many outlets as
possible
The objective is full market coverage and the ultimate goal is to sell to as many customers as
possible Associated with convenience goods. The consumer does not want to search for
additional information (because the item has been bought before) and will accept a substitute
rather than have to frequent more than one store. Those purchased with a minimum of effort,
because the buyer has knowledge of product characteristics prior to shopping. Frequency: high
Effort: low Price: Low)
Convenience goods classified into 3:
 Staples: are low priced items that are routinely purchased on a regular basis ex: detergents,
milk, rice, water, bread, pasta.
 Impulse goods: are items that the consumer does not plan to buy on a specific trip to a store
(you buy the product when you see it …. Products near cashier) ex: ice cream, tissue, candy
and snacks.
 Emergency goods: are items purchased out of urgent need ex: umbrella, asprin, flashlight,
candles, batteries.

2) Selective distribution:
It is a limited number of outlets in a given geographical area are used to sell the product.
Very important to select channel members that maintain the image of the product.
Shopping Goods:
Those for which consumers lack sufficient information about product alternatives and their
attributes and therefore must acquire further knowledge in order to make a purchase decision.
Frequency: medium
Price: slightly increased (More than convenience goods)
Effort: slightly increased (More than convenience goods)

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The unit price, as well as the profit margin of shopping products, is usually high.

Retailers generally play an important role in the sale of shopping products as a lot of persuasive
effort is needed to convince the buyers to purchase them.

Purchasing decision is preplanned

The two major kinds of shopping goods are attribute-based and price-based.

For attribute-based shopping goods: consumers get information about product features,
warranty, performance, options and other factors and they choose the product that has the best
combination of attributes they wanted to have. Ex: buying iPhone or buying from clothes brand
as: Nike, Zara.

Price based attribute: These are those products customers judge product attributes and prefer
the cheapest one. Here, customers have become more price-conscious. They primarily focus on
the price of the product instead of other attributes when making buying decisions ex: buying
oppo or Huawei phone.

3) Exclusive distribution:
Only one retail outlet in a specific geographical area carries the firm’s products.
It protected territories for distribution of a product in a given geographic area; business maintains
tight control over a product
Frequency: minimum (one time), Effort: high, Price: very high
These products are offered only at specific outlets and they best match a specific type
of consumer needs, tastes, and preferences.
Consumers associated with specialty products are very loyal to the brand, they will not make a
purchase if their brand is not available.
The buyers are willing to spend a lot of time & money

Ex: Luxury cars (Rolls Royce, Lamborghini), rolex watches,

Channel Length Requirements: Specify the number of the channel levels that are required to
fulfill a supplier’s objectives.

Direct distribution Indirect distribution

Zero level One to three levels
Manufacturer selling directly to consumers
(no middleman or intermediary)
One level channel: means that there is only

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 one intermediary involved between the
manufacturer and the customer to sell the
goods. This intermediary is
known as a retailer

Two level channel: involves two

intermediaries for the sale of products is
known as Two Level Channel. The
intermediaries involved are wholesalers and
retailers. The producer sells their products to
wholesalers in bulk quantity, who sells them
to small retailers

Three level channel: three intermediaries

involved between the manufacturer and the
customer for the sale of products.

What is the product positioning in the marketing channels?

 Replacement Rate (The rate at which a product is purchased by users). = frequency of
buying
 Gross Margin (The total channel costs measured by the difference between product costs and
the final selling price for a goods). Gross margin= Sales- COGS
 Adjustment (Services applied to a product to meet customers’ needs or product customization
requirements).
 Time of Consumption (The time period during which the product is used).
 Searching Time: time taken to search or find a product (shopping time)

What are the factors to Consider When selecting specific intermediaries?

The producer will want to use intermediaries who:
1) Reach their target market
2) Have a good reputation
3) Handle distribution functions efficiently
4) Order large quantities
5) Pay invoices quickly
6) Display and promote merchandise well
7) Have a good location
8) Professional salespeople

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  Channel Design: It refers to those decisions involving the development of new
marketing channels where none had existed before, or to modification of existing
channels.
 Decisions associated with forming new or altering existing channels.
 Channel design is important because it helps companies to identify the most effective
marketing channels to reach target customers and achieve company objectives. The goal
of channel design is to create a system that optimizes customer engagement and
minimizes costs. (to understand only)

The channel design decision can be broken down into seven phases or steps Discuss.

1. Recognizing the need for a channel design decision.

2. Setting and coordinating distribution objectives.
3. Specifying the distribution tasks
4. Developing possible alternative channel structures.
5. Evaluating the variables affecting channel structures.
6. Choosing the best channel structure
7. Selecting the channel members.

Step 1: Recognizing the need for a channel design decision: Developing a new product or
product line or aiming an existing product to a new target market

Step 2: Setting and coordinating distribution objectives. Channel objectives are the goals that a
company wants to achieve through its marketing channels. Marketing channel objectives can
include increasing sales, reaching new customers, and improving customer service.

Step 3: Specifying the distribution tasks The job of the channel manager in outlining distribution
functions or tasks.
Step 4: Developing possible alternative channel structures. should be evaluated in terms of the
following three dimensions:
(1) number of levels in the channel,
(2) intensity at the various levels,
(3) type of intermediaries at each level.

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Step 5: Evaluating the variables affecting channel structures
 These six basic categories are most important:
1. Market variables: market size, market geography, market behavior
2. Product variables: Bulk & Weight Perishability Unit Value Degree of Standardization
Technical versus Nontechnical
3. Company variables: Firm size and financial capacity and managerial expertise
4. Intermediary variables: availability, cost and service
5. Environmental variables: PESTEL (political, economic, sociocultural, technological,
environmental and legal)
6. Behavioral variables:

Step 6: Choosing the best channel structure: the channel manager should choose an optimal
structure that would offer the desired level of effectiveness in performing the distribution tasks at
the lowest possible cost

Step 7: Selecting the channel members. Selection process as follows:

1. Finding prospective channel members (search)
2. Applying selection criteria to determine the suitability of prospective channel members
(evaluate different channel members criteria)
3. Securing the prospective channel members as actual channel members (choice)