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Level of Distribution Coverage

Level of Distribution Coverage Assignment / Homework Help
A marketer needs to consider various factors before he decides upon the right level of distribution coverage. It is well understood that distribution always increases company costs. A part of this cost is covered by the customer for instance shipping costs but the rest cannot be passed on to the customer. The marketer can determine the right level of distribution by comparing the profit made (example, more sales) with the cost incurred in achieving the profit. There are three levels of distribution coverage:

  • Mass Coverage

  • Selective Coverage

  • Exclusive Coverage
  • Mass Coverage
  • Mass coverage is also known as intensive distribution. As the name suggests in this level of distribution coverage the product is distributed to nearly all the locations where that type of product is sold. Mass coverage is suitable for low priced products with huge consumer demand. An example of such a product is Coca Cola. The product is available at all kind of stores, grocery stores, convenience stores, vending machines, hotels and more. The distribution cost for such products is very high however huge sales volume keeps the profits running high for the marketer.

  • Selective Coverage
  • In selective coverage the product distribution is limited to certain selected locations. This is the case with products with a smaller market size. As the market size is small the number of locations needed to support the distribution of the product is also smaller.

  • Exclusive Coverage
  • Exclusive coverage is ideal for products that target relatively smaller markets, for instance high-end products have small customer size. These products are more than often purchased by customers who satisfy most of their needs with high quality, expensive products. Efficient and well-trained customer service is essential for satisfying and helping such customers. Due to these characteristics of the product as well as its buyers the marketer sells his products at select stores or exclusive group of resellers. Another kind of product which gets exclusive coverage is the one found only in company owned outlets. These may not be high-end products or very expensive but since they are found only in select outlets they are distributed exclusively.

    With the advent of internet the effectiveness of these three levels of distribution coverage has been severely challenged. This is so because all products sold on internet are distributed by mass coverage. Therefore these three distribution levels are best options for distribution of products that are physically purchased by a customer.
2. Channel Relationship Issues
Apart from marketing decisions the marketer must consider the quality of relationship that exists between distribution channel members. Relationship between channel members just like marketing decisions has the potential to effect product sales.

Relationship issues can be broadly studied under the following three heads:

  • Channel Power
  • A distribution channel usually has several members, each having a set of duties to perform and each add on to the value of the product. Among these members some may hold a stronger position than the others. This phenomenon is known as channel power. This member/s tries to influence the rest of the distribution chain. In such a situation they start demanding for terms and conditions more favorable to them. Like, they would buy more products only if the prices are lowered, will sell only if the prices are higher. Or would demand other members for instance to do more marketing to customers etc.
Channel power can be exerted in the following ways:
  • Backend or Product Power
  • Backend or product power usually lies in the hand of manufacturers whose products enjoy high consumer demand. The rest of the channel members have to carry forward the product in the chain or else they are at the risk of losing their customers.

  • Middle or Wholesale Power
  • Here the power lies in the hands of the wholesaler who is in the commanding position in the distribution chain. Often a wholesaler distributes products among several smaller retailers and he himself obtains products from various manufacturers. The small retailers cannot buy products in bulk or variety because of cost constraints therefore is dependent on the wholesaler who can exert channel power in this situation.

  • Front or Retail Power
  • Front or retail power as the name suggests stays in the hands of the retailers. This state is reached when the retailer generates a high percentage of sales and therefore the rest of the channel members are dependent on them.

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