Sales Channel Intensity

Channel intensity denotes the number of intermediaries existing in a distri­bution or marketing channel. The degree of market coverage, product port­folio, and marketing strategy are important factors in deciding the channel policy and determining the number of intermediaries to be used. Compa­nies usually go for intensive, exclusive, or selective distribution depending on its marketing strategy, the number of intermediaries, and the degree of market coverage.

1. Exclusive distribution

Companies going for exclusive distribution networks offer exclusive rights to a dealer to distribute its products in a particular geographical area. These dealers cannot sell the products of other companies. Companies going for exclusive distribution cultivate and sustain an image of quality and pres­tige for the product. Exclusive distribution allows the company to have a greater control over intermediaries in terms of price, credit, and promo­tion. Exclusive distribution is usually used with high-priced products that have significant service requirements, with a limited number of customers in a particular geographic area. Companies having specialty products are usually good candidates for this kind of distribution intensity. Automobile industry follows exclusive distribution strategy.

2. Selective distribution

The companies going for selective distribution sell their products through selective number of dealers and retailers. Brand image is an important fac­tor for companies going for selective distribution. As the selected retailer will help to create a favorable impression about the products and company in the mind of customers. Companies prefer to offer selective distribution to outlets with good facilities, resources, and image. Selective distribution strategy help companies to reduce costs while establishing strong work­ing relationships with the channel partners. Companies having premium products like perfumes, apparels, jewelry, furniture, household appliances, computers, and electronic equipment prefer to distribute their products through select retailers, whose outlets will assist to enhance the luxuri­ous image of the brand. Channel members like selective distribution as it provides more revenue and profits than the intensive distribution strategy where they have to compete on price.

3. Intensive distribution

Companies opting for intensive distribution stock their goods in as many outlets as possible. Time and place utility are important considerations for companies adopting intensive distribution. An intensive distribution strategy links a product’s sales potential to the number of outlets selling the product. Companies selling products like cold drinks, confectionery, stationary, soaps, detergents, and other convenience goods try to sell their products through every possible retail outlet to generate maximum market coverage and sales. Telecom companies use intensive distribution strat­egy to increase the sales of their pre-paid vouchers, whereas they use the exclusive distribution strategy for their post-paid connections.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.