How your market coverage decision affects your business

Not all companies make the best market coverage decisions. The ones that do will probably have slipped into your subconscious so cleverly you may not have even noticed. 

Have you ever asked been in a bar and asked for a Coke to be asked ‘Pepsi ok?’ The Coca-Cola brand is so ingrained to our subconscious you don’t even realise you are using a brand name instead of asking for cola. This is an example of the market coverage decision of ‘intensive distribution’ – the product is everywhere: all shops, petrol stations, restaurants, bars, sporting events etc. 

This works well for Coca-Cola but would it work well for other items on the market? Lets apply intensive distribution to Michelin tyres as an example. 

Intensive Distribution

If Michelin tyres were in every supermarket, hardware store, petrol station and online store – what would happen?  A small boost in the market share initially would lead to: 

  • Soaring logistics and storage costs to accommodate the vast fragmented distribution network
  • Price competition would be fierce – shops would have to drop the price of the tyres to compete with all the other outlets. 
  • There would be a lack of trained staff to offer advice on sizes requirements or suitability
  • There would be no fitting services at supermarkets or stores. 
  • After sales support and guarantee services would be a huge problem. 

Ultimately the market would be flooded with stock exceeding demand, profits would fall dramatically due to the increased overheads and coupled with the lack of support available the brand would suffer. So as good as it sounds intensive distribution is not suitable for every product.

So what are the market coverage decision options?

There are three main options:

  1. Intensive Distribution (as explained above) 
  2. Selective Distribution
  3. Exclusive Distribution

Selective distribution

Just as the name indicates only a special select number of companies are able to sell and distribute the chosen product or range. This lets the manufacturers distribute their product of range through the most suitable companies with trained staff, normally within the same industry.

Exclusive Distribution

Probably the easiest to explain! As the name dictates – exclusive distribution means a product to range will only be sold and distributed through exclusive outlets. This is used when a manufacturer and/or distributor wants to keep complete control of the distribution of a product. Normally this is only for a unique product that cannot be obtained anywhere else – as such this is the opposite of Intensive distribution (available everywhere). This is often shown on TV adverts for new gadgets stating ‘only available in stores’ or for new TV shows for example ‘only on Netflix’. If you want the product you have no choice but to go to their store or use their service. 

Published by A Kennedy

An award winning, UK based, International Logistics Manager for a multinational tool company. Over 25 years experience in international logistics and supply chain management. Elected ‘Chartered Status’ by the CILT and ‘Expert Status’ by the IoSCM.

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