Distribution policy is an element in marketing-mix strategy, also known under term "place", alongside the price, product and promotion. Distribution policy refers to all the processes of goods acquisition, which also includes all undergoing logistics activities. One of the main focuses is to make sure that all the services company provides are always best quality for the consumers.
This strategy main goal is to achieve high customer satisfaction. To achieve this, the company have to make sure it pays high attention to their distribution channels, like online trade, wholesale trade or direct selling, on the same level as operating methods.
Policies and strategies of distribution
It is very important for the company to choose best distribution channel. A manufacturer should review his channel policies all the time, ensuring they are always adequate to his situation. Another crucial element is deciding on the amount of the middlemen in distribution channels.
There are 5 main policies that can be adopted:
- Intensive Distribution Policy - Producer of the goods wants to use as many outlets in as many places as it is achievable. With this policy, company focuses on mass distribution of their goods, which commonly are cigarettes, sweets, juices, etc., which are available for purchase in wide range of stores and retail shops like food shops, variety markets, restaurants, etc. This policy is usually adopted for products with low base price and high purchase frequency.
- Selective Distribution Policy - In this case, producer of the goods chooses a specific number of shops he will cooperate with closely, to achieve faster sales of the product. This policy if often adopted for goods that are from well known brands or with high base unit price. Goods like those aren't usually selling frequently. They are often: cars, washing machines, TV's, etc.
- Exclusive Distribution Policy - Producer of the goods chooses one single distributor in the area and enters a contract with him. The distributor is then appointed as sales agent for a specific product the company supplies. Under the contract he is obliged to not sell goods supplied by the competition, while producer agrees to not supply to anyone else besides the chosen distributor. This kind of policy can help create an unique image of a product or brand.
- Consignment Selling - Under this distribution policy, title and control over the goods are in the hands of producer, while goods are being handled by a distributor (middleman). He is in a position of an agent, while not being a wholesaler or retailer. Distributor often receives commission form the sales. Producer is still the owner of the goods and can specify on the distributor his actions in terms of investing money or taking any risks. It's very uncommonly chosen policy in current times.
- Franchise Selling Policy - Final policy, franchise, means the owner of a brand or a producer gives someone right to distribute goods under his name. It's a whole system, where the producer or owner chooses a person from received applications, grants that person rights to distribute products or services under his name, in specifically defined area, for a promise, that the distributor will adopt specific behaviours and rules. Good example here can be McDonald's restaurants: chosen person has to suit the place with correct colors and food menu, while still having free hand here and there.
- Kaspers C., 2018, p. 5
- Kaspers C., 2018, p. 5
- Sharma F.C., 2016, p. 123
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- Mathirajan M., Manoj K., Ramachandran V. (2011), A design of distribution network and development of efficient distribution policy, "International Journal of Logistics Systems and Management", Vol. 9, p. 108 - 137
- Sharma F.C. (2016), Sales Management: Latest Edition, SBPD Publications
- Terao T., Otsuka K. (2016), Development of Environmental Policy in Japan and Asian Countries, Springer
Author: Jakub Urban