Exclusive distribution

Exclusive distribution
See also
Direct distribution Product line pricing Distribution policy Range of products Selective distribution Mass Merchandising Category Killer Private label products Price bundling

Exclusive distribution is the most restrictive form of market coverage that covers only one or few dealers in a given area. Since purchasers may need to look or make a trip widely to purchase the item, exclusive distribution is normally restricted to consumer specialty goods, major industrial equipment and a few shopping goods. It is also used for expensive and high-quality products such as luxury cars (Porsche, BMW). Exclusive distribution is located in a relatively large geographical area, where one service point is used for service.

Exclusive Distribution Contracts

In exclusive distribution contracts, the provider embraces to supply the items just to one distributor, by rejecting of other potential merchants, in a predetermined territory (territorial exclusivity) or to a certain group of clients (exclusive customer allocation). This provides the merchant with assurance against intra-brand rivalry (i. e. from results of the same brand expedited to the market by different distributors). The degree of this insurance relies upon the agreement. Examples of exclusive distribution understandings previously showed up in the motor industry. In this way, these agreements have become normal in for all intents and purposes all branches of the wholesale and retail sector (rural hardware, electrical machines, furniture, beauty products and computer equipment).

Intensity of Distribution Levels

There are three types of distribution levels:

• Intensive – number of intermediaries in market - many; the goal is to achieve mass sales, popular among health and beauty products and everyday items that must be available everywhere; examples: Pepsi-Cola, Frito-Lay potato chips, Huggies diapers.
• Selective – number of intermediaries in market - several; the goal is to work intimately with selected intermediaries who meet certain criteria, commonly utilized for shopping products and some specialty goods; examples: Donna Karan clothing, Burton snowboards, Aveda aromatherapy products.
• Exclusive – number of intermediaries in market - one; the goal is to work with a single intermediary for items that require exceptional assets or situating, normally utilized for specialty merchandise and major modern gear; examples: BMW cars, Rolex watches.

Example of exclusive distribution

“The goods that fall in the speciality category are usually distributed using exclusive formats. For instance, automobiles, expensive watches, appliances, and designer apparels are often distributed using exclusive distribution. In the context of service distribution, when services are distributed through franchise route, they follow exclusive distribution arrangements. For instance, McDonald's franchisees are given exclusive rights to offer its services in a geographical area. The same route is also followed by service firms like NIIT and Vandana Luthra's Beauty Clinics.”

Advantages of Exclusive distribution

Exclusive distribution has a range of advantages:

• It allows the manufacturer to maintain tight control over the selling process, ensuring that only approved dealers are selling the product and that the product is being sold for its recommended price.
• It helps to create a sense of exclusivity, as only a select few have access to the product. This can help increase the demand for the product and can help to maintain a higher price point.
• It also helps to reduce the competition from other resellers, as there is only one approved reseller in the area. This can help to ensure higher profits for the manufacturer.
• It allows for better customer service, as the exclusive distributor is likely to be more knowledgeable about the product and can provide additional support for the customer.

Limitations of Exclusive distribution

• Exclusive distribution can limit the availability of products to consumers, as they must travel to a limited number of locations to purchase items.
• It can also limit the total number of sales that can be achieved, as there are fewer locations to purchase the item.
• As exclusive distribution can be expensive to implement, it is not suitable for low-cost items.
• It is also difficult to coordinate promotions, as there are fewer locations to target.
• It can also be difficult to keep accurate records of sales, as all sales are concentrated in one or few locations.
• As exclusive distribution requires a large initial investment, it is not suitable for new and small businesses.

Other approaches related to Exclusive distribution

Exclusive distribution is one of the many market coverage approaches used for marketing products. Other approaches to consider include:

• Intensive distribution: This approach involves the distribution of a product through as many outlets as possible, such as convenience stores and mass-market retailers. It is used for fast-moving consumer goods (FMCG) and items that are frequently bought in large quantities.
• Selective distribution: This approach involves the distribution of a product to a few retailers, usually in specific geographical areas. It is used for higher-priced and higher-quality items, where the manufacturer wants to have control over where their product is sold.
• Exclusive representation: This approach involves the distribution of a product through a single sales representative. It is used for specialized products, such as medical and industrial equipment, that require a high level of technical expertise.

In summary, exclusive distribution is only one of the many approaches used to market products. Other approaches include intensive distribution, selective distribution, and exclusive representation. Each approach has different advantages and disadvantages and should be chosen according to the product, its target market, and the desired level of market coverage.

References

• Hesselink M. W., Rutgers J. W., Diaz O. B., Scotton M., Veldman M. (2006), Commercial Agency, Franchise and Distribution Contracts, Sellier. European Law Publishers
• Lamb Ch. W., Hair J. F., McDaniel C. (2011), Essentials of Marketing, South-Western, Cengage Learning, USA
• Pride W. M., Ferrell O. C. (2010), Marketing, South-Western, Cengage Learning, USA
• Verma H. V. (2007), Services Marketing: Text And Cases, Pearson Education India

Author: Monika Wójcik