Limited distribution: Difference between revisions
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'''Limited distribution''' is an agreement with the main assumption that manufacturer sells products, services, materials etc. to '''only one or limited number of buyers''' <ref> Van Bael & Bellis, (2010), p. 235 </ref>. Another definition explains, it is [[marketing]] [[strategy]] when '''independent specialists''' and chains are encouraged to promote special, unique products or private label products. It leads to'''exclusive dealing''' | '''Limited distribution''' is an agreement with the main assumption that manufacturer sells products, services, materials etc. to '''only one or limited number of buyers''' <ref> Van Bael & Bellis, (2010), p. 235 </ref>. Another definition explains, it is [[marketing]] [[strategy]] when '''independent specialists''' and chains are encouraged to promote special, unique products or [[private label products]]. It leads to'''exclusive dealing''' | ||
<ref> United States. Federal Trade Commission, (2005), p. 32 </ref>. | <ref> United States. Federal Trade Commission, (2005), p. 32 </ref>. | ||
Burnett J. J. describes that limited [[distribution strategy]] together with support of promotional mix would bring quite unpredictable results. It might be surprisingly beneficial, especially when there are other '''[[marketing mix]] factors''' existing and there is big promotional effort such as '''[[personal selling]]''' or '''mass selling''' | Burnett J. J. describes that limited [[distribution strategy]] together with support of promotional mix would bring quite unpredictable results. It might be surprisingly beneficial, especially when there are other '''[[marketing mix]] factors''' existing and there is big promotional effort such as '''[[personal selling]]''' or '''mass selling''' | ||
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== Example of limited distribution item == | == Example of limited distribution item == | ||
Contact lenses is example of the product that limited distribution strategy was used<ref> United States. Federal Trade Commission, (2005), p. 17-32 </ref>: | Contact lenses is example of the product that limited distribution strategy was used<ref> United States. Federal Trade Commission, (2005), p. 17-32 </ref>: | ||
* It was expected that '''prices''' of such products would be different (higher) in comparison with national branded types, however both private label and limited distribution versions were '''not much different''' from products delivered to market with other marketing strategy, | * It was expected that '''prices''' of such products would be different (higher) in comparison with national branded types, however both private label and limited distribution versions were '''not much different''' from products delivered to market with other [[marketing strategy]], | ||
* For limited distribution, very little [[consumer]] '''promotional activities and advertising''' was created, | * For limited distribution, very little [[consumer]] '''promotional activities and advertising''' was created, | ||
* [[Product]] was firstly promoted to professionals who later on promoted it to customers and sell on the [[market]]. It caused '''increased competition''' among sellers. For example, there might be online outlet, when prices of such items are very attractive. In such case, other channels would [[need]] to invest in advertising to be more competitive on the product and attract the [[customer]]. | * [[Product]] was firstly promoted to professionals who later on promoted it to customers and sell on the [[market]]. It caused '''increased competition''' among sellers. For example, there might be online outlet, when prices of such items are very attractive. In such case, other channels would [[need]] to invest in advertising to be more competitive on the product and attract the [[customer]]. | ||
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* Limited distribution helps the manufacturer to have better control over their product and how it is marketed, since they don't have to worry about competing with other buyers. | * Limited distribution helps the manufacturer to have better control over their product and how it is marketed, since they don't have to worry about competing with other buyers. | ||
* It can help to reduce costs since the manufacturer can negotiate better deals with the buyers due to their exclusive access to the product. | * It can help to reduce costs since the manufacturer can negotiate better deals with the buyers due to their exclusive access to the product. | ||
* It can also help to increase the brand value of the product and the manufacturer, as buyers may associate the product with the exclusive access provided. | * It can also help to increase the [[brand]] value of the product and the manufacturer, as buyers may associate the product with the exclusive access provided. | ||
* It can also help to create a higher perceived value of the product, since buyers know that the product is only available from certain sellers. | * It can also help to create a higher [[perceived value]] of the product, since buyers know that the product is only available from certain sellers. | ||
==Limitations of Limited distribution== | ==Limitations of Limited distribution== | ||
Revision as of 04:51, 20 March 2023
| Limited distribution |
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| See also |
Limited distribution is an agreement with the main assumption that manufacturer sells products, services, materials etc. to only one or limited number of buyers [1]. Another definition explains, it is marketing strategy when independent specialists and chains are encouraged to promote special, unique products or private label products. It leads toexclusive dealing
[2].
Burnett J. J. describes that limited distribution strategy together with support of promotional mix would bring quite unpredictable results. It might be surprisingly beneficial, especially when there are other marketing mix factors existing and there is big promotional effort such as personal selling or mass selling
[3].
Example of limited distribution item
Contact lenses is example of the product that limited distribution strategy was used[4]:
- It was expected that prices of such products would be different (higher) in comparison with national branded types, however both private label and limited distribution versions were not much different from products delivered to market with other marketing strategy,
- For limited distribution, very little consumer promotional activities and advertising was created,
- Product was firstly promoted to professionals who later on promoted it to customers and sell on the market. It caused increased competition among sellers. For example, there might be online outlet, when prices of such items are very attractive. In such case, other channels would need to invest in advertising to be more competitive on the product and attract the customer.
Advantages of Limited distribution
Limited distribution has many advantages, including:
- It allows for stronger relationships between the manufacturer and the buyers, creating more loyalty and trust. This means that the buyers are more likely to remain loyal to the manufacturer and their products.
- Limited distribution helps the manufacturer to have better control over their product and how it is marketed, since they don't have to worry about competing with other buyers.
- It can help to reduce costs since the manufacturer can negotiate better deals with the buyers due to their exclusive access to the product.
- It can also help to increase the brand value of the product and the manufacturer, as buyers may associate the product with the exclusive access provided.
- It can also help to create a higher perceived value of the product, since buyers know that the product is only available from certain sellers.
Limitations of Limited distribution
Limited distribution has some limitations to consider when utilizing it as a marketing strategy. These limitations include:
- Limited reach: As the name implies, limited distribution limits the number of outlets that can carry a product which can lead to fewer potential customers being reached.
- No control: Limited distribution means that the manufacturer has no control over how a product is marketed or advertised by the outlets. This can lead to a lack of a unified message and brand recognition.
- Poor customer service: With limited distribution, there is less incentive for outlets to provide good customer service as there is little competition between them.
- High cost: As the outlets may have exclusive rights to the product, they can often set the prices higher than the manufacturer desires. This can lead to a higher cost for the customers and lower profits for the manufacturer.
In addition to the limited distribution agreement, there are several other approaches related to the strategy. These include:
- Exclusivity agreements - These agreements involve allowing only a single retailer or distributor to sell a product in a particular geographic area.
- Tiering agreements - These agreements involve setting up different levels of distribution for a product. This creates an incentive for retailers to sell higher-end products, as they can receive greater discounts or other incentives for reaching certain levels of sales.
- Private labeling - This involves creating a unique product that is sold exclusively through a certain retailer or distributor. Private labeling allows companies to differentiate their products from competitors, while also increasing the value of the product by associating it with a particular retailer.
- Cross-branding - This involves partnering with other companies to promote a product or service. For example, a company may partner with a restaurant chain to promote a new product.
In summary, there are many approaches related to limited distribution that can be used to create a competitive edge in the marketplace. These include exclusivity agreements, tiering agreements, private labeling, and cross-branding. By implementing these strategies, companies can create a unique product or service that stands out from the competition and provides greater value for customers.
Footnotes
References
- Burnett J. J., (1984), Promotion Management: A Strategic Approach, West Publishing Company
- D’Arma A., (2011), Content Aggregation in the Age of Online Video: An Analysis of the Impact of Internet Distribution on the Television Business in "Journal of Media Business Studies Volume 8, 2011 - Issue 3"
- Daft J., Albers S., (2014), An empirical analysis of airline business model convergence, Working Paper, No. 112, University of Cologne, Department of Business Policy and Logistics, Cologne
- Jain S. C., (2000), Distribution Strategies in Marketing Planning & Strategy, SWC-Marketing Series, South-Western College Pub
- Picard R. G., (2005), Unique Characteristics and Business Dynamics of Media Products in "Journal of Media Business Studies Volume 2, 2005 - Issue 2"
- Ryan M. D., Hearn G. N., (2010), Next generation ‘filmmaking’ : new markets, new methods and new business models., Media International Australia, Incorporating Culture and Policy
- United States. Federal Trade Commission, (2005), The Strength of Competition in the Sale of Rx Contact Lenses: An FTC Study, DIANE Publishing
- Van Bael & Bellis, (2010), Competition Law of the European Community, Wolters Kluwer Law & Business
Author: Katarzyna Żurek
