7.4.2 Channel Breadth¶
Channel breadth refers to the decisions regarding the number and type of intermediaries involved in distributing a product. This involves determining how many retailers, wholesalers, or distributors will be used to reach consumers, and whether they will be the same or different types of companies and formats. These decisions shape how a product will be available to the target market and how it will be positioned within different consumer segments.
Types of Channel Breadth¶
There are three primary types of distribution based on the number of intermediaries: Exclusive Distribution, Selective Distribution, and Intensive Distribution. These distribution strategies are based on the focus and scope of the product's availability to consumers.
1. Exclusive Distribution¶
- Definition: A strategy where the product is sold through a very limited number of retailers or wholesalers. This approach ensures that the product gets maximum attention and is sold to specific consumer segments.
- Example: Luxury goods like high-end audio systems (e.g., Bose), designer apparel, or exclusive vehicles. These products require specific customer experiences, and selling through a limited number of high-end retailers ensures brand control and exclusivity.
When to use: Exclusive distribution is ideal for specialty goods or premium products that need specialized attention and a high-touch customer experience. These products are often purchased infrequently and require careful presentation.
2. Selective Distribution¶
- Definition: This strategy involves selecting a few retailers or wholesalers to distribute the product. It’s less restrictive than exclusive distribution but still focuses on specific outlets.
- Example: Shopping goods such as fashion apparel, accessories, home appliances (e.g., TVs, refrigerators), or electronics. In this case, you may choose a set of retailers that cater to particular consumer segments, such as premium department stores or electronics specialty stores.
When to use: Selective distribution is suitable for shopping goods that require some degree of consumer involvement in purchasing. These goods are typically higher in value than convenience goods and need retailers who can provide a level of customer service or knowledge.
3. Intensive Distribution¶
- Definition: The product is distributed through as many retailers and wholesalers as possible. This approach aims to maximize availability and reach a wide customer base.
- Example: Fast-moving consumer goods (FMCG) like soaps, toothpaste, snacks, and household products. These products are widely available and typically sold through various channels, such as supermarkets, hypermarkets, convenience stores, and online platforms.
When to use: Intensive distribution is best for convenience goods or mass-market products that need to be available everywhere for consumers to easily purchase. The focus is on achieving widespread market coverage.
Channel Breadth Decision Factors¶
When making decisions about channel breadth, consider the following factors: - Product Type: Different products require different distribution strategies. For example: - Luxury or Specialty Products: These require exclusive distribution channels. - Shopping Goods (e.g., electronics, fashion items): These products typically use selective distribution to balance reach and brand positioning. - Convenience Goods (e.g., FMCG products): These require intensive distribution for maximum reach.
- Consumer Segments: Different retailers serve different types of consumers. For example, premium retailers (like Tata Group) serve one consumer group, while discount retailers (like Reliance or Amazon) target another group. The decision is made based on the type of consumer you are targeting.
- Tata Group might cater to more affluent consumers.
- Amazon might cater to tech-savvy, online-focused consumers.
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Reliance might serve mass-market consumers in India.
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Retailer Type: Should you work with hypermarkets, supermarkets, specialty stores, or online platforms? Each type of retailer serves a different purpose and consumer need. Understanding the relationship between retailer type and target consumer is crucial in deciding channel breadth.
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Multiple Retail Formats: In many cases, manufacturers may use multiple retailer formats to cater to different consumer needs. For example, a brand may sell in both hypermarkets (for price-conscious consumers) and specialty boutiques (for those looking for premium experiences).
Summary of Channel Breadth Types¶
- Exclusive Distribution: For specialty goods or luxury products that need a high level of attention and a specific customer experience.
- Products: High-end audio systems, luxury cars, designer apparel.
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Retailers: Few, high-end stores or exclusive online channels.
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Selective Distribution: For shopping goods that require some level of customer service or product knowledge but don’t need extreme exclusivity.
- Products: Fashion goods, electronics, home appliances.
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Retailers: Specialized department stores, electronics retailers, selected online stores.
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Intensive Distribution: For convenience goods that need to be widely available to a broad consumer base.
- Products: FMCG, household products, snacks.
- Retailers: Supermarkets, convenience stores, mass retailers, online platforms.
Conclusion¶
Choosing the right channel breadth strategy depends on the nature of the product, the target consumer, and the brand positioning. Exclusive distribution is best for premium, high-value products, while selective distribution suits shopping goods that require some level of customer interaction. Intensive distribution is necessary for mass-market products that need to be available everywhere to maximize consumer reach.
By understanding the relationship between the product, the retailer, and the consumer, companies can design the most effective distribution strategy that aligns with their overall business goals.
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