Week 3 - IBM_Channel Management (SW).pdf

# Distribution intensity models Distribution intensity models define the extent to which a brand's products are made available to consumers through its distribution channels [3](#page=3) [4](#page=4). ### 1.1 Defining distribution coverage Distribution coverage refers to how broadly a territory is covered by a brand's distribution channels. It is calculated as the number of outlets carrying a brand divided by the total number of potential selling points. Coverage can range from full to partial [4](#page=4). ### 1.2 Levels of distribution intensity Distribution intensity exists on a spectrum from highly intensive to less intensive. This spectrum includes [5](#page=5): * **Total saturation:** The brand is available in every possible outlet. This is also referred to as mass coverage [5](#page=5). * **Mass coverage:** The brand can be purchased from many possible outlets [5](#page=5). * **Selective coverage:** The brand can be purchased from a few selected vendors [5](#page=5). * **Exclusive coverage:** The brand can be purchased only through one vendor [5](#page=5). ### 1.3 Tension between manufacturers and retailers There can be a potential tension between manufacturers and retailers regarding distribution intensity. Manufacturers often seek maximum coverage to achieve more sales and volume, while also aiming for maximum differentiation through limited outlets, which can lead to higher prices and margins [6](#page=6). ### 1.4 Factors influencing distribution intensity decisions The decision on distribution intensity is influenced by several key factors: #### 1.4.1 Product categories Product categories significantly influence the intensity decision [12](#page=12) [7](#page=7). * **Convenience products:** These are typically for mass coverage [12](#page=12) [7](#page=7). * **Shopping products:** These often utilize selective coverage but can also be mass-covered depending on the brand positioning [12](#page=12) [7](#page=7). * **Specialty products:** These usually require selective or exclusive coverage [12](#page=12) [7](#page=7). #### 1.4.2 Brand positioning Brand positioning also plays a critical role in determining distribution intensity [12](#page=12). * **Premium positioning:** This often leads to selective distribution, as each channel member needs to support the brand's image and reputation to signal superior quality and justify a superior price [15](#page=15). * **Niche positioning:** This targets a narrow, specialized group of buyers and typically employs selective distribution [15](#page=15). #### 1.4.3 Competitive dynamics Competitive dynamics also impact the intensity decision [13](#page=13). #### 1.4.4 Brand strategy The overall brand strategy is a major driver of the intensity decision [13](#page=13). ### 1.5 Types of distribution intensity #### 1.5.1 Intensive (or mass) coverage * **Description:** This involves wide distribution in nearly all locations where a type of product is sold. It is typically used for relatively low-priced products appealing to a very large target market, such as convenience products [8](#page=8). * **Advantages:** * Greater availability for final consumers [17](#page=17) [8](#page=8). * Higher volumes allow producers to amortize manufacturing costs faster [17](#page=17) [8](#page=8). * High competition can lead to lower prices for consumers [17](#page=17) [8](#page=8). #### 1.5.2 Selective coverage * **Description:** This approach targets specific end clients within smaller, more focused markets, requiring fewer locations to support product distribution [9](#page=9). * **Advantages:** * Brand control and image protection [9](#page=9). * Enhanced customer experience [9](#page=9). * Better retailer relationships [9](#page=9). * Pricing stability [9](#page=9). * Focused marketing and support [9](#page=9). * Supports premium positioning and attracts the best partners [16](#page=16). * Allows serving a smaller but more active account base with greater focus [16](#page=16). * Reduced complexity, fewer channel conflicts, and lower transaction processing costs for the manufacturer [16](#page=16). * Retailers receive better support and can earn higher profits due to higher margins [16](#page=16). * Consumers benefit from a higher level of service and personalized advice [16](#page=16). #### 1.5.3 Exclusive coverage * **Description:** This is typically for high-end products with a relatively small customer base and high expectations for customer service, involving a very select group of exclusive resellers [10](#page=10). * **Advantages:** * Higher-end positioning and image [10](#page=10). * Higher retailer commitment [10](#page=10). * Higher level of customer relationship [10](#page=10). * Stricter control over premium pricing [10](#page=10). * Supports premium positioning and attracts the best partners [16](#page=16). * Allows serving a smaller but more active account base with greater focus [16](#page=16). * Reduced complexity, fewer channel conflicts, and lower transaction processing costs for the manufacturer [16](#page=16). * Retailers receive better support and can earn higher profits due to higher margins [16](#page=16). * Consumers benefit from a higher level of service and personalized advice [16](#page=16). ### 1.6 Examples #### 1.6.1 Hamilton vs. Rolex Hamilton and Rolex, despite being in the same product category (watches), may employ different distribution intensities, illustrating how brand positioning can dictate this choice [11](#page=11). #### 1.6.2 Banking services * **Highly intensive:** Banks serving retail and SME clients across the country and internationally might use mass coverage [14](#page=14). * **Less intensive:** Banks focused on regional areas and communities or those serving high-net-worth individuals and institutional clients may opt for selective or exclusive coverage [14](#page=14). ### 1.7 The magic retail formula The relationship between brand sales and distribution is often simplified by the formula: Brand Sales = Number of Stores * Average Sales per Store [18](#page=18). To increase sales, one can either increase the number of stores or the average sales per store. To increase profit, strategies often involve higher prices, higher margins, and potentially fewer stores, driven by increased desirability [18](#page=18). --- # Direct vs. indirect distribution channels This section examines the distinctions between direct and indirect distribution channels, outlining their respective advantages, disadvantages, and the complexities introduced by hybrid models. ### 2.1 Direct distribution channels Direct distribution channels involve the supplier owning and managing all resources in the value chain up to the customer. This model bypasses any intermediaries, allowing the producer to interact directly with the end consumer [21](#page=21). #### 2.1.1 Forms of direct distribution Examples of direct distribution include: * **Online direct distribution:** This occurs through a company's own website [21](#page=21). * **Direct sales force:** This involves a company's sales team contacting very large corporate accounts [21](#page=21). * **Telesales:** Sales conducted over the phone. * **Key accounts:** Managing relationships with major clients. > **Example:** EasyJet utilizes a direct channel strategy by connecting the producer (EasyJet) directly with the customer [22](#page=22). * **Direct selling organization (DSO) or Multi-Level Marketing (MLM):** This model involves the sale of consumer products or services in a face-to-face manner, typically away from a fixed retail location. These organizations rely heavily on personal selling to reach final consumers and often focus on consumable products that can be repurchased repeatedly [23](#page=23). ### 2.2 Indirect distribution channels Indirect distribution channels employ intermediaries between the supplier and the customer. These intermediaries help increase market reach, provide specialized services, or position the product within established market networks [24](#page=24). #### 2.2.1 Types of indirect distribution * **One-tier distribution:** This model uses one set of intermediaries between the company and its customers [24](#page=24). * For consumer products, this might involve a supplier selling to a retailer, who then sells to the consumer [24](#page=24). * For business customers, this could be a supplier selling to a distributor [24](#page=24). * **Two-tier distribution:** This model involves two sets of intermediaries between the company and its customers [24](#page=24). * For consumer products, this could be a supplier selling to a wholesaler, who then sells to a retailer, who finally sells to the consumer [24](#page=24). * For business customers, this might involve a supplier selling to an agent, who then sells to a distributor, who then sells to the business customer [24](#page=24). #### 2.2.2 Value addition by channel intermediaries Channel intermediaries add value in several ways: * **Connecting to the right target:** They provide access to established channels and networks that are connected to the correct target audience. Examples include well-known retailers like Harrods, Bon Marché, and Jelmoli, or organizations like the Swiss Parliament [28](#page=28) [29](#page=29). * **Providing the right assortment in the right format:** Intermediaries help match the needs of the end consumer with the production capabilities of the supplier. Suppliers typically produce large quantities of a limited number of goods, while intermediaries buy limited quantities of a wide variety of goods. Intermediaries break down heterogeneous products into homogeneous units, stock from multiple sources to offer a broader selection, break bulk into smaller lots, and build assortments tailored for specific audiences [30](#page=30). * **Reducing complexity:** Using distributors can significantly reduce the number of contacts required for a supplier to reach its customers. For instance, if a manufacturer has 'M' suppliers and 'C' customers, the number of contacts without a distributor is $M \times C$. With one distributor, the number of contacts reduces to $M + C$ [31](#page=31). * **Improving financial results:** Indirect channels can lead to better financial outcomes for the supplier through increased market access, accelerated time-to-market, and reduced working capital and infrastructure investments. This efficiency contributes to a higher Return on Capital Employed (ROCE) [32](#page=32). #### 2.2.3 Benefits of indirect distribution * **Easy and immediate access:** Provides quick entry into well-defined customer segments [33](#page=33). * **Broader assortment:** Offers end clients a wider and more relevant selection of goods [33](#page=33). * **Efficient selling:** Facilitates breaking bulk and selling in appropriate quantities and formats [33](#page=33). * **Channel simplification:** Streamlines the distribution process [33](#page=33). * **Leveraging investments:** Allows suppliers to benefit from the assets and infrastructure already established by intermediaries [33](#page=33). #### 2.2.4 Disadvantages of indirect distribution * **Trading margins:** Requires granting a portion of the profit (trading margin) to the intermediary [33](#page=33). * **Dilution of focus:** Can lead to a diluted focus if intermediaries sell multiple brands, including direct competitors [33](#page=33). * **Reduced control:** Offers less control over the final customer experience [33](#page=33). * **Distance from customer:** Creates greater distance from the end customer, resulting in less data about their behavior and preferences [33](#page=33). ### 2.3 Hybrid distribution model A hybrid distribution model combines both direct and indirect channels, allowing a supplier to leverage the strengths of both approaches. This strategy aims to achieve greater market coverage and reach while catering to customers with diverse shopping behaviors [25](#page=25) [26](#page=26) [27](#page=27). #### 2.3.1 Benefits of hybrid distribution * **Greater coverage and reach:** Expands the market presence by utilizing multiple channel types [27](#page=27). * **Captures varied shopping behaviors:** Appeals to a wider range of customers with different preferences for how they purchase products [27](#page=27). #### 2.3.2 Risks of hybrid distribution * **Cannibalization:** Direct channels may take sales away from indirect channels, or vice versa [27](#page=27). * **Channel conflict:** Disagreements can arise between direct and indirect channels, particularly concerning pricing and the emergence of gray markets [27](#page=27). * **Favoritism towards own channel:** Companies may unintentionally favor their own direct channels over those managed by third parties [27](#page=27). * **Free riding:** One channel may benefit from the efforts or investments made by another channel without contributing proportionally [27](#page=27). --- # Franchising and licensing as distribution strategies Franchising and licensing offer distinct yet complementary pathways for businesses to expand their market reach and generate revenue by leveraging external partners and intellectual property [42](#page=42) [58](#page=58). ### 3.1 The franchise model The franchise model is a contractual relationship where one party, the franchisor, grants another party, the franchisee, the right to use its business system, brand name, and trademarks to offer products or services. This model is commonly observed in sectors such as food and beverage, hotels, convenience stores, and various service industries. It represents a semi-integrated channel structure that bridges the gap between fully owned subsidiaries and complete outsourcing [38](#page=38) [39](#page=39) [40](#page=40) [41](#page=41) [44](#page=44) [47](#page=47) [48](#page=48). #### 3.1.1 Roles and responsibilities In a franchise relationship, there are two primary stakeholders: the franchisor and the franchisee [44](#page=44). * **Franchisor's Role:** * Develops an entire business format, including detailed methods for marketing products or services [45](#page=45). * Licenses this business format to the franchisee in a specific market area [45](#page=45). * Provides all necessary know-how and operational guidance [45](#page=45). * Maintains control over how the brand is presented to ensure consistency [45](#page=45). * Ultimately aims to increase overall sales and brand equity [45](#page=45) [54](#page=54). * Offers coaching, training, and problem-solving support [54](#page=54). * Responsible for brand enforcement and market development [54](#page=54). * **Franchisee's Role:** * Adopts the franchisor's identity completely, purchasing the rights to use and market the brand [45](#page=45). * Focuses exclusively on the franchisor's products or services, acting as an exclusive dealer [45](#page=45). * Adheres strictly to the guidelines provided by the franchisor [45](#page=45). * Typically receives some territory exclusivity [45](#page=45). * Is responsible for its own sales and profit generation [45](#page=45). * Pays fees, often royalties, to exploit the business model [46](#page=46). * Runs daily operations and bears the risk associated with the business [54](#page=54). The franchise contract typically outlines provisions for fees, proven methods, trademarks, names, products, know-how, and marketing techniques [47](#page=47). #### 3.1.2 Benefits of the franchise model The franchise model offers substantial benefits to both parties involved. * **Benefits for the Franchisee:** * **At Launch Phase:** * Provides an opportunity for entrepreneurs to own a business while minimizing risk due to a pre-packaged solution [52](#page=52). * Acquisition of rights to exploit an established brand name and equity [52](#page=52). * Access to training and assistance for management and employees [52](#page=52). * Availability of operating manuals detailing precisely how to run the business [52](#page=52). * Support services including market surveys, site selection, and financing advice [52](#page=52). * Leveraging economies of scale for services sourced through the franchisor [52](#page=52). * This is considered the fastest way to start up a business with minimized risk [52](#page=52). * **On-going Support:** * Field supervision of operations, including quality inspections [52](#page=52). * Management report feedback and analysis [52](#page=52). * Provision of merchandising and promotional materials [52](#page=52). * Involvement in national advertising campaigns [52](#page=52). * Assistance with centralized planning and market data [52](#page=52). * Access to group insurance plans [52](#page=52). * Allows for running business operations with assistance, scale, and specialization [52](#page=52). * **Benefits for the Franchisor:** * Rapid access to financial and managerial capital, facilitating fast growth [53](#page=53). * Quickly gains scale, which can justify further investments like national advertising [53](#page=53). * A more cost-effective alternative to traditional investors, as entrepreneurs tend to request lower rates [53](#page=53). * Acquires highly involved managers who have invested in the business [53](#page=53). * Benefits from local insights and new ideas provided by franchisees to refine the business model [53](#page=53). * The combination of speed to market, a cheaper source of capital, and motivated staff is a significant advantage [53](#page=53). This two-way relationship, characterized by mutual benefits, drives quick growth and brand equity building [54](#page=54). > **Tip:** The franchisor's role is often described as a coach and supporter, but also an enforcer of standards. Franchisees, while seeking to maximize their own profit, are highly dependent on the franchisor and relinquish a degree of control [56](#page=56). #### 3.1.3 Variations and challenges of the franchise model Several plural models exist within franchising: * **Exploiting franchisees with company outlets:** Company-owned outlets can serve as laboratories for refining the business model and for benchmarking performance across locations, fostering a mutual learning curve [55](#page=55). * **Multi-unit franchising:** This involves a single company, often referred to as a "Master Franchisee," operating multiple franchise locations [55](#page=55). **Key Success Criteria for Franchising:** * A strong and distinctive business concept [56](#page=56). * Replicability and scalability of the business model [56](#page=56). * Clear and comprehensive legal terms in the franchise contract [56](#page=56). * A strong human factor, encompassing effective training and suitable personal qualifications [56](#page=56). **Potential Challenges in Franchising:** * Maintaining a cooperative atmosphere between franchisor and franchisee [56](#page=56). * The inherent dependence of the franchisee on the franchisor [56](#page=56). * The risk of cannibalization if company-owned outlets compete directly with franchised locations [56](#page=56). ### 3.2 Licensing as a distribution strategy Licensing is a commercial agreement where one company (the licensor) permits another company (the licensee) to manufacture its product or use its intellectual property (IP) for a specified payment, typically in the form of royalties. It is considered a fast and cost-effective method for business growth through the expansion of patents, trademarks, copyrights, and designs [62](#page=62). #### 3.2.1 Brand expansion through licensing Licensing is a strategic approach employed for two primary forms of brand expansion: * **Brand Expansion: New Category:** * Allows a brand to diversify its offerings and develop products in new categories [59](#page=59). * Aims to grow brand revenue rather than just sales turnover [59](#page=59). * Limits risks associated with R&D, marketing, and administrative costs by relying on an expert licensee [59](#page=59). * Examples include vision care and eyewear specialists like EssilorLuxottica with many brands, or beauty and fragrance experts like Coty with numerous brands [60](#page=60). * **Brand Expansion: New Territory:** * Enables entry into new geographical markets without requiring specific market knowledge or a local team [61](#page=61). * Leverages the local licensee's team for product and marketing adjustments [61](#page=61). * Facilitates the localization of the brand's consumer experience [61](#page=61). #### 3.2.2 Benefits and disadvantages of licensing Licensing offers a range of advantages but also presents significant disadvantages. * **Benefits:** * Significant financial gain through royalty payments [62](#page=62). * Market expansion into new categories or territories [62](#page=62). * Utilization of expert partners in manufacturing or distribution [62](#page=62). * Low management costs for the licensor [62](#page=62). * Reduced financial risk for the licensor [62](#page=62). * **Disadvantages:** * Potential loss of brand control [62](#page=62). * Challenges in international development and coordination [62](#page=62). * Difficulty in ensuring uniformity of the consumer experience [62](#page=62). * Concerns regarding product quality and adherence to standards [62](#page=62). * Risk of conflicts of interest with the licensee [62](#page=62). #### 3.2.3 Success factors and examples The success of a licensing model is heavily reliant on the strength of the licensing agreement, the careful selection of capable licensees, and effective monitoring and management of the licensee's activities. It is crucial for brand owners to thoroughly assess these advantages and inconveniences before entering into such arrangements [63](#page=63). **Example: Authentic Brands Group (ABG)** ABG is a notable example of a company that heavily utilizes the licensing model for brand expansion. They acquire brand portfolios and then license them to various partners across different product categories and territories. * ABG acquired the sportswear brand Champion, planning to extend its global reach and explore new product categories and regions like Europe and Asia [64](#page=64) [67](#page=67). * Champion's US collegiate apparel business was licensed to GearCo, managed by Ames Watson with Fanatics as an investor [67](#page=67). * Various subsidiaries and partners manage Champion's core activities in different segments, such as sportswear, underwear, sleepwear, tights, and socks [67](#page=67). * Champion also launched an eyewear line under license with L'Amy America, continuing the design, manufacture, and distribution of optical and sunglass products [68](#page=68). > **Tip:** Licensing can be a powerful tool for brand owners looking to monetize their intellectual property and expand rapidly without significant direct investment. However, a robust legal framework and diligent oversight are paramount to mitigate the inherent risks [63](#page=63). --- # The role of intermediaries and value-added resellers Intermediaries play a crucial role in the distribution of products and services, evolving from simple resellers to complex solution integrators [69](#page=69) [72](#page=72). ### 4.1 Intermediary roles and service orientation Intermediaries can be categorized based on their service orientation, ranging from basic product resale to providing integrated solutions. These roles often imply varying levels of knowledge and core competencies required for effective operation [72](#page=72) [74](#page=74). #### 4.1.1 Extension of vendor This type of intermediary primarily focuses on executing the vendor's established processes. Their core activities include logistics, back-office operations, order handling, and inventory management. They are often cost-sensitive, aiming for efficient execution of these functions. The knowledge required for this role is centered on supply chain management and process management [73](#page=73) [74](#page=74). #### 4.1.2 Product completer Product completers enhance the vendor's offering by providing local customization or packaged solutions. Their role involves adapting the product to specific market needs or bundling it into a more complete offering. The knowledge base for this role includes understanding how to configure products [73](#page=73) [74](#page=74). #### 4.1.3 Service provider Service providers focus on ensuring the product functions correctly and adding value through services. Their expertise tends to span horizontally across various aspects of product usage, aiming to help customers get the best out of the product. This involves making the product work effectively [73](#page=73) [74](#page=74). #### 4.1.4 Solution integrator Solution integrators offer tailored solutions that meet unique customer needs. They specialize in complex product and service configurations, requiring deep vertical or technical expertise. Their role involves making products work seamlessly with other products and integrating them within the customer's organizational context [73](#page=73) [74](#page=74). #### 4.1.5 Advocate to consumer This intermediary acts as a bridge between the customer and the product, possessing deep knowledge of customer requirements and product specifications. They define business requirements and provide objective advice to consumers. Their core competency lies in understanding customer needs and identifying the most suitable products to meet those needs [73](#page=73) [74](#page=74). > **Tip:** The spectrum of intermediary roles highlights a clear progression from operational execution to strategic solution provision, each demanding distinct levels of expertise and customer engagement. > **Example:** A simple electronics distributor acting as an "extension of vendor" might handle warehousing and shipping. A company that bundles software with hardware and offers installation and training would be a "solution integrator". A consultant who helps a business choose the right software based on their operational challenges and defines the implementation plan would be an "advocate to consumer" [73](#page=73). --- # Consumer behavior and modern retail trends This topic examines how evolving consumer behaviors, such as webrooming and showrooming, are reshaping traditional distribution strategies through the integration of omni-channel and e-commerce approaches [95](#page=95) [97](#page=97). ### 5.1 Understanding consumer behavior in retail The consumer purchase journey is influenced by a variety of touchpoints, including social media, direct mail, email, catalogues, apps, reviews, communities, events, websites, and traditional advertising like print and TV. Understanding these interactions is crucial for modern retail [97](#page=97). #### 5.1.1 Webrooming and showrooming defined * **Webrooming** refers to the practice of researching products online before purchasing them in a physical store [99](#page=99). * **Showrooming** is the practice of visiting a physical store to examine a product, and then buying it online, often at a lower price [99](#page=99). #### 5.1.2 Consumer perspectives on webrooming and showrooming ##### 5.1.2.1 Consumer angle on webrooming * **Advantages:** * Access to a wider product selection, online reviews, and ratings before buying . * In-store interaction provides reassurance for the final purchase . * Saves time when a specific product and its location are known . * Supports local businesses and physical retailers . * **Disadvantages:** * Less convenient than 100% online shopping, especially for home delivery preferences . * Potential for impulse buying in the physical store . ##### 5.1.2.2 Consumer angle on showrooming * **Advantages:** * Allows customers to see and touch products, reducing purchase regret . * Opportunity to take advantage of lower online prices and discounts . * Convenient for avoiding carrying large or heavy items home . * **Disadvantages:** * Can harm local businesses and physical retailers . * May not provide the immediate satisfaction of taking the product home the same day . * Concerns regarding shipping costs, delivery times, and counterfeit products . ### 5.2 Business perspectives on modern retail trends Retailers and manufacturers must consider how webrooming and showrooming impact their strategies . #### 5.2.1 Manufacturer's viewpoint Manufacturers need to assess whether these trends are beneficial or detrimental, decide whether to encourage or limit them, and develop appropriate reactions . #### 5.2.2 Retailer/Wholesaler's viewpoint Similarly, retailers and wholesalers must evaluate the impact of these trends, determine their strategic response, and identify how to adapt . #### 5.2.3 Brand's viewpoint on key considerations Brands must focus on several interconnected areas: 1. **Omnichannel Retailing:** Integrating online and offline experiences seamlessly . 2. **Price Transparency:** Managing pricing across all channels consistently . 3. **In-Store Experience:** Creating compelling physical retail environments . 4. **Online Presence:** Maintaining a strong and accessible digital footprint . 5. **Product Availability:** Ensuring products are accessible through preferred channels . 6. **Customer Data Integration:** Leveraging data for personalized experiences and insights . 7. **Loyalty Programs:** Developing programs that reward customers across all interactions . 8. **Collaborative Partnerships:** Working with other entities to enhance the customer journey . > **Example:** Nespresso and Ferrari represent brands with exclusive approaches that manage their distribution and customer experience strategically . #### 5.2.4 Retailer's strategies for addressing showrooming and supporting webrooming ##### 5.2.4.1 Addressing showrooming Retailers can leverage showrooming by focusing on: * **Increased Foot Traffic:** Attracting customers to physical stores to see and experience products . * **Brand Exposure:** Using in-store interactions to positively influence brand perception . * **Customer Engagement:** Providing personal interaction, product demonstrations, and addressing concerns . * **Immediate Gratification:** Offering the option for customers to take products home the same day . * **Returns and Exchanges:** Providing convenient in-store options for online purchases . * **Local Marketing Opportunities:** Targeting showrooming customers with localized promotions . ##### 5.2.4.2 Supporting webrooming Retailers can benefit from webrooming by focusing on: * **Increased In-Store Traffic:** Drawing informed customers to physical locations . * **Higher Conversion Rates:** Converting well-researched customers into buyers . * **Enhanced Customer Experience:** Providing personalized assistance and recommendations based on online research . * **Cross-Selling Opportunities:** Suggesting complementary products to informed customers . * **Local SEO Benefits:** Improving local search visibility as customers find local availability online . * **Data Collection:** Gathering insights into customer preferences and behaviors . * **Competitive Advantage:** Differentiating by offering a seamless online-to-offline experience . ### 5.3 Transitioning distribution to the new economy Omni-channel and e-commerce strategies have fundamentally altered traditional distribution models [98](#page=98). #### 5.3.1 Impact on retail location and reach * **Traditional Retail Location:** Characterized by local public reach and limited storage space, leading to limited assortment potential [98](#page=98). * **E-commerce Site:** Offers global reach and no storage limits, enabling an unlimited assortment potential [98](#page=98). #### 5.3.2 Impact on pricing * **Fixed Retail Price:** Common in traditional fixed retail locations [98](#page=98). * **Retail Price Adjustability:** Enabled by e-commerce due to market dynamics and competition [98](#page=98). #### 5.3.3 Key takeaways for distribution and customer behavior * Distribution strategy and channel intensity are dictated by product type and brand strategy, but must ultimately adapt to evolving customer behaviors . * Online retail and omni-channel presence are essential for addressing: * Visibility, searchability, and product information needs . * Brand and product awareness . * Creating a seamless digital and physical customer experience . * Effective customer data integration for insights and personalization . --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Distribution Intensity | The extent to which a product is made available for purchase. It ranges from intensive (available everywhere) to exclusive (available in very few places). | | Coverage | A metric indicating the breadth of distribution channels across a given territory, calculated as the number of outlets carrying a brand divided by the total number of potential selling points. | | Intensive Distribution | A strategy where a product is made available in as many outlets as possible, typically for convenience goods with a broad target market and lower price points. | | Selective Distribution | A strategy where a product is distributed through a limited number of chosen outlets that align with the brand's image and target market, offering better brand control and customer experience. | | Exclusive Distribution | A strategy where a product is distributed through only one or a very limited number of intermediaries in a specific territory, often for high-end or luxury products requiring a high level of customer service. | | Direct Distribution Channels | Channels where the producer or supplier sells directly to the end customer, owning and managing all aspects of the value chain without intermediaries. | | Indirect Distribution Channels | Channels where one or more intermediaries (e.g., distributors, retailers, agents) are used to move products from the producer to the end customer. | | Hybrid Distribution Model | A distribution strategy that combines both direct and indirect channels, allowing a company to achieve greater coverage, reach diverse customer segments, and leverage different strengths. | | Intermediaries | Businesses or individuals that act as a link between producers and consumers, facilitating the sale and distribution of goods and services. | | Value-Added Resellers (VARs) | Resellers who provide more than just product resale; they integrate products with other services, offer customization, or provide complete solutions tailored to customer needs. | | Franchising | A business model where a franchisor grants a franchisee the right to use its brand name, business model, and proprietary knowledge in exchange for fees and royalties. | | Licensing | A commercial agreement where one company (licensor) grants another company (licensee) permission to use its intellectual property (e.g., trademarks, patents) for a specified period and payment. | | Franchisor | The company that develops a business format and licenses it to franchisees, providing know-how, brand control, and ongoing support. | | Franchisee | An individual or entity that purchases the right to operate a business under the franchisor's brand and system, adhering to guidelines and paying fees. | | Webrooming | The practice of researching products online before making a purchase in a physical store. | | Showrooming | The practice of examining a product in a physical store but then purchasing it online, often at a lower price. | | Omni-channel Retailing | A retail strategy that integrates multiple channels (online, physical stores, mobile, etc.) to provide a seamless and consistent customer experience across all touchpoints. | | Brand Positioning | The unique place a brand occupies in the minds of its target consumers relative to competing brands, influencing product strategy, pricing, and distribution. | | Channel Intensity | The degree to which a product is available in the marketplace, ranging from intensive to selective to exclusive. | | Business Model | A company's plan for how it will generate revenue and profits, outlining its value proposition, target customers, and key activities. | | Intellectual Property | Creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images, protected by law. | | Return on Capital Employed (ROCE) | A financial ratio that measures a company's profitability and the efficiency with which it generates profits from the capital employed in the business. | | Added Value Resellers | Resellers who provide additional services or solutions beyond basic product resale, enhancing the value proposition for the customer. | | Consumer Purchase Journey | The complete path a consumer takes from initial awareness of a product or service to final purchase and post-purchase advocacy. |