Selective Distribution

Definition

Selective distribution is a marketing strategy where a manufacturer or producer limits the number of authorized retailers or wholesalers who are allowed to carry and sell their products. This approach aims to maintain control over the distribution and positioning of products in the market.

5 Must Know Facts For Your Next Test

1. Selective distribution allows manufacturers to maintain control over the brand image and positioning of their products in the market.
2. By limiting the number of authorized retailers, manufacturers can ensure that their products are sold in appropriate, high-quality outlets that provide a consistent customer experience.
3. Selective distribution can help prevent unauthorized resellers or grey market sales, which can undermine brand value and pricing strategies.
4. This strategy is often used for premium or luxury products, where the manufacturer wants to maintain an exclusive, high-end image.
5. Selective distribution can lead to higher wholesale prices and profit margins for authorized retailers, as they have less competition.

Review Questions

• Explain how selective distribution helps manufacturers maintain control over their brand image and positioning.
  • By limiting the number of authorized retailers who can carry their products, manufacturers using a selective distribution strategy can ensure that their products are sold in high-quality, brand-appropriate outlets. This allows them to control the customer experience and prevent their products from being sold in ways that could undermine the brand's image or positioning in the market. Selective distribution helps manufacturers maintain a consistent brand identity and positioning across the distribution channel.
• Describe how selective distribution can help prevent unauthorized resellers and grey market sales.
  • Selective distribution allows manufacturers to carefully vet and approve the retailers who are authorized to sell their products. This helps prevent unauthorized resellers or grey market sellers from obtaining the products and selling them outside of the authorized distribution network. By limiting the number of approved outlets, manufacturers can better track and control the flow of their products, reducing the risk of price erosion and brand dilution that can occur with grey market sales.
• Evaluate the potential benefits of selective distribution for both manufacturers and authorized retailers.
  • For manufacturers, selective distribution can lead to higher wholesale prices and profit margins, as authorized retailers have less competition. It also allows them to maintain tighter control over brand image and positioning. For authorized retailers, selective distribution can be beneficial as well, as they can charge higher prices and provide a more exclusive, premium shopping experience for consumers. This can lead to higher profit margins for the retailers, as they have less price competition from other outlets carrying the same products. However, selective distribution may also limit the overall market reach and sales potential for both manufacturers and retailers.

Related terms

Exclusive Distribution:

A distribution strategy where a manufacturer grants exclusive rights to one retailer to sell its products in a specific geographic area.

Intensive Distribution:

A distribution strategy where a manufacturer makes its products available through as many retail outlets as possible to maximize market coverage and sales.

Channel Conflict: Tension or disagreement between different members of a distribution channel, such as manufacturers, wholesalers, and retailers, over issues like pricing, inventory, or customer service.