Intermediaries and Exclusive Distribution Agreements
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Why would intermediaries want to be exclusive distributors for a product? Why would producers want exclusive distribution? Would intermediaries be equally anxious to get exclusive distribution for any type of product? Why or why not? Explain with reference to the following products: candy bars, batteries, golf clubs, golf balls, steak knives, televisions, and industrial woodworking machinery.
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Solution Summary
This solution looks at the benefits that intermediaries and producers generate by exclusive distribution agreements. However, this distribution model is only one type out of three distribution models, which include intensive and selective distribution agreements. Exclusive distribution agreements are looked at critically and reviewed on their effectiveness, based on the type of products sold to consumers.
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1) Distribution Methods
There are essentially three forms of distribution between the producers and the consumer, with varying levels of intermediaries: selective distribution, exclusive distribution, and intensive distribution. Selective distribution has a couple of intermediaries that bring specialized goods, such as big appliances and handyman tools, to consumers. However, exclusive distribution has very little intermediaries or even one intermediary, which is a popular method of distribution (manufacturer to retailer to consumer). In this type of distribution, specialized products can be even more restricted to a specific location/country and market group even, with the producers arranging for their products to be sold to consumers via very few intermediaries. An example of an exclusive distribution model would be between an automobile manufacturer and two intermediaries to sell its special brand of automobile with a focus on the German market. Lastly, intensive distribution, otherwise known as direct marketing, has no intermediaries, and this distribution model generally includes basic foods, snacks, and basic supplies.
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