Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

11. Place and Development
    of Channel Systems

Text © The McGraw−Hill

Companies, 2002

Place and Development of Channel Systems 327

selective distribution, he would focus on about 280 of

the best hot-tub dealers (2 or 3 in the 100 largest

metropolitan areas).

Intensive distribution would require Hydropump to

do more mass selling—primarily advertising in home

renovation magazines—to help stimulate consumer fa-

miliarity with the brand and convince retailers that

Hydropump equipment will sell. The price to the retailer

might have to be lower too (to permit a bigger markup)

so they will be motivated to sell Hydropump rather than

some other brand offering a smaller markup.

With intensive distribution, each Hydropump sales

rep could probably handle about 300 retailers effectively.

With selective distribution, each sales rep could handle

only about 70 retailers because more merchandising help

would be necessary. Managing the smaller sales force and

fewer retailers, with the selective approach, would re-

quire less manager overhead cost.

Going to all suitable and available retailers would

make the pump available through about 20 times as

many retailers and have the potential of reaching more

customers. However, many customers shop at more than

one retailer before making a final choice—so selective

distribution would reach almost as many potential cus-

tomers. Further, if Hydropump is using selective distri-

bution, it would get more in-store sales attention for its

pump and a larger share of pump purchases at each re-

tailer.

Black has decided to use a spreadsheet to analyze the

benefits and costs of intensive versus selective distribu-

tion.

a. Based on the initial spreadsheet, which approach

seems to be the most sensible for Hydropump? Why?

b. A consultant points out that even selective distribution

needs national promotion. If Black has to increase

advertising and spend a total of $100,000 on mass

selling to be able to recruit the retailers he wants for

selective distribution, would selective or intensive dis-

tribution be more profitable?

c. With intensive distribution, how large a share (per-

cent) of the retailers’ total unit sales would

Hydropump have to capture to sell enough pumps to

earn $200,000 profit?

For additional questions related to this problem, see

Exercise 11-3 in the Learning Aid for Use with Basic Mar-

keting,14th edition.