DISTRIBUTIVE ACTIVITIES: CHARACTERISTICS, TYPES AND EXAMPLES - ECONOMY - 2024

The distributive activities are associated group activities with the supply of finished products from the production line to consumers. It is the process of establishing that a service or product is available to the commercial user or consumer who needs it.

Distributive activities consider many sales distribution channels, such as wholesalers and retailers, and includes critical decision areas such as customer service, inventory, materials, packaging, order processing, transportation, and logistics.

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You will often hear that these activities are known as distribution, which is used to describe the merchandising and movement of products.

The distribution process, which accounts for almost half of the product marketing budget, attracts the attention of managers and owners. As a result, these activities are the focus of process improvement and cost saving initiatives in many companies.

By the way distributive activities are handled, without changing the product, price or promotional methods, it can significantly increase sales and profits, or ruin the business.

characteristics

Distributive activities are characterized by having the following elements involved:

- A good transport system that allows goods to be carried to different geographical areas.

- There is a good tracking system so that the right products arrive at the right time and in the right quantity.

- They have good packaging, which protects the product from possible wear and tear during the transport journey.

- Track the places where the product can be placed so that there is a maximum opportunity to buy it.

- It also implies a system to recover the goods returned by the trade.

The importance of distribution activities for a company can vary and is generally associated with the type of product and the need it has for customer satisfaction.

For example, a company that offers custom bags might consider shipping its finished products via air freight, rather than train or truck, to speed up shipping time.

Analysis

One of the main distributive activities is to review the options that are being used.

Some distribution channels increase sales volume, but have higher costs that reduce profitability. Others are more expensive, but increase gross profit.

The effect of each distribution channel must be reviewed, according to its effect on sales volumes, profit margins, gross profits and brand support.

Promotion

Distributors should be asked if they need occasional discounts, different packaging, or other promotional support that generates purchases.

You have to visit partner locations and websites to determine if they are promoting in the same way that the company would. If not, they should be given specific suggestions on how they can increase the sale of the products.

Classification

Distributive activities should be classified as follows: cost of sales, profit margin, gross profit, sales volume, returns, invoicing of accounts receivable and administrative resources necessary to maintain the channel.

Types

At the strategic level, there are three general distribution approaches: mass, selective, or exclusive distribution.

The number and type of intermediaries selected largely depends on the strategic approach. The distribution channel must add value to the consumer.

Massive distribution

Also known as intensive distribution. When products are destined for a mass market, the marketer will look for intermediaries that appeal to a broad market base.

For example, snacks and drinks are sold through a wide variety of stores. For example, supermarkets, convenience stores, vending machines, coffee shops and others.

The choice of distribution point is tilted towards those that can profitably offer mass markets.

Selective distribution

A manufacturer may choose to restrict the number of outlets that handle a product.

For example, a manufacturer of premium electrical products may choose to negotiate with department stores and independent outlets that can provide the level of value-added service required to support the product.

Dr. Scholl's orthopedic sandals only sell their product through pharmacies, because this type of intermediary supports the desired therapeutic positioning of the product.

Exclusive distribution

In an exclusive distribution approach, a manufacturer chooses to negotiate with only one broker or one type of broker. The advantage of an exclusive approach is that the manufacturer maintains greater control over the distribution process.

In exclusive agreements, the dealer is expected to work closely with the manufacturer and add value to the product through level of service, after-sales care or customer support services.

The most common type of exclusive agreement is an agreement between a supplier and a retailer. This agreement grants exclusive rights to the retailer within a specific geographic area to sell the supplier's product.

Examples

A more exclusive and higher service distribution will generally mean less intensity and less reach.

Most consumers will choose to purchase a brand of soda from a vending machine, rather than walking to a convenience store several blocks away. Therefore, here the intensity of the distribution is essential.

However, for sewing machines, consumers will expect to go to at least one discount department store. Premium brands can have more credibility if they are bought only in specialized stores with a full service.

Compaq

In its early history, Compaq instituted a policy that all of its computers must be purchased through a reseller.

Viewed from above, Compaq missed a great opportunity to sell large numbers of computers directly to large companies, without having to share the profits with distributors.

However, on the other hand, dealers were more likely to recommend Compaq. This because they knew that consumers would buy them from them and not through other means.

So, for example, when customers asked for IBM, resellers indicated that if they really wanted IBM computers, they could have them. "But first we're going to show you how to get better value from a Compaq."

Parallel distribution

They are products sold both through conventional channels and through the Internet or factory stores.

For a specified cost, a business can promote its goal through activities such as in-store displays or a special placement, for which the retailer is paid.

Joint partnerships and promotions may involve a distribution. For example, Burger King clearly sells Hershey brand cakes.

References

1. Sam Ashe-Edmunds (2019). Channel of Distribution Activities. Small Business - Chron.com. Taken from: smallbusiness.chron.com.
2. Study (2019). Physical Distribution in Marketing: Definition, Functions & Importance. Taken from: study.com.
3. Wikipedia, the free encyclopedia (2019). Distribution (marketing). Taken from: en.wikipedia.org.
4. The Economic Times (2019). Definition of 'Distribution'. Taken from: economictimes.indiatimes.com.
5. Lars Perner (2018). Channels of Distribution. University of Southern California. Taken from: consumerpsychologist.com.