Marketing Management
Marketing Mix: Product Distribution (B)
What is the effect of product distribution to the marketing mix? Learn about relation between numeric and net weighted distribution.
Posted: Dec 2011
The marketing mix is composed of four components: Product, Promotion, Price and product Distribution. Product it is first prerequisite for the company to run their Business. But product also needs to be shipped to the sales outlets, in order to be sold to the consumers. This means that the product needs to be at the reach oh the consumer's hand. This is segment of marketing mix is called the distribution of the product. Simply, the product needs to be delivered to specific outlets, in order to be at disposal to the consumer to buy it.
The extent of product distribution is the part of the company strategy. The strategy of the company can be to capture only some channels. Even, not all outlets need to be supplied necessary. It all depends of the distribution strategy that needs to be aligned with marketing and sales from commercial aspect, and with finances from cost perspective.
Also, the product distribution can be limited by competition and saturation of the market. If the competition is blocking shelf space and credit potential of the customers, than entrance could be difficult.
Choosing the right distribution strategy is the matter of balance between intention to maximize presence in the market and cost of doing that. This strategy must take into account the expense of distribution. The success of the company is measured with market share that need to be as higher as possible, and cost related to distribution and commercial fees that need to be as lower as possible.
There are several ways of measuring distribution. The measurement can expressed as numeric distribution and net weight distribution.
Numerical Distribution
The numeric distribution is the percentage of outlets that have specific SKU or portfolio on stock, out of total relevant number of outlets in the market.
This indicator is measured based on sales data history. In case that market is supplied by distributors, without exact distribution data, the market surveys conducted by market research agencies can be used. The numeric distribution is expression of range of distribution.
Net Weighted Distribution
The weighted distribution is considering ratio between total volume of the company that is sold in the market, versus total sold volume of the relevant category.
The volume is presented in relevant unit of measure ( liter, oz, kg, pound, piece, etc ). The calculation can not be done directly, since company do not possess exact information about total volume sold in the whole market.
Therefore, market research agencies are necessary again to complete the picture related to weighted market share.
The weighted distribution is expression of quality/relevance of distribution.
The relationship between numeric and volume distribution is not directly related. The example below explains how these two types of distribution measurement can fluctuate:
In this particular case, the market universe contains three outlets, with their market share A–50%, B-30% and C-20%. "X" sign represents the numeric distribution. Both brands own numeric distribution of 66%. Still, Brand A possesses 80% of weighted distribution, while Brand B own 50% of weighted distribution, since market share of outlets is not the same.
More About:
Marketing Mix
Marketing Mix: Price
Marketing Mix: Promotion
Marketing Mix: The Product
Marketing Mix: Product Distribution
Promotion Mix: Public Relationships
Promotion Mix: Advertising
Promotion Mix: Personal Sales ( Soon )
Promotion Mix: Sales Promotion ( Soon )
