Directorate of distance education

Franchised
– where a central organization controls nearly all 
activities of other members
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Administrative
– In certain channel arrangements a single 
member may dominate the decisions that occur within the channel. 
These situations occur when one channel member has achieved a 
significant power position. This most likely occurs if a manufacturer 
has significant power due to brands in strong demand by target 
markets (e.g., Procter &Gamble) or if a retailer has significant 
power due to size and market coverage (e.g., Wal-Mart). In most 
cases the arrangement is understood to occur and is not bound 
by legal or financial arrangements. (More discussion on channel 
power can be found below.)
Issues in Establishing Distribution Channels
Like most marketing decisions, a great deal of research and thought 
must go into determining how to carry out distribution activities in a way 

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that meets a marketer’s objectives. The marketer must consider many 
factors when establishing a distribution system. Some factors are directly 
related to marketing decisions while others are affected by relationships 
that exist with members of the channel.
Next we examine the key factors to consider when designing a 
distribution strategy. We group these into two main categories:
1. Marketing Decision Issues
2. Channel Relationship Issues
In turn, each of these categories contains several topics of concern 
to marketers.
Level of Distribution Coverage
As we will see the marketer must take into consideration many 
factors when choosing the right level of distribution coverage. However, 
all marketers should understand that distribution creates costs to the 
organization. Some of these expenses can be passed along to customers 
(e.g., shipping costs) but others cannot (e.g., need for additional salespeople 
to handle more distributors). Thus, the process for determining the right 
level of distribution coverage often comes down to an analysis of the 
benefits (e.g., more sales) versus the cost associated with gain the benefits.
Additionally, it is worth noting that for the most part distribution 
coverage decisions are of most concern to consumer products companies, 
though there are many industrial products that also must decide how 
much coverage to give their products.
There are three main levels of distribution coverage - mass 
coverage, selective and exclusive. 
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Mass Coverage
- The mass coverage (also known as intensive 
distribution) strategy attempts to distribute products widely in 
nearly all locations in which that type of product is sold. This level 
of distribution is only feasible for relatively low priced products that 
appeal to very large target markets (e.g., see consumer convenience 
products). A product such as Coca-Cola is a classic example since 

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it is available in a wide variety of locations including grocery stores, 
convenience stores, vending machines, hotels and many, many 
more. With such a large number of locations selling the product 
the cost of distribution is extremely high and must be offset with 
very high sales volume. 
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