A selective distribution policy might be used to avoid selling to wholesalers and/or retailers for a number of reasons. Which of the following reason(s) could be given for following a selective strategy?
A. Retailers/wholesalers have a poor credit rating.
B. The intermediaries have a reputation for making too many returns or requests for service calls.
C. The middlemen place orders that are too small to justify making calls or providing service.
D. The intermediaries are not in a position to do a satisfactory job.
E. All of the above are good reasons.
Answer: (E) The question deals with the establishment of a selective distribution policy that is used to avoid sales to certain intermediaries. All of the reasons stated are excellent reasons to utilize this type of distribution. (A) is true but not the most correct response. Poor credit translates to inefficient use of cash for the producer or manufacturer, and perhaps a poor cash flow. Too many returns (B) cause additional expenses for the producer in terms of human and capital resources. If there is only one intermediary making these returns, the problem is probably with the channel member and not the products themselves. In order to create economies of scale, the producers need to produce in large enough amounts to make cost of the product competitive with other products on the market. Sales in very small amounts cost the manufacturer (C). If there are numerous small accounts, the manufacturer may want to consider utilizing distributors for their products. Thus (C) is true, but not the most correct response. (D) is also true, but not the most correct response. If the intermediary channel member cannot help with product sales in a satisfactory (or better) manner, than the manufacturer may want to avoid doing business with them.