Question

Based on the initial spreadsheet (see below), which approach seems to be the most sensible for Hydropump? Why?

SPREADSHEET FOR CALCULATIONS

	Intensive Distribution	Selective Distribution
Number of Retailers	5600	280
Retailers per Sales Rep	300	70
Sales Reps Needed	19	4
Salary per Sales Rep	18000.00	18000 00
Personal Selling Expense	342000,00	72000.00
Mass-selling Expense	200000.00	50000.00
Overhead Cost	120000.00	80000.00
Cost to Produce a Pump	35.00	35.00
Total Pumps Sold by Dealers	175000	26000
Hydropump's Percent of Dealers' Units	14.00	40.00
Total Expected Units	24500	10400
Price to Retailers	70.00	75.00
Hydropump Total Revenue	1715000.00	780000.00
Hydropump Total Cost	1519500.00	566000.00
Hydropump Profit	195500.00	214000.00

Answer 1

Based on the spreadsheet, Selective Distribution seems to be best.

This is because of the following reasons-

1. Personal selling expense, Mass selling expense, Overheads, is lower in selective distribution.
2. Salary per sales rep, cost to produce a pump is the same in both options.
3. Total Hydropump profit is more in selective distribution.
4. Less sales reps are needed in Selective distribution.
5. Focus area is smaller with higher profits, so it is undoubtedly better than intensive distribution.