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ServiSoft Software 1. Should ServiSoft cave in to the distributors, or go around them and go direct using independent reps? I would recommend that ServiSoft use the independent representatives’ distribution channel and sell to retailers, first and foremost. In looking at distributing the product through the wholesalers, margin would definitely decrease and retailer price may have to increase to make up for this. But more importantly is how ServiSoft wants to penetrate the market and how fast. Using the wholesale distribution channel provides an established path of delivering this product to a network of retailers and mass merchants, but at a price. They have a very liberal return policy that can cut into sales drastically.…show more content…
2. Go through a margin analysis, and determine how much revenue ServiSoft will realize per unit under both distribution options. Using $8.50 as the variable cost provided at the bottom of the case study and using $39.95 as the retail selling price as compared to $23.97 as the wholesale selling price (60% of the retail price), ServiSoft will realize a contribution margin of $31.45 with the retail distribution channel versus $15.47 with the wholesale distribution channel. | | |Wholesale | |Retail | |Expected Unit Sales | | | | | | | | | |250,000 | | Change in variable costs = $.50 savings | | | | | | | | | | | | | | | | | | | | | | | | | |
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