introduction to business 3e 13 part v: marketing copyright © 2004 south-western. all rights...

Copyright © 2004 South-Western. All rights reserved.

Jeff MaduraIntroduction to

Business 3e

Introduction to Business 3e

1313Part V: MarketingPart V: Marketing

Distributing ProductsDistributing ProductsDistributing ProductsDistributing Products

Copyright © 2004 South-Western. All rights reserved. 13–2

Distributing ProductsDistributing Products


Learning GoalsLearning Goals• Explain advantages and disadvantages of direct distribution channel.

• Identify factors that could determine optimal channel of distribution.

• Differentiate between types of market coverage.

• Explain how to accelerate the distribution process.


Learning Goals (cont’d)Learning Goals (cont’d)•Explain how retailers serve customers.

•Explain how wholesalers can serve. manufacturers and retailers.

•Explain the strategy and benefits of vertical channel integration.


Distributing ProductsDistributing Products


Channels of DistributionChannels of Distribution•Determine how the firm’s products will be accessible to customers– Convenience of place

•Direct channel– Allows full control over price– Provides first-hand customer feedback– Requires more employees– Incurs more expenses to promote product– May require selling on credit


Channels of DistributionChannels of Distribution•One-Level Channel

– One marketing intermediary is between the producer and the customer Merchants Agents

•Two-Level Channel– Two marketing intermediaries are between

the producer and the customer Small businesses may use agents to generate sales

to retailers


One-Level Distribution One-Level Distribution ChannelChannel

Exhibit 13.1


Two-Level Distribution Two-Level Distribution ChannelChannel

Exhibit 13.2


Comparison of Common Comparison of Common Distribution SystemsDistribution Systems

Exhibit 13.3


Optimal Distribution Optimal Distribution ChannelChannel

•Depends on product’s characteristics– Ease of transporting

If product is easy to transport, use of intermediary is more likely

If product is difficult to transport, use of direct channel is more likely

– Degree of standardization Standardized products more likely to use

intermediary

– Ability to fulfill Internet orders Internet ordering allows use of direct channel


Degree of Market Degree of Market CoverageCoverage

•Degree of product distribution among outlets– Provide easy customer access to products– Ensure that outlet is capable– Intensive distribution across most or all

possible outlets– Selective distribution through selected

outlets– Exclusive distribution through only one or a

few outlets


Alternative Degrees of Market Alternative Degrees of Market CoverageCoverage

Exhibit 13.4


Selecting Transportation Selecting Transportation ModeMode

•Cost of transporting products can exceed production costs– Important to select most efficient mode of

transportation that is appropriate– Firm should estimate timing, cost, and

availability before selecting a mode of transportation Truck, rail, air, water, pipeline


Additional Transportation Additional Transportation DecisionsDecisions

• Determine efficient way to load products

• Create best route to distribute product to outlets

• Determine appropriate number of transporters

• Decide if all of the company’s products should be delivered at the same time, or separately

• Estimate costs of all possible transportation modes and select most efficient


Accelerate Distribution Accelerate Distribution ProcessProcess

• Important to get products into the hands of customers as quickly as possible– Slow delivery may cause customers to buy

from a competitor– Reduction in distribution time can enhance

firm’s value Allows firm to get paid sooner and be able

to reinvest those funds


A Restructured Distribution A Restructured Distribution ProcessProcess

Exhibit 13.5


Relationship between Production Relationship between Production and Distributionand Distribution

Exhibit 13.6


Methods of AccelerationMethods of Acceleration•Streamline distribution channels

– Eliminate warehouses– Deliver direct to customers

• Integrate production and distribution processes– Maintain adequate inventory to avoid

shortages– Use E-marketing to process orders and keep

track of inventory


RetailersRetailers•Valuable intermediaries that distribute products directly to customers– Number of outlets

Independent retail store versus chain store Chain stores get lower prices by buying in bulk Chain stores gain national reputation

– Quality of service Full-service store versus self-service store

– Variety of products offered Specialty retailer versus variety retail store


Non-Store RetailersNon-Store Retailers• Mail-order retailers

– Receive orders over the phone or through the mail– Works well for products that are light, somewhat

standardized, and do not need to be serviced

• Websites– Firm does not have to send out catalogs– Cuts costs and allows changes to be made easily

and often

• Vending machines


WholesalersWholesalers• Intermediaries who purchase products from manufacturers and sell them to retailers

•Serve manufacturers– Warehousing– Providing sales expertise– Delivery to retailers– Assumption of credit risk– Information


WholesalersWholesalers•Serve retailers

– Warehousing Allows retailer to order in smaller quantities

– Promotion Increase sales by retailers

– Displays Attract customer attention

– Credit – Information

Inform retailers about competitors’ policies


Steps Involved Steps Involved in the in the

Production Production and and

Distribution of Distribution of ProductsProducts

Exhibit 13.7


Vertical Channel Vertical Channel IntegrationIntegration

•Two or more levels of distribution are managed by a single firm– Manufacturer decides to open its own retail

stores– Retailer decides to produce its own products,

rather than buying products from a manufacturer

– Must consider costs and benefits before deciding to vertically integrate


Trade-off from Using Vertical Trade-off from Using Vertical Integration.Integration.

Exhibit 13.8


Chapter SummaryChapter Summary•Advantages and disadvantages of using a direct channel of distribution

•Optimal channel depends on product characteristics.

•Firms must choose appropriate type of market coverage.

•Accelerating the distribution channel can add value to the firm.


Chapter Summary (cont’d)Chapter Summary (cont’d)•Retailers serve as intermediaries and are distinguished by characteristics.

•Wholesalers provide valuable services to manufacturers and retailers.

•Vertical channel integration occurs when a single firm manages more than one level of distribution.

introduction to business 3e 13 part v: marketing copyright © 2004 south-western. all rights...

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