BUSN Ch. 13 Distribution and Pricing: Right Product Right Person, Right Place, Right Price

distribution strategy

A plan for delivering the right product to the right person at the right place at the right time.

channel of distribution

The network of organizations and processes that links producers to consumers.

physical distribution

The actual, physical movement of products along the distribution pathway.

direct channel

A distribution process that links the producer and the customer with no intermediaries.

channel intermediaries

Distribution organizations that facilitate the movement of products from the producer to the consumer.

retailers

Distributors that sell products directly to the ultimate users, typically in small quantities, that are stored and merchandized on the premises.

wholesalers

Distributors that buy products from producers and sell them to other businesses or nonfinal users such as hospitals, nonprofits, and the government.

independent wholesaling businesses

Independent distributors that buy products from a range of different businesses and sell those products to a range of different customers.

merchant wholesalers

Independent distributors who take legal possession, or title, of the goods they distribute.

agents/brokers

Independent distributors who do not take title of the goods they distribute (even though they may take physical possession on a temporary basis before distribution).

Merchant Wholesalers: Full-service merchant

Full-service merchant wholesalers provide a complete array of services to the retailers or business users who typically purchase their goods. This includes warehousing, shipping, promotional assistance, product repairs, and credit.

Merchant Wholesalers: Limited-service merchant

Limited-service merchant wholesalers provide fewer services to their customers. For example, some might warehouse products, but not deliver them. Others might warehouse and deliver, but not provide credit or marketing assistance. The specific categories of limited-service merchant wholesalers include the following:

Merchant Wholesalers: Drop Shippers

Drop shippers take legal title of the merchandise, but they never physically process it. They simply organize and facilitate product shipments directly from the producer to their customers. Drop shippers are common in industries with bulky products, such as coal or timber. Amazon, however, successfully pioneered the use of drop shipping in e-commerce, where it has become a standard shipping method for a number of major websites.

Merchant Wholesalers: Cash and Carry Wholesalers

These distributors service customers who are too small to merit in-person sales calls from wholesaler reps. Customers must make the trip to the wholesaler themselves and cart their own products back to their stores. Costco and Staples are both examples.

Merchant Wholesalers: Truck Jobbers

Typically working with perishable goods such as bread, truck jobbers drive their products to their customers, who are usually smaller grocery stores. Their responsibilities often include checking the stock, suggesting reorder quantities, and removing out-of-date goods.

multichannel retailing

Providing multiple distribution channels for consumers to buy a product.

Intensive Distribution

Intensive distribution involves placing your products in as many stores as possible (or placing your stores themselves in as many locations as possible). This strategy makes the most sense for low-cost convenience goods that consumers won't travel too far to find. Marketers have chosen this strategy for Snickers candy bars, Dial soap, and Sports Illustrated magazine, among thousands of other items.

Selective Distribution

Selective distribution means placing your products only with preferred retailers (or establishing your stores only in limited locations). This approach tends to work best for medium- and higher-priced products or stores that consumers don't expect to find on every street corner. Marketers have chosen this strategy for Neiman Marcus, Jones Soda, and most brands of paintball equipment, for instance.

Exclusive Distribution

Exclusive distribution means establishing only one retail outlet in a given area. Typically, that one retailer has exclusive distribution rights and provides exceptional service and selection. This strategy tends to work for luxury-goods providers with a customer base that actively seeks their products. Examples include top-end cars such as Tesla and fashion trendsetters such as Raf Simons.

wheel of retailing

A classic distribution theory that suggests that retail firms and retail categories become more upscale as they go through their life cycles.

Nonstore Retailers

Online Retailing

Direct Response Retailing

Direct Selling

multilevel marketing (MLM) I

nvolves hiring independent contractors to sell products to their personal network of friends and colleagues and to recruit new salespeople in return for a percentage of their commissions.

supply chain

All organizations, processes, and activities involved in the flow of goods from the raw materials to the final consumer.

supply chain management (SCM)

Planning and coordinating the movement of products along the supply chain, from the raw materials to the final consumers.

logistics

A subset of supply chain management that focuses largely on the tactics involved in moving products along the supply chain.

Elements of the Supply Chain

Raw materials > Logistics > Warehouse > Production > Warehouse > Logistics > Distribution

modes of transportation

The various transportation options—such as planes, trains, and railroads—for moving products through the supply chain.

penetration pricing

A new product pricing strategy that aims to capture as much of the market as possible through rock-bottom prices.

everyday-low pricing (EDLP)

Long-term discount pricing, designed to achieve profitability through high sales volume.

high/low pricing

A pricing strategy designed to drive traffic to retail stores by special sales on a limited number of products, and higher everyday prices on others.

loss-leader pricing

Closely related to high/low pricing, loss-leader pricing means pricing a handful of items—or loss leaders—temporarily below cost to drive traffic.

skimming pricing

A new product pricing strategy that aims to maximize profitability by offering new products at a premium price.

breakeven analysis

The process of determining the number of units a firm must sell to cover all costs.

profit margin

The gap between the cost and the price of an item on a per-product basis.

odd pricing

The practice of ending prices in numbers below even dollars and cents in order to create a perception of greater value.