Summary
Summary Chapter 13
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Chapter 13 of Introduction to business: Processes and Context
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Distribution and pricing13.1: Distribution: getting your product to your customer
Distribution strategy: a plan for delivering the right product to the right person at the
right time.
This has two elements, channels of distribution and physical distribution.
o Channel of distribution: path that a product takes from producer to consumer
o Physical distribution: movement of products along that path.
Some producers choose to sell their products directly through a direct channel: no
intermediates.
Most producers use channel intermediaries to help their products move more efficiently
from their factories to their consumers.
13.1.1: Role of distributors: adding value
Distributors add value (additional benefits) to products. They charge for adding this, but
less than it would cost for consumers/producers to add that value on their own.
Distributors add to the production cost without providing comparable benefits, however,
middlemen do not stay in business.
One role of distributors is to reduce the number of transactions for goods to flow from
producer to consumer.
Distributors add utility in a number of different ways: form, time, place, ownership,
information, and service. Sometimes, they deliver the value, but often they add new
utility themselves.
Form utility: providing customer satisfaction by converting inputs into finished products.
Time utility adds value by making products available at convenient times for consumers.
Place utility satisfies customer needs by providing the right products in the right place.
Ownership utility adds value by making it easier for customers to actually possess the
goods and services they purchase.
Information utility boosts customer satisfaction by providing helpful information.
Service utility adds value by providing fast, friendly, personalised service.
The members of the channel: retailers versus wholesalers
Many producers sell their goods through different distributions.
Retailers are the distributors that we know on a daily basis. They sell products to final
consumers. E.g. Starbucks.
Wholesalers: buy products from the producer and sell them to business. The business
that buy from wholesalers can be retailers, other wholesalers or business users.
13.2: Wholesalers: sorting out the options
Some are owned by producers, while others are owned by retailers, but the vast majority
are independent wholesaling business.
These represent a number of different producers, distributing their goods to a range of
customers.
, They fall into two categories: merchant wholesalers: who take legal possession of the
goods they distribute, and agents/brokers: who do not take title of the good
13.2.1: Merchant wholesalers
By taking the legal title, merchant wholesalers reduce the risk of producers’ products
being damaged or stolen – or even that they will not sell.
Taking title allows them to develop their own marketing strategies.
o Full-service merchants: They provide a complete array of services to the retailers
or business users who purchase the goods (e.g. shipping)
o Limited-service: fewer services. E.g. warehousing of products, but without
delivery. Different categories:
Drop shippers: take legal title of the merchandise, but not processing it
physically. They organise/facilitate product shipments directly from the
producer to the customers. E.g. Coal/timer production
Cash and carry wholesalers: service customers who are too small to
merit in-person sales calls from wholesaler reps. Must make the trip to
the wholesaler themselves. E.g. Staples
Truck Jobbers: work with perishable goods. E.g. Bread. They drive them
to customers (grocery stores). Responsibility includes checking stock
13.2.2: Agents and brokers
Connect buyers and sellers, and facilitate transactions in exchange for commissions.
Many insurance companies distribute via agents, whilst brokers handle real estate and
seasonal products. E.g. vegetables
13.3: Retailers: consumer connection
The last stop on the distribution path: sell goods and service directly to final consumers
Given their tight consumer connection, they must keep in close touch with rapidly
changing consumer needs/wants.
Retailers gain competition by providing more utility than others. Low pricers are only part
of this.
Retailing falls into two main categories: store and non-store. Multi-channel retailing
(encouraging consumers to buy through different venues) is an emerging phenomenon.
Some marketers sold their products through multiple channels for years. But internet
provided a host of new opportunities for firms that weren’t considered a multichannel
approach.
13.3.1: Store retailers
Both retailers and the producers who distribute through them must carefully consider
their distribution strategy.
o Intensive distribution: involves placing your products in as many stores as
possible. It makes sense for low-cost convenience goods that consumers will not
travel far for to find. E.g. Snickers
o Selective distribution: placing the products only in preferred retailers. Works for
medium- and higher-priced products.
o Exclusive distribution: establishing one retail outlet in a given area. Tends to
work for luxury-goods with a customer base that seeks their products.
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