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Summary Chapter 13

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Chapter 13 of introduction to business, required course for first year IBA

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  • H13
  • 4 de julio de 2018
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  • 2016/2017
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Distribution and pricing

13.1: Distribution: getting your product to your customer
 Distribution strategy:o 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 distributionn path that a product takes from producer to consumer
o Physical distributionn movement of products along that path.
 Some producers choose to sell their products directly through a direct channeln no
intermediates.
 Most producers use channel intermediaries to help their products move more efciently
from their factories to their consumers.

13.1.1: Role of distributors: adding value
 Distributors add value (additional beneftss 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 benefts, however,
middlemen do not stay in business.
 One role of distributors is to reduce the number of transactions for goods to fow from
producer to consumer.
 Distributors add utility in a number of diferent waysn form, time, place, ownership,
information, and service. Sometimes, they deliver the value, but ofen they add new
utility themselves.
 Form utilityn providing customer satisfaction by converting inputs into fnished products.
 Time utility adds value by making products available at convenient times for consumers.
 Place utility satisfes 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 diferent distributions.
 Retailers are the distributors that we know on a daily basis. They sell products to fnal
consumers. E.g. Starbucks.
 Wholesalerso 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 diferent producers, distributing their goods to a range of
customers.

,  They fall into two categoriesn merchant wholesalerso who take legal possession of the
goods they distribute, and agents/brokersn 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 merchantsn They provide a complete array of services to the retailers
or business users who purchase the goods (e.g. shippings
o Limited-servicen fewer services. E.g. warehousing of products, but without
delivery. Diferent categoriesn
 Drop shipperso 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: wholesalerso 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 Jobberso work with perishable goods. E.g. Bread. They drive them
to customers (grocery storess. 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 pathn sell goods and service directly to fnal 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 categoriesn store and non-store. Multi-channel retailing
(encouraging consumers to buy through diferent venuess is an emerging phenomenon.
 Some marketers sold their products through multiple channels for years. But internet
provided a host of new opportunities for frms 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 distributiono 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 fnd. E.g. Snickers
o Selective distributiono placing the products only in preferred retailers. Works for
medium- and higher-priced products.
o Exclusive distributiono 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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