CHAPTER 13: DISTRIBUTION AND PRICING
Right Product, Right Person, Right Place, Right Price
GETTING PRODUCTS TO THE RIGHT PLACE

Distribution is a key element of the marketing mix
 Where
should the product be sold?
 How will it get to the location(s) from the factory?
DISTRIBUTION: GETTING YOUR
PRODUCT TO YOUR CUSTOMER
Producer
Wholesaler
Channel of Distribution –
the path that a product takes from
the producer to the consumer
Consumer
CHANNEL INTERMEDIARIES
Channel Intermediaries – informally called middlemen. They
facilitate the movement of products from the producer to the
consumer.
DISTRIBUTING DIRECTLY TO THE CONSUMER
Producer
Consumer
Direct Channel –
Distribution process that links the
producer and the customer with
no intermediaries.
THE ROLE OF DISTRIBUTORS:
ADDING VALUE (utility)
Form Utility: Turning inputs into finished goods
Time Utility: Providing products at the right time
Place Utility: Offering products at the right place
Ownership Utility: Providing credit, cashing checking,
delivering products
Information Utility: Offering helpful information
Service Utility: Providing fast, friendly, personalized
service
DISTRIBUTORS: STREAMLINING
CONSUMER TRANSACTIONS
STRATEGIC DISTRIBUTION
“
Reed Hastings created Netflix – which revolutionized
video distribution – partly out of anger that Blockbuster
charged him $40 in late fees for a single overdue rental
of Apollo 13.
“
THE MEMBERS OF THE CHANNEL
Retailers – the
distributors that sell
products directly to
the ultimate users
Wholesalers –
distributors that buy
products from producers
and sell them to other
businesses or
nonfinal users.
WHOLESALERS: SORTING OUT THE OPTIONS

Merchant Wholesalers
 Full-service
 Limited
 Drop
Service
Shippers
 Cash and Carry
 Truck Jobbers
RETAILERS: THE CONSUMER CONNECTION


Store Retailers
Non-Store Retailers
 Online
 Direct
Response
 Direct Selling
 Vending
DISTRIBUTION STRATEGY
INTENSIVE DISTRIBUTION
SELECTIVE DISTRIBUTION
EXCLUSIVE DISTRIBUTION
MULTICHANNEL RETAILING
Store
Retailers are
encouraging consumers
to buy through multiple
channels
Online
STORE RETAILERS
Category Killer
Convenience Store
Department Store
Discount Store
Outlet Store
Home Depot, Best Buy, Staples
7-eleven, AM/PM markets
Nordstrom, Neiman Marcus, JCPenny
Target, Wal-Mart, Kmart
Nike, Gap, Gucci, Versace
Specialty Store
Barnes & Noble, Victoria’s Secret, Hot Topic
Supermarket
Kroger, Safeway, Albertson’s, Whole Foods
Supercenter
Wal-Mart Supercenters, Super Target
Warehouse Club
Costco, Sam’s Club
PHYSICAL DISTRIBUTION: PLANES,
TRAINS, AND MUCH, MUCH MORE
Supply Chain Management –
planning and coordinating the
movement of products along
the supply chain.
Logistics - focuses on
the tactics involved in
moving the products.
ELEMENTS OF THE SUPPLY CHAIN
SUPPLY CHAIN MANAGEMENT
DECISIONS







Warehousing
Materials Handling
Inventory Control
Order Processing
Customer Service
Transportation
Security
DISTRIBUTING TO THE BIG BOX
RETAILERS
A typical Wal-Mart distribution center
is more than one million square feet,
or the equivalent of
10 Wal-Mart retail stores.
www.walmartfacts.com/wal-mart-distribution-centers.aspx
MODES OF TRANSPORTATION
PRICING : A HIGH STAKES GAME


Pricing plays a key role in the demand for
products
Price is a tough variable
 Legal
constraints
 Intermediary pricing

Stable pricing is not the norm
 Prices
must constantly be evaluated
PRICING OBJECTIVES AND STRATEGIES



Building Profitability

Boosting Volume
Matching the
Competition
 Penetration
Creating Prestige
 High/Low
 Skimming
 Loss
Pricing
Pricing
 Every-day-low
Pricing
Pricing
Leader Pricing
“SLIPPERY FINGER” ONLINE PRICING GOOFS





Free flights from Los Angeles to Fiji.
Round-trip tickets from San Jose, California, to
Paris for $27.98.
$1,049 televisions wrongly listed for $99.99 on
Amazon.
$588 Hitachi monitors mistakenly priced at $164.
$379 Axim X3i PDAs wrongly priced at $79 on
Dell’s site.
PRICING IN PRACTICE: A REAL WORLD
APPROACH
Breakeven Point (BP) =
Total fixed cost (FC)
Price/Unit (P) – Variable cost/unit (VC)
Breakeven analysis – the process of determining the number of units that must be sold to cover costs.
USING BREAKEVEN ANALYSIS
Businesses make decisions to adjust the product
price and/or costs.
 Raise
prices
 Decrease
variable costs
 Decrease
fixed costs
FIXED MARGIN PRICING

Cost-Based Pricing

Demand-Based Pricing
Profit Margin –
the gap between
cost and the price
per product.
CONSUMER PRICING PERCEPTIONS: THE
STRATEGIC WILD CARD


Consumer price perceptions can defy logic!
The link between price and perceived quality can
be powerful
 Consumers

will use price as a quality indicator
Does odd pricing like $196 or $199 always mean
a bargain?
PSYCHOLOGICAL PRICING