Marketing
and
Distribution
Marketing
Once, as a business, you have a
good or service, what must you
do?
 Marketing: all activities involved
in moving goods and services
from the producer to the
consumer
• Some economists estimate that
close to 50% of the price people
pay is for the cost of marketing
the product

Marketing
 The sole purpose of
marketing is to convince
consumers that a certain
product will add to their
utility
•Utility: the amount of
satisfaction you receive from
a good or service
Marketing

Four types of utility:
• Form utility: converting raw materials
into products (refining crude oil into
gasoline; cotton into shirts)
• Place utility: having a good or service
where people want to buy it; being in the
right place (gas stations at a busy corner)
• Time utility: having a good or service at
the right time (taco bell being open late;
Wal-Mart being open 24/7)
• Ownership utility: satisfaction by
simply owning a product (MTV cribs with
celebrity houses and cars; diamond
engagement rings)
Market Research

Market research: finding out what
consumers want, by gathering,
recording, and analyzing data on
consumer preferences.
• Usually done before product is
offered/released (helps determine
production of the product—features,
quality)
• To get initial consumer response,
research is done immediately after
product release (Xbox 360)
Market Research
Market survey: information on who
maybe possible product users, based
on characteristics such as age,
gender, income, education, location
(Best Buy survey, warranty cards,
focus groups, individual interviews)
 Before national or large distribution,
most companies use testmarketing: offering a product for
sale in a small area for a limited
amount of time to see how
successful it will be

Marketing Mix
• Product:
What should be produced?
What services should be offered
with product? (warranties,
rebates)
How should the product be
packaged? (“new & improved”;
size, color, design, catch phrase,
coupons)
Product Identification: How
should product be identified?
(logos, endorsements, songs)
• Price:
Determined by supply and demand
(companies must consider costs of
production, advertising, selling &
distribution, as well as profits)
Price leadership: selling products
at a price of similar established
products
Penetration pricing: setting price
lower on a new product to attract
consumers away from already
established products
• Place:
Where the product should be sold?
 Based on past experiences of similar
products

• Promotion: advertising to convince a
consumer that a new & improved
product is available and they should
purchase it
Depends on 3 factors: product, target
consumers, and money (budget)
 Direct-mail advertising: mail informing
about products and order forms (“junk
mail” to most)

Product Life Cycle

Product life cycle: the stages a
product travels through, from introduction
to withdrawal from the market
• Typical life cycle: Introduction,
growth, maturity, decline
Marketing and price are different in
each stage of the product life cycle
Many producers try to extend the
product’s life cycle by redesigning the
product (looks, uses, advertising)
Distribution Channels




Channels of distribution: routes which goods
are moved from producers to consumers
Consumer Goods:
• Manufacturer → Consumer
• Manufacturer → Retailer → Consumer
• Manufacturer → Wholesaler → Retailer →
Consumer (most common)
Raw materials and Producer goods:
• Producers → Business
• Producers → Wholesaler → Business
Wholesaler: businesses that purchased large
quantities of goods from producers for resale to
other businesses (Sam’s club)

Retailers: businesses that sell
consumer goods directly to the
public
• Growing more and more is ecommerce: business conducted
over the internet (“virtual
companies”)

Storage and Transportation:
producers, wholesalers, or
retailers may store products
• Most retailers keep some inventory:
lengthy supply of products for future
sales
• Transportation of products depends
on type of good (speed, weight,
shipping costs)

Distribution channels have grown in the
past years:
• Club warehouse stores: require
membership, usually groups oriented
(Sam’s club)
• Direct marketing: done mainly
through catalogs and the internet (avoid
most state sales taxes); increases sales
because of ease and convenience of
ordering products on consumers own
timeline; order almost anything with
valid credit card
Figure 11.7
Channels of
Distribution