“Distribution” Importance of Distribution Intermediaries Wholesalers Retailers Types of Channels Transportation Methods Unit 4

Distribution (Place) Getting products to the customers. Helping customers find and get products. Purpose: Location, transportation, storage, product handling, and customer service. When distribution works well, nobody notices. When it doesn’t work well, consumers don’t have what they want, when they want it and are very unhappy. Will they come back?

Most complex and challenging of 4P’s. Matches supply with consumer demand. Accounts for up to 50% of marketing costs. Directly affects and utility. (empty shelf, perishable & seasonal goods) – the path a product takes from producer/manufacturer to consumer. The Importance of Distribution

 In some cases, selling directly to the ultimate consumers.  Goal of producers is to have products:  In other cases, this means using intermediaries.  Manufacturer – make or process raw materials into products  Producer – grow or raise organic materials or livestock

 If they use intermediaries:  If they sell directly: They must perform all necessary functions and incurs all the costs. BUT... They earn all of the money from sales. Costs can be passed on to others. Profits could decrease since income must be shared. Income might be higher if the intermediaries are able to sell more than the producers can on their own. Manufacturers & Producers

What is an Intermediary? A middleman handles the product on its way from producers & manufacturers to final consumers. Types: Agents – set up manufacturers with retailers & vice versa; but never own goods Wholesale Clubs – wholesale/retail hybrid

How Intermediaries Help (Buy Big and Sell Small) Buy large quantities of goods from producers. Sell smaller quantities to other intermediaries or consumers. By placing large orders with producers, they’re able to reduce the per-unit cost for goods, allowing them to make a profit and/or pass some of the savings along to other intermediaries or consumers.

Develop an Assortment of Goods Most producers make more than any consumer will purchase at one time. Intermediaries collect goods from a variety of producers and divide them into quantities/assortments consumers want. Consumers are then able to get the desired amounts/types of goods. How Intermediaries Help

Transport and Storage Hold onto products until buyers need them. Saves buyers money & store space. Minimizes risk for buyers. How Intermediaries Help

Perform Other Functions: Provide market information to producers Promote product deals to retailers Sell on credit to retailers Provide management services Plan inventories and store layouts How Intermediaries Help

Intermediaries Adjust Differences Between Manufacturers’ Production & Consumers’ Needs Producers make huge quantities of products. Consumers only buy 1 or several at a time. Producers specialize in a limited variety. Consumers want a variety of products. Producers are located around the world. Consumers want to buy local & conveniently. Producers operate year-round. Consumers don’t use all products year-round.

Intermediaries Untangle Distribution Retailers

Wholesalers Provide storage and inventory management. Inventory management info for retailers: What products are in inventory? What quantity of each are available? How long has each been there? “Turnaround” time identifies good sellers. Buy bulk from many, different Manufacturers. They then own the goods and assume all risk. Break down, regroup, repackage & resell to retailers.

Sells products to final consumers; provides convenience of location. Retailers Retail Categories Convenience stores Limited-line stores Box stores Department stores Superstores Specialty stores Non-store retailing Shopping centers Malls (from kiosks to anchor stores)

Summary: Intermediaries (or middlemen) Help... Adjust the Differences in From the Producers’ To the Consumers’ Quantity Assortment Location TimingProductionConsumption (perishables & seasonals)

4 Types of Channels 4 Types of Channels Direct – Indirect – Reverse – Linked –

Typical Marketing Channels for Consumer Products

Railroads – large qty, slow, cheap, limited Trucks – most flexible, limited only by water Ships – cheap, any size, slow, risk of loss Airplanes – anything, fast, expensive Pipelines – gas, oil, water; expensive Combining methods – FedEx, UPS, etc. Transportation Methods