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2. Distribution and Pricing:
LO1 What is distribution? What is the difference between channels of distribution and physical distribution?
LO2 What are the various types of wholesale distributors?
LO3 What are strategies and trends in store and nonstore retailing?
LO4 What are the key factors in physical distribution?
LO5 What are core pricing objectives and strategies?
LO6 What is pricing in practice and the role it plays in consumers’ perceptions?
Distribution and Pricing:
Right Product, Right Person, Right Place, Right Price

3. Distribution: Getting Your Product to Your Customer
Producer
Wholesaler
Consumer
Channel of Distribution –
the path that a product takes from
the producer to the consumer
Distribution Strategy: getting the right product to the right person at the right place, at the right time

4. Elements of Distribution Strategy
Physical Distribution – the actual movement of products to consumers
Direct Channel – producers who sell products directly to consumers
Channel Intermediaries – help products move from factories to consumers efficiently

5. Reducing Transactions Through Marketing Intermediaries
Check exhibit.

6. The Role of Distribution: Adding Value
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

7. The Members of the Channel: Retailers versus Wholesalers
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

8. Wholesalers: Sorting out the Options
Merchant Wholesalers
Full-service merchant wholesalers
Limited-service merchant wholesalers
Drop Shippers
Cash and Carry Wholesalers
Truck Jobbers
Agents/Brokers
Connect Buyers and Sellers

9. Retailers: The Consumer Connection
Store Retailers
Nonstore Retailers
Online (e-tailing)
Direct Response
Direct Selling
Vending
Multichannel retailing encourages buying through different channels

10. Distribution Strategy
INTENSIVE DISTRIBUTION
SELECTIVE DISTRIBUTION
EXCLUSIVE DISTRIBUTION

11. Store Retailers Category Killer Home Depot, Best Buy, Staples
Convenience Store
7-Eleven, AM/PM markets
Department Store
Nordstrom, Neiman Marcus, JCPenney
Discount Store
Target, Walmart, Kmart
Outlet Store
Nike, Gap, Gucci, Versace
Specialty Store
Barnes & Noble, Victoria’s Secret, Hot Topic
Supermarket
Kroger, Safeway, Albertson’s, Whole Foods
Supercenter
Walmart Supercenters, Super Target
Warehouse Club
Costco, Sam’s Club

12. Physical Distribution: Planes, Trains, and 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
How will the product flow through the channel from
producer to consumer?

13. Elements of the Supply Chain
Check exhibit.

14. Transportation Decisions
Marketers must consider what each mode of transportation offers. The right choice depends on the needs of the business and the product.

15. Modes of Transportation
Check exhibit.

16. Proactive Supply Chain Management
Supply chain management can build a competitive advantage
Many firms outsource their supply chain activities
Firms like UPS have been successful in supply chain management

17. Pricing Objective and Strategies
Significant impact on company success
Price is a tough variable
Legal constraints
Intermediary pricing
Stable pricing is not the norm
Prices must constantly be evaluated

18. Pricing Objective and Strategies
Building Profitability
Boosting Volume
Matching the Competition
Creating Prestige
Boosting Volume
Penetration Pricing
Every-day-low Pricing
High/Low Pricing
Loss Leader Pricing
Goals can be measured through market share.

19. Matching Competition & Creating Prestige
The goal is to set prices based on what everyone else is doing
Wipe out price as a point of comparison
Use price to send consumers a message
Rolex watches and Bentley cars use prestige pricing to reinforce their image
Price skimming entices price-insensitive consumers

20. Pricing in Practice
Breakeven analysis – the process of determining the number of units that must be sold to cover costs.
Breakeven Point (BP) =
Total fixed cost (FC)
Price/Unit (P) – Variable cost/unit (VC)
Businesses make decisions to adjust the price and/or costs.
Raise prices
Decrease variable costs
Decrease fixed costs

21. Fixed Margin Pricing Profit Margin – the gap between
cost and the price
per product
Cost-Based Pricing
Demand-Based Pricing

22. Consumer Pricing Perceptions
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?
The perceived value between $99.99 and $ is much greater than the actual gap

23. Looking Back
What is distribution? What is the difference between channels of distribution and physical distribution?
What are the various types of wholesale distributors?
What are strategies and trends in store and nonstore retailing?
What are the key factors in physical distribution?
What are core pricing objectives and strategies?
What is pricing in practice and the role it plays in consumers’ perceptions?