1. Distribution The “Place” Decision

2. Distribution Intermediaries Intermediaries reduce the number of transactions required by manufacturers to reach their final customers. What expenses of doing business are lowered by this reduction in transactions?

3. Distribution – How It Works I. Channel of Distribution – the path a product takes from producer or manufacturer to final user A.Channel Members → Intermediaries 1. Wholesalers – obtain goods and services from manufacturers and resell them to industrial users, other wholesalers and retailers  Rack Jobbers – manage inventory and merchandising for retailers by counting stock, filling it when needed, and maintaining store displays  Drop Shippers – own the goods they sell but do not physically handle the products

4. Distribution – How It Works 2.Retailers – sell goods to the final consumer Retail Stores – sell goods to the customer from their own physical stores Ex: Department stores, Specialty stores, Supermarkets, Drugstores, Convenience stores, and Discount stores Nonstore Retailing – sell goods through other avenues Ex: Vending machines, Telephone & mail orders, Door to door, and E-tailing

5. Distribution – How It Works 3.Agents - intermediaries that bring buyers and sellers together Manufacturers’ Agent – sells similar products for several noncompeting producers Broker – brings buyers and sellers together

6. II. Direct and Indirect Channels A.Direct Distribution – goods or services are sold from the producer directly to the consumer B.Indirect Distribution – selling the goods or services involves one or more intermediaries between the producer and consumer

7. Channels of Distribution ConsumersConsumers WholesalersWholesalers AgentsAgents RetailersRetailers Manufacturers / Producers Distribution Intensity

8. III.Distribution Intensity A.Exclusive Distribution – selling through only one middleman in a particular geographic area B.Selective Distribution – selling through only those middlemen who will give the product special attention C.Intensive Distribution – selling a product through all responsible and suitable middlemen who will stock the product

9. © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Interactive Exercise: Ideal Market Exposure

10. Purchasing Organizational buyers – people who buy goods for business purposes, usually in much greater quantities than the average consumer Wholesaler and retail buyers – people who purchase goods for resale: they forecast customers’ needs and buy the necessary products to meet those needs Six-month merchandise plan – the budget that estimates planned purchases for a six-month period Open-to-buy (OTB) – the amount of money left for buying goods after all other expenses have been considered

11. Planning Purchases Centralized Buying – buying for all branches in a central location, such as company headquarters Decentralized Buying – local store managers or their designated buyers are authorized to make special purchases for their individual stores

12. The Buying Process New-task Purchase Want slips – customer requests for items that are not carried in the store Modified Re-buy Resident buying offices – retailers’ representatives in a central market Straight Re-buy

13. Selecting Suppliers Production capabilities Past experiences Special buying arrangements Consignment buying – goods are paid for only after they are purchased by the final consumer Memorandum buying – the supplier agrees to take back any unsold goods by a certain date Special services Negotiating Terms Internet Purchasing