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Published byMargaret Shepherd Modified over 7 years ago
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Distribution is the Place Decision in the 4 P’s Channels of Distribution-path a product takes from producer to final user Channels end when a product changes form
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ApplesApple Juice Manufacturer Grower Apple Juice Manufacturer Food Broker Retailer(store) Consumer
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Producer –grows a good Manufacturer-makes or assembles a good on a large scale through laborers and/or machinery Intermediaries-Channel members who help move products from producer to final user ◦ Merchant intermediaries - take title(ownership) of the good ◦ Agents- do not take title and are paid commission to help buyers and sellers get together Non-channel members ◦ transportation companies-truck, plane, barge
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Wholesalers ◦ buy large quantities, store goods, & resell to retailers Wholesalers, Rack Jobbers, Drop shippers Retailers ◦ sell goods to ultimate consumers through their stores ◦ large companies may be both(Sears) ◦ smaller use wholesalers Non-store Retailers ◦ Electronic retail outlets-sell goods thru television programs and computers home shopping network, CCS ◦ Vending Service Companies Buy manufacturer’s products and sell them thru machines that dispense to consumers ◦ Catalog Companies ◦ Direct Mail
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Negotiate the title of goods between buyer and seller Two types Independent manufacturer’s representatives represent several related companies(Coleman,Daisy, Bushnell, Nikon, Eagle Optics) Brokers Principle function to bring buyer and seller together. Typically do not continue relationships, they negotiate the sale & paid commission.
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Channel A (direct distribution) Producer Consumers Indirect Distribution Channel B Producer Retailer Consumer Channel C Producer Wholesaler Retailer Consumer Channel D Producer Agent Wholesaler Retailer Consumer Channel E Producer Agent Retailer Consumer
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Manufacturer/Producer may use more than one channel to reach different customers Consumer Products ◦ Most commonly used channel is B Industrial Products ◦ Most commonly used channel is A
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Using outlets to sell products where they previously weren’t sold example: iPods previously sold in electronic stores can be purchased through vending machines
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Product fits the needs of industrial and consumer users Patagonia (outdoor clothing) sells through their own stores, catalogs and other retailers
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In-house sales force=most control but most costly ◦ Only use if product is well known and high sales volume If new company or new product may want to use an agent ◦ Less control but also costs less
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Another issue is the power of retail giants to dictate terms to manufacturers Wal-mart, etc. may tell a manufacturer how to ship, package, and price products or else they won’t be sold there
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Three levels Intensive distribution(ex. Coca-cola) ◦ objective=complete market coverage (use of all suitable outlets) Selective Distribution( ex. Ralph Lauren) ◦ objective=select channel members (limited) that are good credit risks, aggressive marketers, & good inventory planners Exclusive Distribution (ex. Subway) ◦ objective=prestige, image, channel control & high profit (protected territories in a geographic area)
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Form of exclusive distribution ◦ Manufacturer is the wholesaler and retailer ◦ Example: Banana-Republic sells its clothes in company owned stores
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Chapters 24 & 25 Part III
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Must be coordinated with other business functions Must have the products in the right place at the right time Involves 3 marketing functions ◦ Transporting(moving goods from seller to buyer) ◦ storing ◦ handling
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Motor Carriers(trucking) ◦ Most frequently used ◦ lightweight shipments over moderate distances ◦ Four major types common carriers-charge a fee, usually specialize in a single commodity (good) Contracted carriers-negotiate rates with each business Private carriers-owned by business, transports own goods Exempt carriers-free from direct regulation of rates and operating procedures. Usually agricultural products
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Trucking advantages ◦ convenient ◦ reduces packaging costs ◦ reduced inventory costs(rapid delivery) Trucking disadvantages ◦ traffic jams & accidents ◦ equipment breakdowns ◦ Not good for long distances(expensive)
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Rail ◦ Move heavy, bulky freight (coal) Ton mile-movement of one ton of freight one mile Carload-min. number of pounds of freight needed to fill a box car ◦ Five specialized services Piggyback & Fishyback service Specialized services (refrigerator cars) Package cars(lower rate after reaching weight) Diversion-in-Transit(redirection when in route) Processing-In-Transit(processed in route) ◦ Advantages-low costs, weather not a problem ◦ Disadvantages-lack of flexibility(limited to station stops)
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Water Transportation ◦ oldest method ◦ Internal Waterways (river, lake ports) ◦ Intracoastal Waterways (ports along east or west coast or from Atlantic to Pacific) ◦ International Waterways-almost all international shipments due to low cost ◦ Advantages-low cost ◦ Disadvantages-slow, off-loading, bad weather
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Pipelines Owned by company using them Transport oil & natural gas Carry same amount of ton-miles as trucking Advantages- dependable Disadvantage-high cost to construct, breakage
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Air Transportation Used for high-value, low-weight items Perishable items (flowers) Advantages-speed, reduces storage costs Disadvantages-high cost, bad weather, breakdowns
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US Postal Service-parcel post-packages weighing 16 ounces or less Express carriers-door-to-door delivery, rates based on speed, weight, & distance Bus Package companies-less than 100 lbs., must be on scheduled route Freight Forwarders-combine shipments, use all methods, can obtain lower rates
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Chapter 24 and 25 Part IV
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Inventory=amount of goods stored Storage(holding goods till they are sold) adds time and place utility to goods Costs involve space, equipment, and personnel Also the cost of money tied up in inventory
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Production has outpaced consumption Product is only available during certain times of the year (agricultural) Items bought in quantity to get discount Stored in convenient locations to get faster delivery to customers
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Private warehouses(owned by business) ◦ designed to meet needs of owner, often house offices too Public warehouse(any business that will pay) ◦ rent space and provide services(shipment consolidation, barcode labeling, receiving) Distribution Center(designed to speed delivery of goods and min. storage costs) ◦ consolidate large orders and redistribute them as separate orders Bonded warehouses(store products that require the payment of federal tax) ◦ hold until taxes paid, business save by taking out goods only as they need them
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Commodity warehouses-agricultural products Bulk storage warehouses-bulk form such as chemicals Cold storage warehouses-store perishables such as fruits Household goods warehouses-personal property storage General merchandise warehouse-any item that doesn’t require special handling
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