BUSN 3rd kelly mcgowen chapter13

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BUSN

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing:
Right Product, Right Person,
Right Place, Right Price

• What is distribution and the various channels of
distribution?
• What are the various physical distribution options?
• What are in-store and nonstore retail strategies and
trends?
• What are the key factors in physical distribution?
• What are core pricing objectives and strategies?
• What are the basics of pricing practice including
customer perception?

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

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

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Distribution: Channel Intermediaries

Channel Intermediaries – informally called middlemen.
They facilitate the movement of products from the
producer to the consumer.

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

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
BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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BUSN

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Reducing Transactions Through Marketing
Intermediaries

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

The Members of the Channel:
Retailers versus Wholesalers

Retailers – the
distributors that sell
products directly to

the ultimate users

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Wholesalers –
distributors that buy
products from producers
and sell them to other
businesses or
nonfinal users

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Wholesalers: Sorting out the Options

Merchant Wholesalers
• Full-service
• Limited Service
 Drop Shippers
 Cash and Carry
 Truck Jobbers

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Retailers: The Consumer Connection

• Store Retailers
• Nonstore Retailers
 Online
 Direct Response
 Direct Selling
 Vending

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Store

BUSN

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Multichannel Retailing

Retailers are
encouraging
consumers to buy
through multiple
channels

Online

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Store Retailers

Category Killer
Convenience Store
Department Store
Discount Store
Outlet Store

Home Depot, Best Buy, Staples
7-eleven, AM/PM markets
Nordstrom, Neiman Marcus, JCPenny
Target, Walmart, Kmart
Nike, Gap, Gucci, Versace

Specialty Store

Barnes & Noble, Victoria’s Secret, Hot Topic

Supermarket

Kroger, Safeway, Albertson’s, Whole Foods

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Distribution Strategy

INTENSIVE DISTRIBUTION

SELECTIVE DISTRIBUTION

EXCLUSIVE DISTRIBUTION

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Without a Map:
Your Shaving Cream May be Spying on You!

The next time you walk out of your local drug store, radio frequency
(RFID) tags may help a high-tech billboard to be exposed
specifically to YOU.
• The chips emit radio frequency waves that can
identify the location of any product
• The tags have been used for supply chain
management
• Many retailers are now mandating their use
• The benefits are huge but consumers may feel
the benefits are intrusive
BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Physical Distribution:
Planes, Trains, and Much, Much More…

Determining the best distribution channels for your
product is only half the distribution strategy.
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?
BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Elements of the Supply Chain



Supply chain management can
be increasingly complex



Coordination can be a challenge



Gap contracts with more than
3,000 factories in 50 countries

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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BUSN

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Elements of the Supply Chain

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Transportation Decisions

Marketers must consider what each mode of
transportation offers

The right choice depends on the needs of the
business and the product

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Modes of Transportation

Source: Table 1-46b: U.S. Ton-Miles of Freight (BTS Special Tabulation), October 10, 2008, Bureau of Transportation Statistics website,
accessed March 13, 2009

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Proactive Supply Chain Management

• Supply chain management can build a
competitive advantage
• Supply chain management is complex
• Many firms outsource their supply chain
activities
 Firms like UPS have been successful in
supply chain management

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Pricing Objective and Strategies:
A High Stakes Game

• Pricing plays a key role in the
demand for products
• Price is a tough variable
o Legal constraints
o Intermediary pricing
• Stable pricing is not the norm
o Prices must constantly be
evaluated
BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Pricing Objective and Strategies

Building Profitability
• Matching the
Competition
• Creating Prestige
• Skimming Pricing

Boosting Volume
• Penetration Pricing
• Every-day-low
Pricing
• High/Low Pricing
• Loss Leader Pricing

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Oops: “Slippery Finger” Pricing Goofs

• Free flights from Los Angeles to Fiji.
• Round-trip tickets from San Jose, California, to
Paris for $27.98.
• $1,049 televisions wrongly listed for $99.99 on
Amazon.
• $588 Hitachi monitors mistakenly priced at $164.
• $379 Axim X3i PDAs wrongly priced at $79 on
Dell’s site.

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Matching Competiton & 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

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Pricing in Practice: A Real World Approach

Breakeven Point (BP) =
Total fixed cost (FC)
Price/Unit (P) – Variable cost/unit (VC)

Breakeven analysis – the process of determining the number of
units that must be sold to cover costs.

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Applying Breakeven Analysis

Businesses make decisions to adjust the product
price and/or costs.
• Raise prices
• Decrease variable costs
• Decrease fixed costs

BUSN

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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