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©2013 Cengage Learning. All Rights Reserved.
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13
Distribution and
Pricing:
Right Product, Right
Person, Right Place,
Right Price
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?
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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
3
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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
4
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copied
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Reducing Transactions Through
Marketing Intermediaries
5
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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
6
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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
7
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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
8
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Retailers: The Consumer Connection
 Store Retailers
 Nonstore Retailers




Online (e-tailing)
Direct Response
Direct Selling
Vending
 Multichannel retailing encourages
buying through different channels
9
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Distribution Strategy
INTENSIVE DISTRIBUTION
SELECTIVE DISTRIBUTION
EXCLUSIVE DISTRIBUTION
10
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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
11
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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?
12
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Elements of the Supply Chain
13
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Transportation Decisions
Marketers must consider what each
mode of transportation offers.
The right choice depends on the needs
of the business and the product.
14
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Modes of Transportation
15
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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
16
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Pricing Objective and Strategies
• Significant impact on company success
• Price is a tough variable
o Legal constraints
o Intermediary pricing
• Stable pricing is not the norm
o Prices must constantly be evaluated
17
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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.
18
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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
19
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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
©2013 Cengage Learning. All Rights Reserved. May not
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20
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Fixed Margin Pricing
• Cost-Based Pricing
Profit Margin –
the gap between
cost and the price
per product
• Demand-Based Pricing
21
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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 $100.00 is
much greater than the actual gap
22
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13
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?
23
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