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Chapter 15 - Distributing Products
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lecture link 15-4
WHAT INTERMEDIARIES TO USE WHEN GOING INTERNATIONAL
It’s one thing to decide to sell a product internationally; it’s something else again to try to imple-
ment such a program. How are you going to reach the consumer? You could, of course, send sales repre-
sentatives to contact people directly, but that would be costly and risky. How can you get your product
into foreign markets at a minimum cost and still have wide distribution?
USE IMPORTERS AND EXPORTERS. Importers and exporters take all the risks of business
CALL ON DISTRIBUTORS DIRECTLY. You can bypass exporters and brokers and call on
SELL DIRECT. The most costly and risky way to sell internationally is to set up your own dis-
lecture link 15-5
THE MARKETING FIRM STOCKING AMERICA’S GROCERIES
Given the immense size of many supermarkets, the complicated process that brings food to store
shelves may be lost on many consumers. After all, retailers have a nearly limitless choice of items and
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Of course, Acosta’s services expand beyond securing Cap’n Crunch a spot on the shelf befitting
his naval rank. It also spearheads manufacturer-funded promotions and sales scheduled for busy shopping
lecture link 15-6
HOW RETAILERS COMPETE
PRICE COMPETITION
Discount stores such as Wal-Mart, Target, Kmart, and T.J.Maxx/Marshalls—not to mention all
the various Internet discount sites—succeed by offering low prices. It’s hard to compete with these price
SERVICE COMPETITION
A second competitive strategy for retailers is service. Retail service involves putting the customer
first. This requires all frontline people to be courteous and accommodating to customers. Retail service
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LOCATION COMPETITION
Many services, especially convenience services like banks and dry cleaners, compete effectively
by having good locations. That’s why you find automated teller machines in convenient places such as
SELECTION COMPETITION
A fourth competitive strategy for retailers is selection. Selection is the offering of a wide variety
of items in the same product category. Category killer stores offer wide selection at competitive prices.
They are called category killers because they are so competitive that they usually overpower smaller
Internet stores can offer products from dozens of suppliers and offer almost unlimited selection
(e.g., Amazon.com). Small retailers sometimes compete by offering wide selection within one or a few
categories of items. Thus, you have successful small stores that sell nothing but coffee beans or party
ENTERTAINMENT COMPETITION
The Internet may be a convenient place to shop, but it can’t possibly be as much fun as a brick-
and-mortar store designed to provide entertainment as well as a place to buy things. When you approach a
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lecture link 15-7
PARTY ON
The days of the neighborhood Tupperware parties are over, but other types of home selling are
making a rebound. Twenty years ago, most home-party purchasers were friends of the hostess and could
She is banking on American’s increasing obsession with their pets, which is fueling the 6% annu-
al growth in the $34 billion pet-care industry. “Pets are the new kids,” she says, noting that young couples
lecture link 15-8
WHEN THE SUPPLY CHAIN BREAKS
The supply chain is only as strong as its weakest link. The unexpected closure of Clark Foam in
December 2005 clearly illustrates this. Clark, a Laguna Niguel, California, company, mass-produced
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Clark finally shut down the facility of his own volition, rather than face the legal fallout. The me-
dia attention on Clark’s closure focused light on this and other environmental problems associated with
But Clark’s closure may turn out to be the best thing to happen to the sport. Surfers have been
forced to find a new ride. A handful of small companies had already been working, some for up to 20
years, on cleaner surfboard-making technologies that would cost the same as the dirtier ones. But they
Today, Homeblown has gained a toehold in the U.S. market—though it still produces only 75 to
100 foam blanks a day, compared to Clark’s 1,000 a day production. It is ramping up its efforts to bring
more sustainable surfboards into the market. The end of Clark’s monopoly in surfboard blanks has paved
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lecture link 15-9
THE HIGH-TECH FUTURE OF FREIGHT
The freight railroad system is one of the country’s earliest network businesses. And unlike so
many other older national networks, such as the U.S. Post Office, that have had trouble adapting to the
modern age, railroads continue to play a vital role in the shipping industry. In spite of its longevity the
Indeed, the soaring costs associated with upgrading have kept railway companies reluctant to
change their entrenched ways on a wide scale. For example, a new type of electronically controlled brakes
improves vastly on the air-based brakes used on locomotives for ages. Though the electronic system en-
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critical
thinking exercises
Name: ___________________________
Date: ___________________________
critical thinking exercise 15-1
TOP 100 RETAILERS
1. Which retailer has the highest revenue for the current year? _____________________________
a. Where is the headquarters?
b. Give the current year’s revenue figure.
c. Is this an increase or decrease from the previous year? By what percentage?
d. Give the current year’s earnings.
e. How many stores does the company have?
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critical thinking exercise 15-1 (continued)
2. Choose two other retail companies that you are familiar with and answer the same questions.
COMPANY 1: ______________________________________________
a. Where is the headquarters?
f. Why did you choose this company?
COMPANY 2: ______________________________________________
a. Where is the headquarters?
b. Give the current year’s revenue figure.
c. Is this an increase or decrease from the previous year? By what percentage?
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Name: ___________________________
Date: ___________________________
critical thinking exercise 15-2
FORMS OF UTILITY
The text discusses five types of utility created by marketing. For one of the companies below, de-
scribe how it creates each type of utility with its goods or services.
Name: ___________________________
Date: ___________________________
critical thinking exercise 15-3
DISTRIBUTION CHANNELS
Let’s find out about the kinds of distribution channels that manufacturers in your area use. Call or
visit five manufacturers in your area and ask them the following questions. Record your answers on the
chart below.
1. What is your main product?
2. How do you distribute your product to consumers? Do you use a direct channel (straight from you
to consumers) or an indirect channel (through intermediaries)?
3. If you use wholesalers, what kind?
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MANUFACTURER
MAIN
PRODUCT
DISTRIBUTION CHANNEL
DIRECT OR INDIRECT
WHOLESALERS
Name: ___________________________
Date: ___________________________
critical thinking exercise 15-4
RETAIL DISTRIBUTION STRATEGY
The text discusses three categories of retail distribution—intensive distribution, selective distribu-
tion, and exclusive distribution. For each of the categories, summarize the distribution strategy and give
three examples of each that are not included in the text discussion.
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INTENSIVE DISTRIBUTION
Summarize the strategy:
Example 1: _____________________________________
Example 2: _____________________________________
Example 3: _____________________________________
SELECTIVE DISTRIBUTION
Summarize the strategy:
Example 1: _____________________________________
Example 2: _____________________________________
Example 3: _____________________________________
EXCLUSIVE DISTRIBUTION
Summarize the strategy:
Example 1: _____________________________________
Example 2: _____________________________________
Example 3: _____________________________________
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Name: ___________________________
Date: ___________________________
critical thinking exercise 15-5
CAREERS IN DISTRIBUTION
What would a career in distribution involve? What are the educational requirements? The future
job prospects?
1. Describe the nature of the work for this career.
2. What are the working conditions?
3. What training and qualifications are needed?
4. How many jobs are available in this career area?
5. What is the job outlook for the next decade?
6. What are the median annual earnings for this career?
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Name: ___________________________
Date: ___________________________
critical thinking exercise 15-6
INTERNET AUCTIONS: BYPASSING THE RETAILER
1. Open two listings for fax machines: the least expensive offered and the most expensive. Choose
items that have approximately 24 hours before expiration. Write down the description and current
price bid. Why do you think sellers of the lower-priced item are asking such a low price?
2. Check the eBay site after 8 to 24 hours. How have the bids changed?
3. What type of payment is accepted for each of these items? How do these payment types differ
from payment options at brick-and-mortar stores? Why?
4. What type of business would be able to use an online auction site effectively to sell its products?
5. eBay also offers an option for businesses to establish nonauction “eBay stores” to sell products
through the website. What would be the advantages to a small business of establishing such a
store rather than a brick-and-mortar store? Would there be any disadvantages? Explain.
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bonus
cases
bonus case 15-1
UNITED STATIONERS: OFFICE-SUPPLY INTERMEDIARY
The Internet has created rapid change in the sale and distribution of most goods. Perhaps nowhere
is such change more apparent than in the office-supply market. By the early 1990s, half of the smaller
stationers in the United States had gone out of business—about 6,000 stores. Staples, Office Depot, and
If Business as Usual places an order to United Stationers by 4 p.m., the store gets the supplies by
the next day. Even better, Business as Usual can have United Stationers send the supplies directly to its
customers. By providing a large inventory and speedy delivery low prices, United Stationers has made it
possible for small companies to survive. It was Randall Larrimore who helped make all this possible.
Staples and Office Depot also use the services of United Stationers. These superstores order in
such large volumes that they buy most of their products directly from manufacturers. However, there are
many products that are not very popular but that superstores must carry in order to become one-stop
discussion questions for bonus case 15-1
1. What does this case teach you about the need for constant change in marketing?
2. Does this case indicate that intermediaries are becoming less or more important to marketers?
15-75
3. What do you see as the future of online marketing in general and B2B online marketing in partic-
ular?
notes on discussion questions for bonus case 15-1
1. What does this case teach you about the need for constant change in marketing?
2. Does this case indicate that intermediaries are becoming less or more important to marketers?
3. What do you see as the future of online marketing in general and B2B online marketing in partic-
ular?
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bonus case 15-2
STARTING AN ONLINE BUSINESS
When Joseph Cohen’s parents left for a weeklong trip out of town, the 14-year-old Brooklyn
didn’t plan a big parents-free party. He called a cab, collected the money he had saved up working for his
Despite his entrepreneurial ability, Joseph is still a teenager and still has to attend school. He runs
his online enterprise out of his office/warehouse after school. He does admit to taking “sick days” from
school when business is heavy.
He has made some mistakes, however. The summer he turned 15, Joseph took his eye off the
business, doing what kids do during the summer. He went to travel camp, visiting a different North Amer-
ican city each week. At the time, Polsteins was selling a 50-foot rolled flat hose for $20. While he was
away for six weeks, thousands of orders poured in and were automatically put on back order.
When he returned from camp, Joseph rushed out the $30,000 worth of back orders, only to dis-
cover that the hoses were defective. Once they were returned, he had to repay customers, while applying
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1. If you were to start an online business, what kind of products would you be interested in selling?
What would you anticipate to be your biggest problem?
2. What do you see as the advantages of starting an online store versus a brick-and-mortar store?
3. What are the advantages and disadvantages of starting an online business while you are still in
school?
1. If you were to start an online business, what kind of products would you be interested in selling?
What would you anticipate to be your biggest problem?
2. What do you see as the advantages of starting an online store versus a brick-and-mortar store?
3. What are the advantages and disadvantages of starting an online business while you are still in
school?
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bonus case 15-3
MULTILEVEL MARKETING
Multilevel marketing often doesn’t get the respect it deserves in marketing literature. When multi-
1. Amway and others have been successful in Japan. To what other countries could you lead such
companies so that you could become a top earner?
2. What will happen as multilevel marketing distributors begin selling and recruiting others using
the latest in technology such as the Internet?
3. Why do you suppose multilevel marketing hasn’t received the same acceptance as other retail in-
novations such as catalog sales? What could the companies do to improve their image?
4. If multilevel marketing works so well for beauty and health care products, why not use the same
concept to sell other products?
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1. Amway and others have been successful in Japan. To what other countries could you lead such
companies so that you could become a top earner?
2. What will happen as multilevel marketing distributors begin selling and recruiting others using
the latest in technology such as the Internet?
3. Why do you suppose multilevel marketing hasn’t received the same acceptance as other retail in-
novations such as catalog sales? What could the companies do to improve their image?
4. If multilevel marketing works so well for beauty and health care products, why not use the same
concept to sell other products?
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endnotes
Company, May 2006.
iv Sources: Associated Press, The Clarion-Ledger, December 10, 2005; Robert Whitfield, “Clark Foam Surfboard
Blanks on eBay,” The Orange County Register, December 15, 2005; Nancy Luna, “Former Clark Foam Employees
Say They’ve Formed a New Foam-Making Factory,” The Orange County Register, March 4, 2005; Nancy Luna,
“Buyers Flood Clark Foam Auction,” The Orange County Register, March 9, 2006; Coco Masters, “Surfing’s New
Wave,” Time, July 17, 2006.
v Source: Daniel Machalaba, “The Little Engine Really Could,” The Wall Street Journal, May 23, 2011.
115–124.
