Chapter 15 – Distributing Products
15-16
test
prep
PPT 15-19
Progress Assessment
TEST PREP
15-19
• What is a channel of distribution and what
intermediaries participate in it?
• Why do we need intermediaries? Illustrate how
intermediaries create exchange efficiency.
• How would you defend intermediaries to
someone who said getting rid of them would save
consumers millions of dollars?
• Give examples of the utilities intermediaries
create and how they provide them.
PPT 15-20
Wholesale Intermediaries
WHOLESALE INTERMEDIARIES
15-20
LO 15-3
• Wholesalers normally make B2B sales, however,
stores like Staples and Costco also have retail
functions.
– Retail sales are sales of goods and services to customers
for their own use.
– Wholesale sales are sales of goods and services to other
businesses for use in the business or resale.
• Consumers are more familiar with retailers than
wholesalers.
lecture enhancer 15-3
WHAT INTERMEDIARIES TO USE
WHEN GOING INTERNATIONAL
What intermediaries are needed to reach the international cus-
tomer? (See the complete lecture enhancer on page 15.63 of
this manual.)
critical thinking
exercise 15-3
DISTRIBUTION CHANNELS
This exercise asks students to identify the channels of distribu-
tion of manufacturers in their areas. (See the complete exer-
cise on page 15.72 of this manual.)
PPT 15-21
Types of Wholesale Intermediaries
TYPES of WHOLESALE
INTERMEDIARIES
15-21
LO 15-3
• Merchant Wholesalers — Independently owned
firms that take title to the goods they handle. There
are two types:
1. Full-service wholesalers perform all distribution functions.
2. Limited-function wholesalers perform only se lected
distribution functions.
Chapter 15 – Distributing Products
15-17
only selected functions, but try to do them espe-
cially well.
3. RACK JOBBERS are wholesalers that furnish
racks or shelves full of merchandise to retailers,
display products, and sell on consignment.
4. CASH-AND-CARRY WHOLESALERS are
wholesalers that serve mostly smaller retailers
with a limited assortment of products.
5. DROP SHIPPERS are wholesalers that solicit
orders from retailers and other wholesalers and
have the merchandise shipped directly from a
producer to a buyer.
C. AGENTS AND BROKERS
1. Agents and brokers bring buyers and sellers to-
gether and help NEGOTIATE AN EXCHANGE,
but they never own the products.
a. They do not usually carry inventory.
b. Agents and brokers earn commissions or
fees based on a percentage of the sales
revenues.
c. AGENTS maintain long-term relationships
with the people they represent.
d. BROKERS are usually hired on a temporary
basis.
2. Agents who represent producers are known as
MANUFACTURER’S AGENTS or SALES
AGENTS.
a. MANUFACTURER’S AGENTS may repre-
Chapter 15 – Distributing Products
15-18
TEXT FIGURE 15.4
A Full-Service Wholesaler
This text figure shows the functions performed by a full-
service wholesaler.
PPT 15-22
Types of Limited-Function
Wholesalers
TYPES of LIMITED-FUNCTION
WHOLESALERS
15-22
LO 15-3
• Rack Jobbers — Furnish racks or shelves of
merchandise such as music and magazines for
retailers for display and sell them on consignment.
• Cash-and-Carry Wholesalers — Serve mostly
smaller retailers with a limited assortment of
products.
• Drop Shippers — Take orders from retailers and
other wholesalers and have the merchandise shipped
from producer to buyer.
PPT 15-23
Roles of Agents and Brokers
• Agents generally maintain long-term relationships
with the clients they represent.
ROLES of AGENTS
and BROKERS
15-23
LO 15-3
– Manufacturer
’
s agents
represent several
manufacturers in a specific
territory.
– Sales agents represent a
single client in a larger territory.
• Brokers usually represent
clients on a temporary
basis.
lecture enhancer 15-4
THE MARKETING FIRM STOCKING
AMERICA’S GROCERIES
Jacksonville-based Acosta is responsible for getting big retail-
ers to stock their clients’ products. (See the complete lecture
enhancer on page 15.64 of this manual.)
Chapter 15 – Distributing Products
15-19
sent several manufacturers in a specific ter-
ritory.
b. SALES AGENTS represent a single produc-
er in a larger territory.
3. Brokers have no continuous relationship with the
buyer or the seller.
learning objective 4
Compare the distribution strategies retailers use.
IV. RETAIL INTERMEDIARIES
A. A RETAILER is an intermediary that sells to con-
sumers.
1. The U.S. has about 2.3 million retail stores, not
including websites.
2. About 11 million people work for retail organiza-
tions.
B. RETAIL DISTRIBUTION STRATEGY
1. Different products call for different retail distribu-
tion strategies.
2. INTENSIVE DISTRIBUTION puts products into
as many retail outlets as possible; includes
vending machines (used for convenience goods
such as candy and cigarettes).
3. SELECTIVE DISTRIBUTION sends products to
only a preferred group of retailers in an area
(used for shopping goods such as appliances or
furniture).
4. EXCLUSIVE DISTRIBUTION is distribution that
sends products to only one retail outlet in a giv-
en geographic area (used for specialty goods
such as luxury automobiles).
Chapter 15 – Distributing Products
15-20
PPT 15-24
Retailing in the U.S.
• There are over 2 million retailers in the U.S., not
including websites.
RETAILING in the U.S.
15-24
LO 15-4
• Retailers in the U.S.
employ about 5 million
people and operate
under many different
structures.
ADAPTING TO
change
PPT 15-25
Truckin’ On with
Social Media
TRUCKIN’ ON
with SOCIAL MEDIA
15-25
• Today, over 3 million trucks cruise around the U.S.
with lots of specialty items.
• The food truck craze hit around the same time as
Twitter and Facebook blew up.
• Social media sites and food truck-specific apps
help link up hungry mouths with the nearest
trucks.
PPT 15-26
Fastest-Growing Retail Categories
FASTEST GROWING RETAIL
CATEGORIES
15-26
LO 15-4
• Video games
• Sports and fitness
• Home, garden, and
furniture
• Event tickets
• Consumer electronics
PPT 15-27
How to Prevent Coupon Fraud
HOW to PREVENT
COUPON FRAUD
15-27
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.
PhotoCredit:WalmartStores
LO 15-4
• Make sure your coupons
are unique.
• Have clear expiration
dates and rules.
• Train staff on how to spot
fraudulent coupons.
PPT 15-28
How to Prevent Return Policy
Fraud
HOW to PREVENT
RETURN POLICY FRAUD
15-28
PhotoCredit:BillBallentyne
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.
LO 15-4
• Always require receipts for
returns.
• Shred receipts so they cannot be
used to return stolen goods.
• Check for tampering.
• Have customers fill out a return
form and check details.
lecture enhancer 15-5
HOW RETAILERS COMPETE
Retailers compete for the consumer’s dollar in five major ways.
(See the complete lecture enhancer on page 15.64 of this manu-
al.)
PPT 15-29
Types of Retail Stores
TEXT FIGURE 15.5
Types of Retail Stores
TYPES of RETAIL STORES
Types Examples
Department Store Sears, JC Penney, Nordstom
Discount Store Wal-Mart, Target
Supermarket Safeway, Kroger, Albertson’s
Warehouse Club Costco, Sam’s Club
Convenience Store 7-Eleven
Category Killer Toys-R-Us, Bass Pro Shops, Office
Depot
Outlet Store Nordstrom Rack, TJ Maxx, Nike
Outlet
Specialty Store Jewelry store, shoe stores, bicycle
shops
15-29
LO 15-4
Chapter 15 – Distributing Products
15-21
learning objective 5
Explain the various kinds of nonstore retailing.
V. NONSTORE RETAILING
A. Nonstore retailing includes Internet retailing, tele-
marketing, vending machines, direct selling, and
so on.
B. ELECTRONIC RETAILING
1. ELECTRONIC RETAILING is selling goods and
services to ultimate consumers (e.g., you and
me) online.
2. ELECTRONIC RETAILING is a form of electron-
ic commerce that involves using social media
and user contributions to assist in the online
buying experience.
3. Attracting customers is only half the battle; the
other half is delivering the goods, providing ser-
vice, and keeping your customers.
4. Internet retailers have had difficulties with SER-
VICE AFTER THE SALE, such as handling
complaints and returns.
a. Most Internet retailers provide e-mail confir-
mation.
b. Some websites have live chat functions.
5. Old brick-and-mortar stores are going online;
these are sometimes called “BRICK-AND–
CLICK” STORES.
6. To be successful in the future, companies will
Chapter 15 – Distributing Products
15-22
PPT 15-30
Retail Distribution Strategies
RETAIL DISTRIBUTION
STRATEGIES
15-30
LO 15-4
• Intensive Distribution — Puts products into as
many retail outlets as possible.
• Selective Distribution — Uses only a preferred
group of the available retailers in an area.
• Exclusive Distribution — The use of only one
retail outlet in a given geographic area.
critical thinking
exercise 15-4
RETAIL DISTRIBUTION STRATEGY
This exercise asks students to give examples of each category
of distribution strategy. (See the complete exercise on page
15.73 of this manual.)
PPT 15-31
Pick a Strategy . . .
PICK a STRATEGY…
What’s the Correct Retail Strategy for These Products?
15-31
LO 15-4
• Ralph Lauren Polo Shirts
• Diet Pepsi
• Rolls Royce Automobiles
• Calloway Golf Clubs
• Snickers Candy Bars
• Steinway Pianos
test
prep
PPT 15-32
Test Prep
TEST PREP
15-32
• Describe the activities of rack jobbers and drop
shippers?
• What kinds of products would call for each of the
different distribution strategies: intensive,
selective, and exclusive?
PPT 15-33
Forms of Nonstore Retailing
• Electronic Retailing — Selling goods and services
to ultimate consumers online.
• Telemarketing — The sale of goods and services
via the telephone.
FORMS of NON-STORE
RETAILING
15-33
LO 15-5
• Vending machines dispense
convenience goods when
consumers deposit sufficient
money.
PPT 15-34
Forms of Nonstore Retailing
FORMS of NON-STORE
RETAILING
15-34
LO 15-5
• Social Commerce – A form of electronic commerce
that involves using social media, online media that
supports social interaction, and user contributions to
assist in the online buying and selling of products.
TEXT FIGURE 15.6
Types of Social Commerce
As these models of social commerce are tested and proven to
increase sales and customer satisfaction, more will likely be
introduced.
PPT 15-35
What Online Sites Need
WHAT ONLINE STORES NEED
Important Features on E-Commerce Web Sites
Source: GSI Commerce; Harris Interactive. 15-35
LO 15-5
• Convenient return
policies
• Established brands
• User reviews
• Professional site design
• Alternative payment
options
Chapter 15 – Distributing Products
15-23
need both a real store and an online presence.
7. Both traditional retailers and new Internet retail-
ers need to develop new distribution strategies
to satisfy Internet-savvy shoppers (example:
Sears learned to use a new kind of distribution).
C. TELEMARKETING
1. TELEMARKETING is the sale of goods and
services by telephone.
2. Many companies use telemarketing to supple-
ment in-store selling.
D. VENDING MACHINES, KIOSKS, AND CARTS
1. The benefit of vending machines is their CON-
VENIENT LOCATION.
2. CARTS and KIOSKS have lower costs than
stores, so they can offer lower prices.
3. Kiosks also serve as gateways to the Internet.
E. DIRECT SELLING
1. DIRECT SELLING is selling to consumers in
their homes or where they work.
2. Many companies are sponsoring parties at
workplaces and on weekends and evenings to
accommodate working adults.
F. MULTILEVEL MARKETING
1. Multilevel marketing salespeople work as inde-
pendent contractors.
a. They EARN COMMISSIONS on their own
sales and create commissions for the “uplin-
ers” who recruited them.
Chapter 15 – Distributing Products
15-24
lecture enhancer 15-6
MAKING VENDING MACHINES
SMARTER
The days of the old-fashioned candy and Coke in a vending
machine are over. (See the complete lecture enhancer on page
15.66 of this manual.)
PPT 15-36
Forms of Nonstore Retailing
FORMS of NON-STORE
RETAILING
15-36
LO 15-5
• Direct Selling — Selling goods
and services to customers in
their homes or workplaces.
• Multilevel marketing uses
salespeople who work as
independent contractors.
• Direct Marketing — Any
activity that directly links
manufacturers or intermediaries
with ultimate customers.
bonus case 15-1
MULTILEVEL MARKETING: SAFE
OR SCAM?
Multilevel marketing often gets a bad rap. But when multi-
level marketing companies succeed, their growth can be aston-
ishing. (See the complete case, discussion questions, and sug-
gested answers beginning on page 15.75 of this manual.)
Chapter 15 – Distributing Products
15-25
b. MLM salespeople also RECEIVE COMMIS-
SIONS from “downliners” whom they recruit
to sell.
2. The main attraction of multilevel marketing is the
LOW COST OF ENTRY.
3. Because of some unethical MLM schemes, po-
tential salespeople should carefully check out
the organization.
G. DIRECT MARKETING
1. DIRECT MARKETING is any activity that direct-
ly links manufacturers or intermediaries with the
ultimate consumer.
2. Direct retail marketing includes direct mail, cata-
log sales, telemarketing, and online market-
ing.
3. Examples are L.L. Bean, Lands’ End, Dell Com-
puters, and Coldwater Creek.
4. Direct marketing is MORE CONVENIENT FOR
CONSUMERS than going to stores.
5. Sellers can provide information on websites to
create INTERACTIVE EXCHANGES.
6. In order for consumers to receive the maximum
benefit from marketing intermediaries, THE
ORGANIZATIONS MUST WORK TOGETHER.
learning objective 6
Explain the various ways to build cooperation in channel systems.
Chapter 15 – Distributing Products
15-26
lecture enhancer 15-7
IMAGES TRUMP WORDS IN SOCIAL
MEDIA
Threadless employees work on small teams to create and pro-
mote products tailored to specific social media sites. (See the
complete lecture enhancer on page 15.67 of this manual.)
Chapter 15 – Distributing Products
15-27
VI. BUILDING COOPERATION IN CHANNEL SYS-
TEMS
A. Traditional retailers can stay competitive by making
the whole system more efficient and cost competi-
tive.
1. Manufacturers, wholesalers, and retailers must
work closely together to form a unified system.
2. One way is to link the firms together in a formal
relationship.
B. A CORPORATE DISTRIBUTION SYSTEM is a dis-
tribution system in which all the organizations in the
channel of distribution are owned by one firm (ex-
ample: Sherwin-Williams).
C. CONTRACTUAL DISTRIBUTION SYSTEM is a dis-
tribution system in which members are bound to co-
operate through contractual agreements.
1. In FRANCHISING SYSTEMS (such as McDon-
ald’s, KFC, Baskin-Robbins, and AAMCO), the
franchisee agrees to all of the rules, regulations,
and procedures of the franchisor.
2. In WHOLESALER-SPONSORED CHAINS (Ace
Hardware and IGA food stores), each store
agrees to use the same name, participate in
chain promotions, and cooperate even though
each store is independently owned.
3. A RETAIL COOPERATE (Associated Grocers)
resembles a wholesaler-sponsored chain except
the retailers initiate it.
Chapter 15 – Distributing Products
15-28
critical thinking
exercise 15-5
CAREERS IN DISTRIBUTION
This Internet exercise asks students to research a career in dis-
tribution. (See the complete exercise on page 15.74 of this
manual.)
PPT 15-37
The Four Systems of Channel Re-
lationships
The FOUR SYSTEMS of
CHANNEL RELATIONSHIPS
15-37
LO 15-6
1. Corporate Distribution Systems
2. Contractual Distribution Systems
3. Administered Distribution Systems
4. Supply Chains
PPT 15-38
Corporate Distribution Systems
CORPORATE DISTRIBUTION
SYSTEMS
15-38
PhotoCredit:DougWilson
LO 15-6
• Corporate Distribution Systems — Exist
when one firm owns all the organizations in a
channel of distribution.
• Examples:
– Goodyear
– Sherwin Williams
PPT 15-39
Contractual Distribution Systems
CONTRACTUAL DISTRIBUTION
SYSTEMS
15-39
LO 15-6
• Contractual Distribution Systems — Exist when
members are bound to cooperate through contractual
agreements.
• Forms of Contractual Systems:
– Franchise Systems: McDonald’s, Baskin-Robbins
– Wholesale-Sponsored Chains: IGA, Ace Hardware
– Retail Cooperatives: Associated Grocers, True Value
Chapter 15 – Distributing Products
15-29
D. ADMINISTERED DISTRIBUTION SYSTEM
1. Producers can manage all the marketing func-
tions themselves if they can’t get retailers to co-
operate.
2. An ADMINISTERED DISTRIBUTION SYSTEM
is distribution system in which producers man-
age all the marketing functions at the retail level.
3. Retailers cooperate with producer-managed sys-
tems because they get so much free help.
E. SUPPLY CHAINS
1. The SUPPLY CHAIN (or VALUE CHAIN) is the
sequence of linked activities that must be per-
formed by various organizations to move goods
from the sources or raw materials to ultimate
consumers.
2. The SUPPLY CHAIN is longer than the channel
of distribution.
3. SUPPLY-CHAIN MANAGEMENT is the process
of managing the movement of raw materials,
parts, work in progress, finished goods, and re-
lated information through all the organizations
involved in the supply chain; managing the re-
turn of such goods, if necessary; and recycling
material when appropriate.
4. The text uses the example of the Kia Sorento
model and its complex supply chain.
5. Computers make it possible to coordinate the
movement of goods and information to create
Chapter 15 – Distributing Products
15-30
PPT 15-40
Administered Distribution Systems
ADIMINISTERED DISTRIBUTION
SYSTEMS
15-40
PhotoCredit:StephenBoisvert
LO 15-6
• Administered Distribution Systems —
Exist when producers manage all the marketing
functions at the retail level.
• Examples:
– Kraft
– Ralph Lauren
PPT 15-41
Supply Chains
SUPPLY CHAINS
15-41
LO 15-6
• Supply Chain — All the linked activities various
organizations must perform to move goods and
services from the source of raw materials to ultimate
consumers.
• Supply Chain Management — The process of
managing the movement of raw materials, parts, work
in progress, finished goods, and related information
through all the organizations in the supply chain.
PPT 15-42
The Supply Chain
TEXT FIGURE 15.7
The Supply Chain
The SUPPLY CHAIN
15-42
LO 15-6