Chapter 15 – Distributing Products
15-46
PPT 15-10
Selected Channels of Distribution
SELECTED CHANNELS of
DISTRIBUTION
15-10
LO 15-1
1. Different types of products will get to market via dif-
ferent channels of distribution.
2. Often small producers will bypass wholesalers and
retailers taking their products directly to the market-
place.
PPT 15-11
Why Marketing Needs Intermediaries
• Intermediaries perform marketing tasks faster
and cheaper than most manufacturers could
provide them.
WHY MARKETING NEEDS
INTERMEDIARIES
15-11
LO 15-1
• Marketing
intermediaries make
markets more
efficient by reducing
transactions and
contacts.
PPT 15-12
How Intermediaries Create Exchange
Efficiency
HOW INTERMEDIARIES CREATE
EXCHANGE EFFICIENCY
15-12
LO 15-1
1. This slide answers the question, “Why does market-
ing need intermediaries?”
2. Intermediaries do add cost, as many assume, but
they also create an efficient exchange of product.
Many students are surprised how intermediaries cre-
ate value for the consumer.
Chapter 15 – Distributing Products
15-47
PPT 15-13
Three Key Facts about Marketing
Intermediaries
THREE KEY FACTS ABOUT
MARKETING INTERMEDIARIES
15-13
LO 15-1
1) Marketing intermediaries can be eliminated but
their activities cannot.
2) Intermediaries perform marketing functions
faster and cheaper than other organizations can.
3) Marketing intermediaries add costs to products
but they are generally offset by the values they
provide.
PPT 15-14
Distribution’s Effect on Your Food
Dollar
DISTRIBUTION’S EFFECT on
YOUR FOOD DOLLAR
15-14
LO 15-1
PPT 15-15
Intermediaries Create Utility
INTERMEDIARIES
CREATE UTILITY
15-15
LO 15-2
• Utility — The want-satisfying ability, or value, that
organizations add to goods and services by making
them more useful or accessible to consumers.
• Six types of utilities:
1. Form
2. Time
3. Place
4. Possession
5. Information
6. Service
Chapter 15 – Distributing Products
15-48
PPT 15-16
How Marketers Use Utility
HOW MARKETERS USE UTILITY
15-16
LO 15-2
• Form Utility — Changes raw materials into useful
products; producers generally provide form utility.
– Starbucks makes coffee the way the customers want it.
– Dell assembles computers according to customer needs.
• Time Utility — Makes products available when
customers want them.
– Many Walgreens stores are open 24-hours a day.
– Colleges offer day and evening classes.
PPT 15-17
How Marketers Use Utility
HOW MARKETERS USE UTILITY
15-17
LO 15-2
• Place Utility — Adds value to products by placing
them where people want them.
– Banks place ATMs at convenient locations.
– 7-11 stores are found in easy-to-reach locations.
• Possession Utility — Helps transfer ownership from
one party to another, including providing credit.
– Pay for lunch at McDonalds with your Visa card.
– A savings and loan office offers loans to home/car buyers.
PPT 15-18
How Marketers Use Utility
HOW MARKETERS USE UTILITY
15-18
LO 15-2
• Information Utility — Opens two-way flows of
information between marketing participants.
– Websites offer advice to shoppers.
– Local government maps show tourist locations.
• Service Utility — Provides service during and after a
sale and teaches customers how to best use
products.
– Apple offers classes to help computer buyers.
– College placement offices help students find jobs.
Chapter 15 – Distributing Products
15-49
PPT 15-19
Test Prep
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.
1. A channel of distribution consists of agents, brokers,
wholesalers, and retailers that join together to
transport and store goods in their path or channel.
2. Marketing intermediaries perform tasks such as
transporting, storing, selling, advertising and rela-
tionship building. They are able to perform these
tasks faster and more cheaply than most manufactur-
ers creating a cost savings.
3. The reason that marketing intermediaries have not
been eliminated is they add value that greatly ex-
ceeds their cost.
4. There are six types of utility provided by intermedi-
aries:
• Form utility occurs when raw materials are
changed into useful products. For example, re-
tail butchers cut pork chops from a larger piece
of meat.
• Time utility is added to products by making
them available to consumers when they want
them. Convenience stores like 7-Eleven and
QuikTrip provide time utility since they are
open 24 hours a day.
• Place utility occurs when products are placed
where people want them. Again 7-Eleven and
QuikTrip provide place utility, since they are in
easy to reach locations.
• Possession utility is added by doing whatever is
necessary to transfer ownership from one party
to another. Activities associated with posses-
sion utility include delivery, installation, guar-
antees, and follow-up service.
• Information utility is created by opening two-
way flows of information between marketing
participants. Newspapers, websites, and sales-
people all provide information utility.
• Service utility is added by providing fast, friend-
ly service before and after the sale. This is a
critical area for most retailers, since without
service utility they would lose business to the
Internet or to catalogs.
Chapter 15 – Distributing Products
15-50
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.
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 selected
distribution functions.
About 80% of wholesalers are merchant wholesalers.
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.
Chapter 15 – Distributing Products
15-51
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.
Agents and brokers do not take title or possession of the
product but simply represent the interest of their clients.
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.
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.
Chapter 15 – Distributing Products
15-52
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
1. This slide presents the fastest growing retail catego-
ries.
2. Have students brainstorm reasons why they believe
these categories are growing at a fast rate.
3. Ask students: What value do consumers see in these
particular categories?
PPT 15-27
How to Prevent Coupon Fraud
HOW to PREVENT
COUPON FRAUD
15-27
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.
PhotoCredit:WalmartStores
LO 15-4
• Make sure your coupons
are unique.
• Have clear expiration
dates and rules.
• Train staff on how to spot
fraudulent coupons.
1. Retail fraud cost the industry approximately $10 bil-
lion a year.
2. In our current economic state, coupon fraud is be-
coming more and more prevalent.
3. This slide shows how businesses can protect them-
selves.
4. Ask students: Is it illegal to counterfeit coupons? Is it
ethical?
PPT 15-28
How to Prevent Return Policy Fraud
HOW to PREVENT
RETURN POLICY FRAUD
15-28
PhotoCredit:BillBallentyne
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.
1. Retail fraud cost the industry approximately $10 bil-
lion a year.
2. In our current economic state, more and more cus-
tomers are returning products after personal use.
3. This slide shows how businesses can protect them-
selves.
4. Ask students: Should retailers have more strict return
policies? What would you do if you owned a shop
and customers were returning used goods?
Chapter 15 – Distributing Products
15-53
PPT 15-29
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
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.
The retail strategy employed often depends on the product
one is selling.
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
Ralph Lauren Polo shirts—selective strategy
Diet Pepsi—intensive strategy
Rolls-Royce automobiles—exclusive strategy
Calloway golf clubs—selective strategy
Snickers candy bars—intensive strategy
Steinway pianos—exclusive strategy
Chapter 15 – Distributing Products
15-54
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?
1. Rack jobbers furnish racks full of merchandise like
toys, health and beauty aids to retailers. They display
the items and sell them on consignment, keeping title
to the goods until they are sold. Drop shippers solicit
orders and have the merchandise shipped directly
from producer to the buyer. They own the merchan-
dise but do not handle it, stock it or deliver it.
2. Intensive distribution includes convenience items
such as gum, magazines, candy and cigarettes. Selec-
tive distribution includes items such as appliances,
furniture, and clothing. Exclusive distribution in-
cludes specialty products such as fly-fishing gear or
equipment for snow skiing.
PPT 15-33
Forms of Non-Store 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.
In many countries vending machines, kiosks and carts are
more popular than in the United States. The Japanese Vend-
ing Machine Manufacturers Association estimates there is
one vending machine for every 23 people, selling everything
from soft drinks to umbrellas. You can even purchase gold
from vending machines in Abu Dhabi!
PPT 15-34
Forms of Non-Store 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.
Chapter 15 – Distributing Products
15-55
PPT 15-35
What Online Stores 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
1. Online retailing is relatively new and is evolving to
be more customer friendly.
2. This slide gives students an idea of the important fea-
tures on e-commerce web sites.
3. The lack of these features often causes people to shy
away from making purchases online.
4. Ask the students: Do you have hesitations about
shopping online? Why or why not?
PPT 15-36
Forms of Non-Store 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.
PPT 15-37
The Four Systems of Channel
Relationships
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
Chapter 15 – Distributing Products
15-56
PPT 15-38
Corporate Distribution Systems
CORPORATE DISTRIBUTION
SYSTEMS
15-38
PhotoCredit:DougWilson
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
PPT 15-40
Administered Distribution Systems
ADIMINISTERED DISTRIBUTION
SYSTEMS
15-40
PhotoCredit:StephenBoisvert
LO 15-6
• Administered Distribution Systems —
Exist when producers manage all the marketing
functions at the retail level.
• Examples:
– Kraft
– Ralph Lauren
Chapter 15 – Distributing Products
15-57
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
The SUPPLY CHAIN
15-42
LO 15-6
1. Supply chain management is a key to effective dis-
tribution in the 21st century.
2. This slide illustrates to students how supply chains
are structured and implemented in the market.
PPT 15-43
Weak Links Can Break a Chain
WEAK LINKS CAN BREAK a CHAIN
15-43
• When nothing goes wrong, supply chains
can be a smashing success.
• But, natural disasters can wreak havoc
and cause billions of dollars in damage.
• Managing the integrity of products
throughout the whole chain is difficult too
• These weak links could cause a chain to
break.
Chapter 15 – Distributing Products
15-58
PPT 15-44
Using Logistics
• Logistics — The planning, implementing and
controlling of the physical flow of material, final goods
and related information from points of origin to points
of consumption.
USING LOGISTICS
15-44
LO 15-7
• Firms outsource to
others specializing in
trade compliance to
determine what is
needed to market
products to global
customers.
PPT 15-45
Logistics Applications
• Inbound Logistics — Brings raw materials,
packaging, other goods and services and information
from suppliers to producers.
LOGISTICS APPLICATIONS
15-45
LO 15-7
• Materials Handling —
Movement of goods
within a warehouse,
from warehouse to the
factory floor and from
the factory floor to
workstations.
PPT 15-46
Logistics Applications
LOGISTICS APPLICATIONS
15-46
LO 15-7
• Outbound Logistics — Manages the flow of
finished products and information to business buyers
and consumers.
• Reverse Logistics — Brings goods back to the
manufacturer because of defects or for recycling.
Chapter 15 – Distributing Products
15-59
PPT 15-47
Comparing Transportation Modes
COMPARING
TRANSPORTATION MODES
Mode Cost Speed Dependability Flexibility Frequency Reach
Rail Med. Slow Medium High Low High
Trucks High Fast High Medium High Highest
Pipeline Low Medium Highest Lowest Highest Lowest
Ships Lowest Slowest Lowest Highest Lowest Low
Air Highest Fastest Low Low Medium Medium
15-47
LO 15-7
PPT 15-48
Logistics Specialists
• Freight Forwarder — Puts many small shipments
together to create a single large shipment that can be
transported cost-effectively by truck or train.
LOGISTICS SPECIALISTS
15-48
LO 15-7
• Intermodal Shipping —
Uses multiple modes of
transportation to complete a
single long-distance
movement of freight.
PPT 15-49
Types of Intermodal Shipping
TYPES of
INTERMODAL SHIPPING
15-49
LO 15-7
• Piggybacking: Truck
trailers placed on
trains
• Fishybacking: Truck
trailers placed on
ships
• Birdybacking: Truck
trailers placed on
planes
A truck driver from North Carolina, Malcolm McLean, in-
vented container shipping in 1956.
Chapter 15 – Distributing Products
15-60
PPT 15-50
Get Your Product There
GET YOUR PRODUCT THERE
Most Popular Modes of Freight Transport
Source: U.S. Freight Transportation Forecast. 15-50
Method % of Distributors
Trucks 69%
Trains 15%
Pipelines 10%
Ships 6%
Air Under 1%
LO 15-7
1. Not only must a manufacturer produce a product,
they then must figure out the best way to ship the
product.
2. This slide gives students insight into the most popu-
lar methods of freight transportation.
3. To make sure students understand this slide, discuss
with the class the advantages and disadvantages of
each method of transportation.
PPT 15-51
Storage Warehouses
• Storage warehouses hold products for a relatively
long period of time.
STORAGE WAREHOUSES
15-51
LO 15-7
• Distribution warehouses are
used to gather and
redistribute products such as:
– Beer and soft drinks
– Package deliveries
Seasonal items, like snow shovels and lawnmowers, are often
held in storage warehouses.