business ch. 13

Distribution strategy

a plan for delivering the right product to the right person at the right place at the right time

Channel of distribution

the network of organizations and processes that links procedures to consumers

Physical distribution

the actual, physical movement of products along the distribution pathway

Direct channel

a distribution process that links the producer and the customer with no intermediaries

Channel intermediaries

distribution organizations - informally called "middlemen: - that facilitate the movement of products from the producer to the consumer

Distributors add

value - additional benefits - to products

One core role of distributors is to

reduce the number of transactions - and the associated costs - for goods to flow from procedures to consumers

ways that distributors add value, or utility

form, time, place, ownership, information, and service


distributors that sell products directly to the ultimate users, typically in small quantities, that are stored and merchandized on the premises


distributors that buy products from producers from procedures and sell them to other businesses or nonfinal users such as hospitals, nonprofits, and the government

Independent wholesaling businesses

independent distributors that buy products from a range of different businesses and sell those products to a range of different customers

Merchant wholesalers

independent distributors who take legal possessions, or title, of the goods they distribute


independent distributors who do not take title of the goods they distribute (even though they may take physical possession on a temporary basis before distribution)

Multichannel retailing

providing multiple distribution channels for consumers to buy a product

key strategic options

Intensive distribution, Selective distribution, Exclusive distribution

Wheel of retailing

a classic distribution theory that suggests that retail firms and retail categories become more upscale as they go through their life cycles

Supply chain

all organizations, processes, and activities involved in the flow of goods from the raw materials to the final consumer

Supply chain management (SCM)

planning and coordinating the movement of products along the supply chain, from the raw materials to the final consumers


a subset of supply chain management that focuses largely on the tactics involved in moving products along the supply chain

Key management decisions

Warehousing, Materials handling, Inventory control, Order processing, Customer service, Transportation, security

Modes of transportation

the various transportation options - such as planes, trains, and railroads - for moving products through the supply chain

Penetration pricing

a new product pricing strategy that aims to capture as much of the market as possible through rock-bottom prices

Everyday-low pricing (EDLP)

long-term discount pricing, designed to achieve profitability through high sales volume

High/low pricing

a pricing strategy designed to drive traffic to retail stores by special sales on a limited number of products, and higher everyday prices on others

Loss-leader pricing

closely related to high/low pricing, loss-leader pricing means pricing a handful of items - or loss leaders - temporarily below cost to drive traffic

Skimming pricing

a new product pricing strategy that aims to maximize profitability by offering new products at a premium price

Breakeven analysis

the process of determining the number of units a firm must sell to cover all costs

Profit margin

the gap between the cost and the price of an item on a per-product basis

Two key ways to determine margins

Cost-based pricing, Demand-based pricing

Odd pricing

the practice of ending prices in numbers below even dollars and cents in order to create a perception of greater 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

breakeven point (BP) =

[total fixed cost (FC)] / [price/unit (P) - variable cost/unit (VC)]

a producer sells products directly to consumers through a direct channel


physical distribution occurs as products actually travel along the distribution pathway


providing credit, cashing checks, and delivering products are all examples of how distributors provide ownership utility


agents and brokers are the most common type of merchant wholesaler


examples of the services provided by full-service merchant wholesalers include extension of credit, promotional assistance, product repairs, and warehousing


many medium and high-priced products use a selective distribution strategy


convenience stores offer multiple locations with a wide variety of merchandise and superior service


outlet stores are owned by producers who sell directly to final customers, and may offer discontinued or flawed goods


a firm's distribution strategy is concerned with two key elements

the channel of distribution and physical distribution

utility adds value by making it easier for customers to actually possess the goods and services that they purchase