Ch13
Chapter 13: Distributing Products
Outline
Introduction
A. The Learning Goals of this chapter are to:
1. Explain the advantages and disadvantages of a direct channel of distribution, and identify factors that could determine the optimal channel of distribution.
2. Differentiate between types of market coverage.
3. Describe the various forms of transportation used to distribute products.
4. Explain how the distribution process can be accelerated.
5. Explain how retailers serve customers.
6. Explain how wholesalers can serve manufacturers and retailers.
7. Explain the strategy and potential benefits of vertical channel integration.
B. Chapter 13 examines the elements of a firm’s distribution strategy, including such considerations as the selection of the appropriate distribution channel, the determination of the degree of market coverage, and the selection of the best modes of transportation.
I. Channels of Distribution
A. A distribution channel is the path a good follows from the producer to the consumer.
B. When a producer deals directly with customers, without using intermediaries, the producer is using a direct channel of distribution.
1. Advantages of a direct channel include:
a. The producer receives the full difference between the manufacturer’s cost and the price charged to the customer.
b. The producer has full control over the price to be charged to the customer.
c. The producer avoids the markups charged by intermediaries, which increase the price of the product but do not add to the manufacturer’s revenue.
d. The producer obtains firsthand feedback from customers.
2. Disadvantages of a direct channel include:
a. The producer must perform all of the distribution functions itself, so it must hire more employees and use additional resources, which increase its costs.
b. The need to perform all of the distribution functions can cause the manufacturer to lose its focus on production.
c. A manufacturer that deals directly with final
Outline
Introduction
A. The Learning Goals of this chapter are to:
1. Explain the advantages and disadvantages of a direct channel of distribution, and identify factors that could determine the optimal channel of distribution.
2. Differentiate between types of market coverage.
3. Describe the various forms of transportation used to distribute products.
4. Explain how the distribution process can be accelerated.
5. Explain how retailers serve customers.
6. Explain how wholesalers can serve manufacturers and retailers.
7. Explain the strategy and potential benefits of vertical channel integration.
B. Chapter 13 examines the elements of a firm’s distribution strategy, including such considerations as the selection of the appropriate distribution channel, the determination of the degree of market coverage, and the selection of the best modes of transportation.
I. Channels of Distribution
A. A distribution channel is the path a good follows from the producer to the consumer.
B. When a producer deals directly with customers, without using intermediaries, the producer is using a direct channel of distribution.
1. Advantages of a direct channel include:
a. The producer receives the full difference between the manufacturer’s cost and the price charged to the customer.
b. The producer has full control over the price to be charged to the customer.
c. The producer avoids the markups charged by intermediaries, which increase the price of the product but do not add to the manufacturer’s revenue.
d. The producer obtains firsthand feedback from customers.
2. Disadvantages of a direct channel include:
a. The producer must perform all of the distribution functions itself, so it must hire more employees and use additional resources, which increase its costs.
b. The need to perform all of the distribution functions can cause the manufacturer to lose its focus on production.
c. A manufacturer that deals directly with final