Chapter 13: DISTRIBUTION AND PRICING. Right Product, Right Person, Right Place, Right Price. DISTRIBUTION: GETTING YOUR PRODUCT TO YOUR CUSTOMER. Distribution is a key element of the marketing mix Where should the product be sold? How will it get to the location(s) from the factory?.
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Right Product, Right Person, Right Place, Right Price
Channel of Distribution –
the network of organizations and processes
that links producers to consumers
Direct Channel –
Distribution process that links the
producer and the customer with
For example, Dell
Channel Intermediaries – informally called middlemen. They facilitate the movement of products from the producer to the consumer.
ATM’s, Gas Stations
Home Depot Service
distributors that buy
products from producers
and sell them to other
Retailers – the
distributors that sell
products directly to
the ultimate users
Placing your products with only one retail outlet in a given area
Tiffany, Bentley automobiles
Placing your products with “preferred retailers”
Placing your product in as many stores as possible
Starbucks, People magazine
Price / Product
Determining the best distribution channels for your product is only half the distribution strategy.
How will the product flow through the channel from producer to consumer?
Supply Chain Management –
planning and coordinating the
movement of products along
the supply chain
Logistics – focuses on
the tactics involved in
moving the products
MODES OF TRANSPORTATION:
Matching the Competition
Loss Leader PricingPRICING OBJECTIVES AND STRATEGIES
Prestige pricing – offering a new product at premium price – attract price insensitive buyers
Usually for newly introduced items, rock-bottom pricing to drive high volume
WalMart, need I say more!
Special sales on limited items (to attract customers), higher prices on the rest
Pricing selected items below cost to attract customers
Total fixed cost (FC)
Breakeven Point (BP) =
Price/Unit (P) – Variable cost/unit (VC)
Breakeven analysis –
the process of determining the number of units that must be sold to cover costs.
Businesses make decisions to adjust the product price and/or costs.
Outsource labor, use cheaper components?
Move your plant to Mexico, advertise less?
A recent survey of 1,200 prices, found that 57% ended in .99 cents, and another 11% ended in .97 or .98 cents. Only about 3% were whole dollar amounts.
Putting It All Together
a goal at the
Doing things right
Doing the right thing
“There is nothing so useless as doing efficiently that which should not be done at all”
Peter Drucker, Management Expert
AUTOMATION: LET THE MACHINES DO IT
Automation – replacing
human operations and
control of machinery
and equipment with some
form of programmed control.
Robot – a
programmable machine that
is capable of manipulating
materials in order
to perform tasks.
Smooth out production schedules
Meet demand increases
Reduce switching costs
Compensate for forecast errors
Unsold inventory ties up funds
Inventory must be warehoused and managed
Risk of losses due to spoilage, obsolescence and pilferageINVENTORY CONTROL: DON’T JUST SIT THERE
Produce goods and services to meet actual demand. Minimize inventories
at all stages of the supply chain through coordination.
Gain control over supply chain
Begin producing its own parts
Use outside firm for producing supplies
Focus on key production areas
Cost savingsTRADE-OFF BETWEEN VERTICAL INTEGRATION AND OUTSOURCING
The trend has been to rely more on outsourcing which has become a controversial issue.
Costs decrease because of less rework,
fewer mistakes, fewer delays and snags,
and better use of time and materials
W. Edwards Deming, viewed as the father of the quality movement, first proposed the relationship between quality and business in the early 1950s.
Capture the market with better
quality and lower price
Stay in business
Provide jobs and more jobs
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Schneck Medical Center, Seymour, Ind. (health care)
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