Chapter 21 Section 21.1.ppt

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Section 21.1 Distribution

 Chapter 21 Channels of Distribution

Marketing Essentials

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SECTION 21.1

What You'll Learn

Distribution

 _{The concept of a channel of distribution}

 _{Who channel members are}

 _{Non-store retailing methods}

 _{How channels of distribution differ for}

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SECTION 21.1

_Distribution

Key Terms

 _{channel of distribution}

 _{intermediaries}

 _wholesalers

 _{rack jobbers}

 _{drop shippers}

 _retailers

 _{brick and mortar} retailers

 _e-tailing

 _agents

 _{direct distribution}

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SECTION 21.1

_Distribution

Why It's Important

The marketing mix (4 P’s) includes decisions about product, price, place, and promotion.

Exploring the place decision—how the product will be distributed and sold in the marketplace.

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SECTION 21.1

_Distribution

•A channel of distribution is the path a product

takes from producer or manufacturer to final user. •The place decision of the four Ps of the marketing mix.

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Consumers Consumers Consumers Consumers Wholesalers Wholesalers Wholesalers Wholesalers Agents Agents Agents Agents Retailers Retailers Retailers Retailers

Manufacturers / Producers

Manufacturers / Producers Consumer Market

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SECTION 21.1

_Distribution

Channel Members

All the businesses involved in sales

transactions that move products from the manufacturer to the final user are called

intermediaries or middlemen.

They provide value to producers because

they often have expertise in certain areas that

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SECTION 21.1

_Distribution

Intermediaries

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SECTION 21.1

_Distribution

Wholesalers

Wholesalers buy large quantities of goods

(taking title) from manufacturers, store the goods, and then resell them to other

businesses. Their customers are called

retailers. They may be called distributors when

their customers are professional or commercial users, manufacturers, governments,

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SECTION 21.1

_Distribution

Two specialized wholesalers are:

_rack _jobbers

_{drop shippers}

Rack jobbers manage inventory and

merchandising for retailers by counting stock,

filling it in when needed, and maintaining store displays. They provide the display racks and bill the retailer only for the goods sold.

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SECTION 21.1

_Distribution

Drop shippers deal in bulk items

such as coal, lumber, and

chemicals that require special handling.

Drop shippers sell the goods to other businesses and have the producer ship the merchandise

directly to the buyers. The products

are owned, but never handled, by the drop shipper.

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SECTION 21.1

_Distribution

Retailers sell goods to the final consumer for

personal use.

Traditional retailers, called brick and mortar

retailers, sell goods to the customer from their

own physical stores.

Non-store retailing operations include automatic retailing, direct mail and catalog retailing, TV

home shopping, and online retailing (e-tailing).

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SECTION 21.1

_Distribution

Note the millions of dollars attributed to online sales by

e-tailers in one month. Which three sectors lead the list? How might this list be

changed if the month was December?

Shopping on the Web

Top e-tailing sectors

Air Travel Books Hardware Software Apparel Hotels Toys/games Music Health, beauty Electronics

Source: Dow Jones

MILLIONS OF DOLLARS

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SECTION 21.1

_Distribution

Unlike wholesalers and retailers, agents

do not own the goods they sell. Agents act as intermediaries by bringing buyers and sellers together.

Agents

 _Example_{Real estate agents, food brokers,}

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SECTION 21.1

_Distribution

Channels of distribution are classified as direct or indirect.

Direct distribution

occurs when the goods or services are sold from

the producer directly to

the customer; no

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Direct and Indirect Channels

Indirect distribution involves one or

more

intermediaries.

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SECTION 21.1

_Distribution

Different channels of distribution are

generally used to reach the customer in the consumer and industrial markets. Both markets make use of direct and

indirect distribution.

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What is Network Marketing

Distribution?

What are Pyramid Schemes?

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21.1

A

SSESSMENTSSESSMENT

Reviewing Key Terms and Concepts

1. What is a channel of distribution? 2. Name two major types of merchant

intermediaries.

3. What type of intermediary is a rack jobber? A drop shipper?

4. Distinguish between brick and mortar and online retailers.

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21.1

A

SSESSMENTSSESSMENT

Thinking Critically

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End of Section 21.1

Marketing Essentials

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Channels of Distribution