What are the two types of distribution channels?
- direct channel of distribution
- indirect channel of distribution
channel of distribution that includes one or more other businesses between the producer or consumer
indirect channel of distribution
What do distribution channels do?
- gathers products from many producers to offer customers the variety of products they need in convenient locations
- they move products efficiently from where they are produced to where they can be sold
- they store products from the time they are produced until customers want to buy them
the locations and methods used to make a product or service available to the target market
when businesses specialize in producing a specific type of product, a channel of distribution will be needed to adjust differences in:
wholesalers who take ____, or ownership of goods, are called merchant wholesalers
What is the relationship between markup and the expected gross margin?
the markup is equal to the expected gross margin
the final business organization in an indirect channel of distribution for consumer products
the amount of money available to the business after all costs and expenses have been paid
intermediaries between manufacturers and retailers, they create an assortment by breaking larger bulks of producer's products into smaller units by repacking and redistributing in smaller lots for retailers and other industrial buyers
a product that has a ready supply will have a (higher/lower) ____ price
if a product is easily available and the seller provides a high level of customer service, prices will go ____ (up/down)
customers expect to pay ____ (low/high) prices if they shop at a large warehouse store that is not as conveniently located and offer little servce
the difference between the selling price and the product costs, represents the amount of money on hand to pay for operating expenses and provide a profit
the money a customer must pay for a product or service
how do you figure out the markup on cost?
product costs x percent markup = markup on cost
products with many features and options will also command ____ (lower/higher) prices
a reduction from the original selling price
happens when demand is not as high as projected, if the selling season is ending, or if there is a flaw in the product
an effective ____ takes the large quantities produced and breaks them into quantities customers want to buy
an effective channel of distribution takes the large quantities produced and breaks them into quantities customers want to buy
the businesses that take part in a channel of distribution
highly complex and technical products have ____ (lower/higher) prices than simple products
prices on seasonal products will be ____ (lowest/highest) just before and at the beginning of the season
the prices will be lower on these items during other times of the year
Describe how the price of a product changes.
- it changes as it moves from producer to consumer
- the manufacturer sets the price that other businesses pay to them
- those businesses then increase the price and sell the products to the final customers
- the price that is set by the businesses is determined by adding the product costs, operating expenses and profit together
the costs to the manufacturer of producing the product or the price paid by other businesses to buy the product
What differences exist between producers and consumers in complex economies?
differences in quantity - businesses produce or sell large amounts of each product to many customers, each consumer needs only a very small number of products at a given time
differences in assortment - businesses usually specialize in producing a specific type of product while consumers want to purchase a variety of products
differences in location - in today's economy, thousands of miles can separate producers and consumers. business may need to distribute their products to customers in many countries
differences in timing - businesses are efficient by producing large amount of a product at one time, agricultural products sometimes can only be produced at a specific time of year. consumers may want to buy products at different times than when they are produced
how do you figure out the markup on selling price?
gross margin / selling price = percent markup on selling price
all expenses of operating the business that are associated with the product; can include salaries, storage, display equipment, facilities, utilities, taxes, etc
why do businesses join a channel of distribution?
- they join a channel when either the producer or consumer does not want to perform one or more marketing activities or when the business can perform the activities better or at a lower cost
channel of distribution where products move from the producer straight to the consumer with no other organizations participating
direct channel of distribution
when products are first introduced to the market, prices will be very _____ (high/low)