CHAPTER 13: DISTRIBUTION AND PRICING Right Product, Right Person, Right Place, Right Price

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Transcript of CHAPTER 13: DISTRIBUTION AND PRICING Right Product, Right Person, Right Place, Right Price

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CHAPTER 13: DISTRIBUTION AND PRICING Right Product, Right Person, Right Place, Right Price Slide 2 DISTRIBUTION: GETTING YOUR PRODUCT TO YOUR CUSTOMER ProducerWholesalerConsumer Channel of Distribution the network of organizations and processes that links producers to consumers 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? Slide 3 DISTRIBUTING DIRECTLY TO THE CONSUMER ProducerConsumer Direct Channel Distribution process that links the producer and the customer with no intermediaries. For example, Dell Slide 4 CHANNEL INTERMEDIARIES Channel Intermediaries informally called middlemen. They facilitate the movement of products from the producer to the consumer. Producer Wholesaler Consumer Slide 5 THE ROLE OF DISTRIBUTORS: ADDING VALUE (Utility) 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 Jamba Juice Vending Machines ATMs, Gas Stations Pay Pal Home Depot Service Makeover stations Slide 6 DISTRIBUTORS: STREAMLINING CONSUMER TRANSACTIONS Slide 7 THE MEMBERS OF THE CHANNEL Retailers the distributors that sell products directly to the ultimate users Wholesalers distributors that buy products from producers and sell them to other businesses or non-final users. Slide 8 WHOLESALERS: SORTING OUT THE OPTIONS Merchant Wholesalers Take legal possession/title Full-service Limited Service Drop Shippers Cash and Carry Truck Jobbers Agents/Brokers Dont take title of the goods Amazon Sams Club Coke Distributor Slide 9 RETAILERS: THE CONSUMER CONNECTION Store Retailers Non-Store Retailers Online Direct Response Direct Selling Vending eBay, Amazon Catalogs, telemarketing Door-to-door Best Buy at airports Slide 10 DISTRIBUTION STRATEGY INTENSIVE DISTRIBUTION SELECTIVE DISTRIBUTION EXCLUSIVE DISTRIBUTION Placing your product in as many stores as possible Placing your products with preferred retailers Placing your products with only one retail outlet in a given area Price / Product Tiffany, Bentley automobiles Paintball equipment Starbucks, People magazine Slide 11 MULTICHANNEL RETAILING Retailers are encouraging consumers to buy through multiple channels StoreOnline Slide 12 PHYSICAL DISTRIBUTION: PLANES, TRAINS, AND MUCH, MUCH MORE 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 Slide 13 ELEMENTS OF THE SUPPLY CHAIN Slide 14 SUPPLY CHAIN MANAGEMENT DECISIONS Warehousing Materials Handling Inventory Control Order Processing Customer Service Transportation Security Slide 15 TRANSPORTATION DECISIONS Mode Percentage of U.S. Volume CostSpeed On-Time Dependability Flexibility in Handling Frequency of Shipments Availability Rail40.2%MediumSlowMedium LowExtensive Truck40.0%HighFastHighMediumHighMost Extensive Ship9.0%LowestSlowestLowestHighestLowestLimited Plane0.2%HighestFastestMediumLowMedium Pipeline**LowSlowHighestLowestHighestMost Limited MODES OF TRANSPORTATION: Slide 16 PRICING : A HIGH STAKES GAME Pricing plays a key role in the demand for products Price is a tough variable Legal constraints Intermediary pricing (ie. wholesalers, distributors) Stable pricing is not the norm Prices must constantly be evaluated Slide 17 PRICING OBJECTIVES AND STRATEGIES Building Profitability Matching the Competition Creating Prestige Skimming Pricing Boosting Volume Penetration Pricing Every-day-low Pricing High/Low Pricing Loss Leader Pricing 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 Prestige pricing offering a new product at premium price attract price insensitive buyers Slide 18 SLIPPERY FINGER ONLINE PRICING GOOFS Free flights from Los Angeles to Fiji. Round-trip tickets from San Jose, California, to Paris for $27.98. $1,049 televisions wrongly listed for $99.99 on Amazon. $588 Hitachi monitors mistakenly priced at $164. $379 Axim X3i PDAs wrongly priced at $79 on Dells site. Slide 19 PRICING IN PRACTICE: A REAL WORLD APPROACH Breakeven Point (BP) = Total fixed cost (FC) Price/Unit (P) Variable cost/unit (VC) Breakeven analysis the process of determining the number of units that must be sold to cover costs. Slide 20 USING BREAKEVEN ANALYSIS Businesses make decisions to adjust the product price and/or costs. Raise prices Decrease variable costs Decrease fixed costs Outsource labor, use cheaper components? Move your plant to Mexico, advertise less? Slide 21 FIXED MARGIN PRICING Cost-Based Pricing Demand-Based Pricing Profit Margin the gap between cost and the price per product. Slide 22 CONSUMER PRICING PERCEPTIONS: THE STRATEGIC WILD CARD Consumer price perceptions can defy logic! The link between price and perceived quality can be powerful Consumers will use price as a quality indicator Does odd pricing like $196 or $199 always mean a bargain? Slide 23 PSYCHOLOGICAL PRICING 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. Slide 24 CHAPTER 17: OPERATIONS MANAGEMENT Putting It All Together Slide 25 OPERATIONS MANAGEMENT: IT ISNT GLAMOROUS, BUT IT MATTERS. Operations Management planning, organizing, leading and controlling all the activities in creating value by producing goods and services and distributing them to customers Good Operations Management: Most efficient and effective processes Produce the right goods and services Produce the right quantities Distribute products to the right customers at the right time Operations Management planning, organizing, leading and controlling all the activities in creating value by producing goods and services and distributing them to customers Good Operations Management: Most efficient and effective processes Produce the right goods and services Produce the right quantities Distribute products to the right customers at the right time Slide 26 EFFECTIVENESS VS. EFFICIENCY Efficiency producing output or achieving a goal at the lowest cost. Effectiveness completing tasks and producing products that create the greatest value. There is nothing so useless as doing efficiently that which should not be done at all Peter Drucker, Management Expert Doing things rightDoing the right thing Slide 27 GOODS VS. SERVICES GOODSSERVICES Tangible, physical form, can be touched, seen, handled Intangible, they can be experienced, no physical form Can be stored and inventoriedMust be consumed when they are produced Can be shippedMust be consumed, where they are provided Are produced independently of the consumer Often require customer involvement Can measure some aspects of quality Quality is based on customer perceptions Slide 28 WHAT DO OPERATIONS MANAGERS DO? Facility Location Process Selection and Facility Layout Inventory Control Scheduling Quality Slide 29 FACILITY LOCATION General Location FactorsExamples of Specific Considerations Adequacy of utilities Is the supply of electricity reliable? Is clean water available? Land Is adequate land available for a facility? How much does the land cost? Labor market conditions Are workers with the right skills available? How expensive is labor? Transportation factors Is the location near customers and suppliers? Is appropriate transportation nearby? Quality of life What is the climate like? Are adequate health care facilities available? Legal and political environment Does the local government support new business? What are the local taxes, fees, and regulations? Slide 30 GOING OVERSEAS Low-wage labor is a key reason firms focus overseas but, low wages do not always translate into low cost There are a variety of opportunities in rapidly growing foreign markets Key to balance advantages with drawbacks: Different laws and customs Inadequate infrastructure Inexperienced workers Political instability Slide 31 PROCESS SELECTION AND FACILITY LAYOUT Flow Shops Produce Large Batches Standardized Products Specialized Machinery Standardized Tasks Assembly Line is a Flow Shop Process Job Shops Produce Small Batches Variety of Products General-purpose Machinery Flexible Processes Slide 32 TECHNOLOGY OF OPERATIONS 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. AUTOMATION: LET THE MACHINES DO IT Slide 33 ROBOTS Robots are well suited for dangerous, tedious, dirty and physically demanding tasks. Robots dont get tired Robots are flexible Slide 34 INVENTORY CONTROL: DONT JUST SIT THERE Why hold inventories Smooth out production schedules Meet demand increases Reduce switching costs Compensate for forecast errors Why not Unsold inventory ties up funds Inventory must be warehoused and managed Risk of losses due to spoilage, obsolescence and pilferage Slide 35 INVENTORY CONTROL Complete inventory and stock management Quickly create invoices Maintain a client database Create Picking Lists and Receipts Stock balance and reorder management Import existing inventory Barcode reader support Warranty returns Group inventory items Pre-defined and custom reports available Slide 36 REDUCING INVESTMENT IN INVENTORY: JUST- IN-TI