Distribution and Pricing Chapter 13

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Questions and Answers

What is the primary focus of the distribution process?

Identifying target customers

Developing marketing strategies

Ensuring product availability to consumers (correct)

Reducing manufacturing costs

Which type of distributor typically sells products to retailers or other businesses?

Wholesale distributor (correct)

Retail distributor

Online distributor

Direct-to-consumer distributor

What does the term 'break-even point' refer to in the context of pricing?

The peak sales volume achievable

The point where total costs and total revenue are equal (correct)

The maximum profit point

The lowest possible selling price

Which strategy is often employed to boost sales volume in pricing?

Psychological pricing Signup and view all the answers

What is a key factor in physical distribution that organizations must consider?

Transportation logistics Signup and view all the answers

What is the primary role of distributors in the distribution strategy?

To reduce the number of transactions Signup and view all the answers

Which of the following accurately describes a retailer?

A distributor that sells goods directly to final consumers in small quantities Signup and view all the answers

What distinguishes wholesalers from retailers?

Wholesalers purchase products to sell to other businesses or nonfinal users Signup and view all the answers

What type of wholesaler does not take legal possession of the goods they distribute?

Agents or brokers Signup and view all the answers

Which of the following describes multichannel retailing?

Offering multiple distribution channels for consumers Signup and view all the answers

Which category of merchant wholesaler provides a comprehensive array of services?

Full-service merchant wholesalers Signup and view all the answers

What method of retailing includes offering products through catalogs and telemarketing?

Direct response retailing Signup and view all the answers

Which of the following is NOT a characteristic of physical distribution?

Requires market research for efficiency Signup and view all the answers

What is a primary focus of supply chain management?

Planning and coordinating the movement of products Signup and view all the answers

Which of the following is a characteristic of multilevel marketing (MLM)?

Independent contractors sell products to their personal networks Signup and view all the answers

Which pricing strategy aims to capture the market by setting very low initial prices?

Penetration pricing Signup and view all the answers

What does breakeven analysis help a firm determine?

The number of units required to cover all costs Signup and view all the answers

What is the main purpose of customer service in supply chain management?

To enhance collaboration among supply chain members Signup and view all the answers

Which of the following correctly describes odd pricing?

Setting prices slightly below even values to enhance perceived value Signup and view all the answers

What is often a tactic within high/low pricing strategy?

Conducting special sales on select items with higher regular prices Signup and view all the answers

What is the effect of using a skimming pricing strategy?

To maximize profitability by pricing new products at a premium Signup and view all the answers

Which of the following decisions is least likely part of supply chain management?

Customer targeting Signup and view all the answers

What role does security play in supply chain management?

To ensure the safety of goods during transportation Signup and view all the answers

Study Notes

Distribution Strategy

Distribution strategy aims to deliver the right product to the right person, at the right place and time.
Two main components:
- Channel of Distribution: Network connecting producers to consumers.
- Physical Distribution: Actual movement of products through the distribution path.

Channels of Distribution

Direct Channel: No intermediaries between producer and customer.
Channel Intermediaries: Organizations facilitating product movement from producers to consumers.
Retailers: Sell directly to consumers, typically in small quantities, and provide additional services such as customer support and advertising.
Wholesalers: Buy in bulk from producers and sell to other businesses or non-final users.

Types of Wholesalers

Independent Wholesalers: Purchase from various producers to sell to diverse clients.
Merchant Wholesalers: Take legal possession of goods. Subcategories include:
- Full-service Merchant Wholesalers: Offer a range of services.
- Limited-service Merchant Wholesalers: Provide fewer services (e.g., drop shippers, cash-and-carry wholesalers).

Retailing

Store Retailers: Operate physical locations and sell directly to consumers.
Non-store Retailing:
- Includes online retailing, direct response retailing (catalogs, telemarketing), vending, and direct selling (door-to-door, MLM).

Physical Distribution

Encompasses all activities involved in moving goods from raw materials to consumers.
Supply Chain Management (SCM): Planning and coordinating product movement within the supply chain, focusing on logistics for tactical product movement.
Key Supply Chain Decisions:
- Collaboration among members can improve effectiveness.
- Important aspects include warehousing, inventory control, order processing, and transportation.

Pricing Objectives and Strategies

Pricing strategies focus on achieving profitability and competitiveness.
Building Profitability: Can be achieved by raising prices or decreasing costs.
Matching Competition: Eliminating price as the competitive factor encourages consumers to choose based on quality or service.
Creating Prestige: Higher prices can indicate higher quality; use of skimming pricing for new premium products.

Pricing Strategies to Boost Volume

Penetration Pricing: Setting low prices to capture market share.
Everyday-low Pricing (EDLP): Long-term low pricing aimed at high sales volume.
High/Low Pricing: Regularly features sales on select items while keeping higher prices on others.
Loss-leader Pricing: Temporarily pricing select items below cost to attract customers.

Break-even Analysis

Determines the number of units needed to cover all costs.
Formula: Break-even Point (BP) = Total Fixed Costs (FC) / (Price per Unit (p) - Variable Costs per Unit (VC)).

Practical Considerations in Pricing

Fixed Margin Pricing: The profit margin calculated between the cost and selling price of an item.
Consumer Pricing Perception: Relation between price and perceived quality; consumers often view higher prices as indicators of better quality.
Odd Pricing: Ending prices in non-rounded figures to create an impression of value.

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Description

Explore key concepts in distribution and pricing strategies in this quiz based on Chapter 13 by Suzaan Hughes. Learn about the different channels of distribution, types of wholesalers, and pricing objectives that drive retail success. Test your understanding of essential distribution strategies and their economic implications.