Page 578 - Business Principles and Management

Chapter 21 • Product Development and Distribution

21.2 Distribution

Goals Terms
• Discuss the important factors to • economic • direct distribution
be considered when selecting discrepancies • indirect distribution
channels of distribution. • economic utility • telemarketing
• Describe the different channels of • channels of • administered
distribution. distribution channel
• channel members • channel integration

Purposes of Distribution

Our economic system relies on the successful exchange of products and services
between businesses and consumers. But no matter how good a product is, this
exchange will not occur successfully unless the company fills orders correctly
and delivers the product undamaged and on time to the correct locations. These
functions are all part of effective distribution. Successful exchanges are not easy.
In fact, most of the problems consumers and businesses face in our economy
occur during the exchange process.
Economic discrepancies are the differences between the business’s offerings
and the consumer’s requirements. Marketers are concerned about four impor-
tant economic discrepancies:
1. Differences between the types of products produced and the types
consumers want.
2. Differences between the time of production and the time consumers want
the products.
3. Differences between the location where products are produced and the
location where consumers want them.
4. Differences between the quantities produced and the quantities con-
sumers want.
Producers manufacture large quantities of one or a very few products; con-
sumers want small quantities of a variety of products. Producers manufacture
products at a specific time and in a particular location; that time and location
do not typically match the time and place consumers need the product. Distribu-
tion systems are designed to get the types and quantities of products customers
want to the locations where and when they want them.

ECONOMIC UTILITY

Businesses create customer satisfaction by providing economic utility. Economic
utility is the amount of satisfaction received from using a product or service.
Businesses create economic utility and customer satisfaction by designing the
form, time, place, and possession of a product.

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