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Marketing Basics - Kotler Philip

Product Distribution Solutions

Now we are ready to deal with the problems of product distribution, i.e. how does the company organize the storage, handling and movement of goods so that they are available to consumers at the right time and in the right place. The distribution system used by the seller has a very strong effect on the consumer. Now we will move on to consider the nature, goals, and organizational aspects of product distribution.

The nature of product distribution

The main elements of the goods distribution complex are presented in Fig. 70. We define product distribution as follows:

Goods distribution is the activity of planning, implementing and controlling the physical movement of materials and finished products from their places of origin to places of use in order to meet the needs of consumers and for their own benefit.

The main costs of goods distribution consist of the costs of transportation, subsequent storage of goods, maintenance of inventories, receipt, shipping and packaging of goods, administrative expenses and processing costs of orders. Today, management is beginning to worry about the general level of costs for organizing goods distribution, which reach 13.6% of the total sales for manufacturing companies and 25.6% for intermediate sellers11.

Shares of items of product distribution as a percentage of the total cost of it

Fig. 70. The shares of the elements of product distribution as a percentage of the total cost of it

Product distribution is not only a source of costs, but also a potential tool for creating demand. By improving the product distribution system, you can offer the best service or lower prices, thereby attracting additional customers. The company loses customers when it does not ensure the delivery of goods on time. In the summer of 1976, Kodak launched a nationwide advertising campaign for its new camera for instant snapshots, without first providing stores with enough goods. Consumers found that there were no cameras in stores, and instead they bought Polaroid cameras.