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In this chapter you will learn: Understand why physical distribution (logistics) is such an important part of place and strategic market planning, understand why the physical distribution customer service level is a marketing strategy variable. understand the physical distribution concept and why it requires coordination of storing,. | Chapter 12: Logistics and Distribution 12-2 Understanding Physical Distribution Costs ($) Customer Service Level 0 0 90% Transporting Cost Lost Sales Inventory Cost Total Cost of PD Exhibit 12-1 Summary Overview Physical distribution (PD) is the transporting, storing, and handling of goods to match target customers’ needs with a firm’s marketing mix. Logistics is another name for physical distribution. PD provides time and place utility and makes possession utility possible. PD activities typically make up half or more of total marketing costs. For this reason, even small savings in PD costs can be significant. Physical Distribution Customer Service Customer Service Level. Customers think about PD in terms of how rapidly and dependably a firm can deliver what the customer wants. Customers, in short, care about their own needs, not about how the product was moved or stored. Invisible. PD is mostly invisible to customers -- and should be. In well-developed macro-marketing systems, PD is taken for granted by customers. Discussion Note: Marketing managers work hard to ensure that things stay this way. Part of the marketer’s profit is justified by taking care of PD activities for the customer. Trade-Off. In PD, there are always trade-offs between costs, the customer service level, and sales. Put another way, as place utility becomes greater so does the cost of creating it. Because PD cost savings can be substantial for each level of service, marketers must determine what level of service is possible and appropriate for each target market. Teaching Tip: Ask students if they have ever ordered software from an Internet site where the product can be immediately downloaded for use. Is this be a new paradigm for some PD issues that change the trade-off ratio? Physical Distribution Concept. This concept says that all transporting, storing, and product-handling activities of a business and a whole channel system should be coordinated as one system that seeks to minimize the . | Chapter 12: Logistics and Distribution 12-2 Understanding Physical Distribution Costs ($) Customer Service Level 0 0 90% Transporting Cost Lost Sales Inventory Cost Total Cost of PD Exhibit 12-1 Summary Overview Physical distribution (PD) is the transporting, storing, and handling of goods to match target customers’ needs with a firm’s marketing mix. Logistics is another name for physical distribution. PD provides time and place utility and makes possession utility possible. PD activities typically make up half or more of total marketing costs. For this reason, even small savings in PD costs can be significant. Physical Distribution Customer Service Customer Service Level. Customers think about PD in terms of how rapidly and dependably a firm can deliver what the customer wants. Customers, in short, care about their own needs, not about how the product was moved or stored. Invisible. PD is mostly invisible to customers -- and should be. In well-developed macro-marketing systems, PD .
