Week 9 · Chapter

Chapter 9 — Reaching More Customers: Distribution, Promotion & Digital Commerce

Introduction to Business Free sample edition

The module's primary reading · ~35–45 minutes · Objective 4 (analyze how a firm creates value through operations, quality management, and information systems, and through marketing — target markets, the marketing mix, the product life cycle, pricing and break-even, distribution, and promotion), Objective 3 (evaluate business conduct with ethical reasoning and the corporate-social-responsibility frameworks, presenting the shareholder and stakeholder positions with their reasons and without a verdict, and distinguishing what is ethical from what is legal) · Read it first this week; the lecture, the slides, the tutorial, and the quiz all build on it.

In plain language

A good product at a fair price still has to reach buyers, and buyers have to hear about it. Distribution (every decision about how a product gets from the business that makes it to the buyer) is the first half of that job. Promotion (the ways a business tells buyers about its offer) is the second half. This week you will trace the paths products take, sort the tools a business uses to talk with buyers, and set a promotion budget. You will also learn which claims a business may honestly make, and which it may not.

Why you already care about this

Think about the last thing you bought that you first saw online. Maybe a friend shared a post, or a store sent a coupon, or a local shop let you order ahead and pick up at the counter. Someone decided how that product would reach you, and someone decided what you would hear about it first.

The coffee cart now faces both decisions. Its plan expects 15,000 drinks in the first year at 5 dollars each, which is 75,000 dollars of planned revenue. It sets aside 4 percent of that for promotion, and it wants to run a punch card: buy nine drinks, and the tenth is free. Is that free drink really free? By the end of this chapter you will be able to work out what the punch card costs and what the whole promotion budget asks of the cart.

This week opens the second half of the course. Week 8 asked what changes when one cart becomes two; this week asks how a growing business reaches more customers.

By the end of this chapter you will be able to:

explain distribution and marketing channels, and tell a direct channel from an indirect one;
name the intermediaries (wholesalers, retailers, and agents) and say what each one does;
describe a supply chain and what supply-chain management coordinates;
sort promotional tools into the promotional mix and explain integrated marketing communications;
compute a promotion budget as a percentage of planned revenue, and read a sales promotion as a cost;
describe digital commerce trends in words and treat online selling as a channel decision;
test a promotional claim against the standard of specific, true, and supportable, and separate what is legal from what is ethical.

Carry this line with you: a promotion is a cost, not a gift; check every claim.

Where we are

Already covered: Week 1, The Idea and Its Environment, built the cart's SWOT; Week 5, What the Business Owes: Ethics & Social Responsibility, separated ethics from legality; Week 6, Making the Product: Operations, Quality & Information Systems, met the cart's bean supplier and opening inventory; Week 7, Who Buys and at What Price: Marketing, Products & Pricing, built the four Ps and the break-even; Week 8, Midterm Review & the Growth Question, drew the cart's organization chart at one cart and at two.
This week: the two Ps that Week 7 left for later, place and promotion: distribution, channels, intermediaries, and the supply chain; the promotional mix and integrated marketing communications; the cart's promotion budget and its punch card; digital commerce; and the claims a promotion may and may not make.
How they connect: Week 7 priced the drink and found the break-even; this week spends part of the cart's costs on reaching buyers and shows that the spending is already inside that break-even.
Where we're going next: Week 10, Leading the Work: Management & Leadership, turns from customers to the people who serve them.

Four earlier weeks matter most here. In Week 7 you met place, every decision about how the offer reaches the buyer, and promotion, the ways a business tells buyers about its offer. You also found the cart's break-even: fixed costs of 36,000 dollars divided by a per-unit margin of 5 − 2 = 3 dollars gives 12,000 drinks a year. In Week 1 the cart's SWOT listed rising bean prices as a threat. In Week 5 you learned three ethical-reasoning questions: is it legal, is it fair to everyone it touches, and would I be comfortable if it were public? All of them return this week.

1. Trace the path: distribution and marketing channels

Picture an illustrative family farm on a summer morning. Some of its vegetables go to its own farm stand at the end of the driveway. The rest go in crates to a grocery co-op in town, where shoppers buy them off the shelf. Same carrots, two very different trips.

Every choice about those trips has a name.

Distribution is every decision about how a product gets from the business that makes it to the buyer who uses it, including the path it takes and the businesses that handle it on the way.

A marketing channel is the path a product takes from the business that makes it to the final buyer, along with every business that handles it on that path.

Channels come in two kinds.

A direct channel is a marketing channel that runs straight from the producer to the buyer, with no other business in between, such as a farm stand or a business's own order page.
An indirect channel is a marketing channel that passes through one or more intermediaries, such as a wholesaler or a retailer, before the product reaches the buyer.

Worked example — the farm's two channels. The farm is illustrative, and the example uses no figures.

The farm stand: farm to shopper, with no business in between. That is a direct channel.
The grocery co-op: farm to co-op to shopper, with one business in between. That is an indirect channel.
What the farm gets from each: the stand keeps the whole sale but needs someone at the stand; the co-op reaches shoppers who never drive past the farm.

In words: the farm sells one product through two channels, and each channel trades something the farm gives up for buyers it could not reach alone.

This is the full meaning of place from Week 7. The farm's place decision is not an address. It is a choice of paths, made for different buyers.

Misconception check. Students often think place means only the store's address, the spot where the product is sold. That is tempting, because "place" sounds like a spot on a map. But the farm has one address and two channels, and each channel reaches different shoppers. The cure is to read place as every decision about how the product reaches the buyer: which path, through whom, and when.

Memory hook: place is the path, not the pin.

2. Name the businesses in between: intermediaries

Stay with the farm. A restaurant across town wants its lettuce, but the farm has no truck that goes there and no time to take orders from 20 kitchens. Businesses that stand between a producer and a buyer solve problems like that.

An intermediary is a business that helps move a product from the producer to the buyer, such as a wholesaler, a retailer, or an agent.

Three kinds come up again and again.

A wholesaler is an intermediary that buys goods in large amounts and resells them to retailers and other businesses rather than to the public.
A retailer is an intermediary that sells goods to the final consumer, the person who will use them.
An agent is an intermediary that arranges sales between a seller and buyers for a fee or commission without ever owning the goods.

Worked example — counting the farm's intermediaries. The farm and its partners are illustrative, and the counts are of businesses in between.

Farm stand: farm to shopper. Intermediaries: 0. A direct channel.
Grocery co-op: farm to co-op (a retailer) to shopper. Intermediaries: 1.
Restaurants: farm to a produce wholesaler, which buys the farm's lettuce by the truckload and resells it to restaurants. The restaurant serves it to diners in meals. Intermediaries between the farm and the restaurant: 1, the wholesaler.
An agent: a food broker who finds new restaurant buyers for the farm and takes a commission on each deal, but never owns a single crate. The broker helps the sale happen without buying anything.

In words: the farm reaches three groups of buyers through paths with zero or one business in between, and an agent can add buyers without ever taking ownership.

Notice the difference between the wholesaler and the agent. The wholesaler owns the lettuce for a while: it buys it, stores it, and resells it. The agent never does.

Misconception check. Students often think a wholesaler sells to the public, like a giant store. That is tempting, because the word sounds like "buying in bulk," and some shoppers buy in bulk. But a wholesaler resells to retailers and other businesses, such as the restaurants buying the farm's lettuce. The cure is to ask who the next buyer is: if it is the final consumer, the seller is a retailer.

Pause and try this. Choose one: (a) pick something you bought this month and sketch its channel, naming each business you think handled it; or (b) explain in two sentences why an agent is an intermediary even though it never owns the goods.

Memory hook: wholesalers sell to sellers; retailers sell to you.

3. Follow the chain: supply-chain management

Now turn the farm's story around and look at it from the coffee cart. Before an office worker two blocks away gets a latte, beans were grown, roasted, and shipped. Cups and lids were made and boxed. Milk was delivered. The cart is one link near the end of a long chain.

A supply chain is the whole series of businesses and steps that turn raw materials into a finished product in a buyer's hands, from the first supplier to the final sale.

Supply-chain management is the work of coordinating the materials, information, and money that flow along a supply chain so the product reaches the buyer on time and at a sensible cost.

Worked example — the cart's supply chain. The cart and its suppliers are illustrative, and the example uses no figures.

Materials flow forward: beans from the bean supplier and cups from the cup supplier reach the cart, and drinks reach the buyer.
Information flows back: the cart's sales tell it how many beans and cups to order next week.
Money flows back too: the buyer pays the cart, and the cart pays its suppliers.
Place sits at the end: the cart parks at the office building on weekdays and at the farmers' market on weekends, the place decisions from Week 7.
A risk at the start: the rising bean prices in Week 1's SWOT begin at the far end of the chain, and they reach the cart as a higher variable cost.

In words: the cart's chain runs from the bean supplier to the buyer's hand, and managing it means keeping materials, information, and money moving together.

You met part of this chain in Week 6. The cart's opening inventory and its bean supplier were resource-planning decisions there. This week they become links in a chain that ends with a buyer.

Misconception check. Students often think a supply chain is only about trucks and warehouses, the physical moving of boxes. That is tempting, because the boxes are what you can see. But the cart's chain also carries information (what sold) and money (who pays whom), and a break in either one stops the drinks as surely as a late delivery. The cure is to trace all three flows, not only the goods.

Memory hook: goods go forward; information and money come back.

4. Sort the tools: the promotional mix

Picture the coffee cart at 7 a.m. A printed menu board stands beside it. The owner chats with a new customer about which drink is least bitter. A regular hands over a punch card for a stamp. On the owner's phone, a post announces the cart's spot for the day. That is four ways of talking with buyers in one morning.

The promotional mix is the set of tools a business uses to communicate with buyers, conventionally advertising, personal selling, sales promotion, and public relations, with direct and digital marketing often counted as a fifth; conventions differ on the count.

Here are the tools, one at a time.

Advertising is a paid message about a product or business carried to many people at once, such as a printed sign, a poster, or a paid online post.
Personal selling is promotion through a person talking one to one with a buyer, answering questions and helping the buyer choose.
Sales promotion is a short-term reward that nudges a buyer to act now or come back, such as a coupon, a sample, or a punch card; it has a cost the business must carry.
Public relations is the work of building goodwill with the public and earning attention from the news and the community, rather than paying for a message.
Direct and digital marketing is promotion aimed straight at a buyer through channels such as social media posts, email, and online selling, often counted as a fifth element of the promotional mix.

Some courses count four tools and some count five, because they file direct and digital marketing differently. This course teaches the tools and never tests the count.

Worked example — sorting the cart's morning. The cart is illustrative, and the example uses no figures.

The printed menu board: a paid message seen by everyone who walks past. Advertising.
The chat about the least bitter drink: one person helping one buyer choose. Personal selling.
The punch card: a reward that brings the regular back. Sales promotion.
The post with the day's spot: aimed straight at followers through social media. Direct and digital marketing.

Public relations needs a different example. Picture an illustrative city transit agency that must move a bus route's schedule. It holds a community meeting, answers a local news reporter's questions, and explains why the change is needed. It pays for none of that attention. That is public relations: earning goodwill and coverage instead of buying space.

In words: the cart uses four tools in one morning, and the transit agency shows the fifth kind, attention it earns rather than buys.

Misconception check. Students often think promotion means advertising and nothing else. That is tempting, because ads are the promotion everyone notices. But the cart's best tool with a new customer may be the chat at the counter, and the transit agency's most useful tool pays for no space at all. The cure is to sort every message by how it reaches the buyer: paid to many, one to one, a short-term reward, earned attention, or direct and digital.

Memory hook: paid, personal, a perk, the press, and posts.

5. Say one thing: integrated marketing communications

Back to the transit agency. Suppose its posters at the stops show the new times, its website still shows the old ones, and its drivers tell riders a third story. Riders would not know which to believe, and some would miss their bus.

Using many tools only helps if they agree.

Integrated marketing communications is coordinating every promotional tool so that buyers hear one consistent message across every channel.

Worked example — one message, many tools. The agency and the cart are illustrative, and the example uses no figures.

The transit agency: the same new times and the same reason for the change appear on the posters at its stops, on its website, in its social posts, and in what its drivers tell riders.
The coffee cart: the menu board, the posts, and the punch card all carry the same 5-dollar price and the same promise that every drink is made to order.
The test: a rider or a customer who meets any one tool first hears the same thing as one who meets another.

In words: integration is not more messages; it is the same message, wherever the buyer meets it.

Misconception check. Students often think more tools always make a stronger message. That is tempting, because more posters and more posts feel like more reach. But tools that disagree confuse buyers, as the transit agency's mixed schedules would. The cure is to check that every tool says the same thing before adding another one.

Pause and try this. Choose one: (a) describe a business or service you use whose messages did not match from one place to another, and say what it cost you; or (b) explain in two sentences why the cart's price should read the same on its menu board and in its posts.

Memory hook: many tools, one voice.

6. Set the budget: promotion as a share of planned revenue

Picture the cart's owner with the first-year plan open on a laptop. The plan expects a certain amount of sales. Promotion has to be paid for out of what those sales bring in, so a common way to set its size is as a share of planned revenue.

Planned revenue is the sales in dollars a business plan expects over a period, found as the planned units times the price.

A promotion budget is the amount a business plans to spend on promotion over a period, often set as a percentage of the revenue it plans to earn.

The formula, on one line with its named inputs:

promotion budget = budget rate as a decimal × planned revenue

Worked example — the cart's promotion budget. The cart's figures are illustrative, constructed for this course and not real data; money is in dollars, and volume is in drinks.

Planned revenue: 15,000 drinks × 5 dollars = 75,000 dollars of planned first-year revenue.
Promotion budget: 4 percent of planned revenue = 0.04 × 75,000 = 3,000 dollars for the year.
Per-unit margin: price 5 − variable cost 2 = 3 dollars a drink.
Drinks to pay for the budget: 3,000 ÷ 3 = 1,000 drinks of per-unit margin.

In words: the cart plans to spend 3,000 dollars on promotion this year, split across social posts, a printed menu board, and the punch card, and the margin from 1,000 of its drinks goes to paying for it.

Here is the part that surprises people. The 3,000 dollars is not a new cost added on top of Week 7's numbers. It is one of the lines inside the 35,000 dollars of operating expenses, which plus 1,000 dollars of interest make the 36,000 dollars of fixed costs behind the 12,000-drink break-even. The break-even already pays for the promotion.

Caveat: a percentage of planned revenue is one common way to set a budget, not the only one, and the plan's 15,000 drinks are a forecast, not a promise. If sales come in lower, the owner may need to revisit the budget.

In practice (your tools). You can set the budget in any free spreadsheet, such as Google Sheets. Type 15000 in cell B2 for the planned drinks and 5 in cell B3 for the price. In cell B4 type =B2*B3 for the planned revenue. Type 0.04 in cell B5 for the budget rate, and in cell B6 type =B5*B4 for the promotion budget. Type 2 in cell B7 for the variable cost, and in cell B8 type =B6/(B3-B7) for the drinks it takes to pay for the budget.

Misconception check. Students often take 4 percent of the wrong revenue figure, such as the break-even revenue from Week 7: 0.04 × 60,000 = 2,400 dollars. That is tempting, because 60,000 dollars is a revenue number they have already met. But the budget rate applies to planned revenue, the 75,000 dollars the plan expects, not to the smaller amount the cart needs to cover its costs. The cure is to name the base before you multiply: 4 percent of what?

Memory hook: name the base before you take the percent.

7. Count the cost: the punch card is not free

Picture a regular who comes to the cart every weekday morning. After nine paid drinks, the punch card is full, and the tenth drink is handed over at no charge. The regular is happy, and that is the aim. But the cup, the lid, the beans, and the milk in that tenth drink were not free.

A punch card is a sales promotion that marks each purchase on a card and gives the buyer a free item after a set number of paid ones, such as buy nine and the tenth is free.

Worked example — one full punch card. The cart's figures are illustrative, constructed for this course; money is in dollars.

Punch card revenue: "buy nine, the tenth is free" means 9 × 5 = 45 dollars for 10 drinks.
Punch card variable cost: 10 × 2 = 20 dollars of cups, lids, beans, and milk for the 10 drinks.
The free tenth drink: it brings in no revenue, still uses its 2-dollar variable cost, and gives up the 5-dollar price it would have earned if sold.

In words: every full card hands out a drink that still costs the cart 2 dollars in supplies and earns none of its 5-dollar price, which is why the punch card is one of the lines the 3,000-dollar promotion budget has to carry.

Honesty note: whether the card pays for itself depends on what the regular would have done without it. If the card brings the regular back on mornings they would have skipped, those extra drinks add margin. If the regular would have come anyway, the card mostly gives drinks away. The arithmetic shows the cost; it cannot show the regular's choices, so the owner has to watch what happens.

Misconception check. Students often think a sales promotion is free, because the customer pays nothing for the reward. That is tempting, because "free" is printed right on the card. But the free drink still uses 2 dollars of supplies and gives up a 5-dollar sale. The cure is to read every sales promotion as a cost the budget must carry.

Pause and try this. Choose one: (a) think of a loyalty card or reward you have used and describe what it cost the business each time you redeemed it; or (b) explain in two sentences why "free to the customer" does not mean "free to the business."

Memory hook: free to the buyer, never free to the seller.

8. Sell where buyers click: digital commerce

Picture an illustrative campus bookstore in the week before classes. A line runs out the door. The store adds a page to its website where students can order a sweatshirt, pay, and then pick it up at a side counter in two minutes. The storefront has not changed, but the store now has a second way to reach buyers.

Digital commerce is buying and selling through websites, apps, and social media, including ordering ahead and paying online.

Three trends are easy to see from the buyer's side. Buyers find more businesses online first, through searches and social posts. More businesses let buyers order ahead and pay online. And small sellers can reach buyers directly through their own pages, without a store or a wholesaler in between.

This course gives no figures for these trends. Platforms change their prices and their audiences often, and a figure without a source and a year is not a figure.

Worked example — the bookstore's new channel. The bookstore is illustrative, and the example uses no figures.

Before: store to shopper, at the counter. A direct channel with a line.
After: the same store adds a web page where the shopper orders and pays, then picks up at a side counter. A second direct channel, this one digital.
Which P is it? The order page is a place decision, because it changes how the product reaches the buyer. Its posts announcing the page are promotion.

In words: a digital order page is a new path to the buyer as well as a new way to talk to the buyer, so it belongs to both place and promotion.

The coffee cart could do the same. A post that says where the cart is parked today is promotion; a page that lets office workers order ahead for pickup would be a new channel.

Misconception check. Students often think selling online is only a kind of advertising. That is tempting, because online selling and online ads appear on the same screens. But an order page changes how the product reaches the buyer, which makes it a place decision. The cure is to ask whether the buyer can complete the purchase there: if so, it is a channel.

Memory hook: if you can buy there, it is a channel.

9. Keep it honest: the claims a promotion may make

Picture the cart's owner drafting a post for the farmers' market. One draft reads: "Espresso drinks made to order, 5 dollars, at the market this weekend." Another reads: "Voted the best coffee in the city! Nine out of ten office workers prefer us." The second draft sounds stronger. It is also made up. No vote happened, and no one counted office workers.

A promotion may make claims that are specific, true, and supportable: the business could show the evidence if asked. It may not use invented testimonials, made-up statistics, or endorsements no one gave.

A testimonial is a statement from a customer about their own experience with a product, used in promotion; an honest one comes from a real customer who said it.
An endorsement is a message in promotion that presents a person or group as backing a product; an honest one comes only from someone who gave that backing.
Deceptive advertising is promotion that misleads buyers with a claim that is false or cannot be supported; in the United States the Federal Trade Commission is the federal agency that polices it.
The Federal Trade Commission is the federal agency, known as the FTC, that polices deceptive advertising and publishes guidance for businesses on truthful claims.

Worked example — testing three draft claims. The cart and its drafts are illustrative, and the example uses no figures beyond the cart's own price.

"Espresso drinks made to order, 5 dollars." Specific, true, and supportable: anyone can watch the drink being made and read the price. It may be used.
"Nine out of ten office workers prefer us." A made-up statistic: no one surveyed anyone. It may not be used.
"Voted the best coffee in the city." An endorsement no one gave: there was no vote. It may not be used.

In words: the first claim can be checked and holds up; the other two would fall apart the moment a buyer asked, "Says who?"

Now separate legality from ethics, as Week 5 taught. The FTC's rules set a floor. Ethics asks what is right beyond that floor. Suppose the owner considers a post that says "the freshest coffee at the market" with no way to show it. Run the three ethical-reasoning questions:

Is it legal? That is a question for the FTC's own guidance, not for this course; nothing here is legal advice for a specific situation.
Is it fair to everyone it touches? The other vendors and the buyers would be judged on a claim no one can check.
Would I be comfortable if it were public? If a buyer asked "how do you know?", the owner would have no answer.

The honest post is the one the owner could defend to any buyer who asked.

Misconception check. Students often think a claim is fine as long as no one checks it. That is tempting, because most buyers never ask for proof. But a claim has to be specific, true, and supportable whether or not anyone asks, and the FTC polices deceptive advertising. The cure is to ask "Could I show the evidence?" before any claim goes out.

Pause and try this. Choose one: (a) find a claim in an ad you saw this week and say whether it is specific, true, and supportable; or (b) explain in two sentences why an invented testimonial can harm buyers even if the product is good.

Memory hook: if you can't show it, don't say it.

Key terms

distribution — Every decision about how a product gets from the business that makes it to the buyer who uses it, including the path it takes and the businesses that handle it on the way. (first used: 1. Trace the path: distribution and marketing channels)
marketing channel — The path a product takes from the business that makes it to the final buyer, along with every business that handles it on that path. (first used: 1. Trace the path: distribution and marketing channels)
direct channel — A marketing channel that runs straight from the producer to the buyer, with no other business in between, such as a farm stand or a business's own order page. (first used: 1. Trace the path: distribution and marketing channels)
indirect channel — A marketing channel that passes through one or more intermediaries, such as a wholesaler or a retailer, before the product reaches the buyer. (first used: 1. Trace the path: distribution and marketing channels)
intermediary — A business that helps move a product from the producer to the buyer, such as a wholesaler, a retailer, or an agent. (first used: 2. Name the businesses in between: intermediaries)
wholesaler — An intermediary that buys goods in large amounts and resells them to retailers and other businesses rather than to the public. (first used: 2. Name the businesses in between: intermediaries)
retailer — An intermediary that sells goods to the final consumer, the person who will use them. (first used: 2. Name the businesses in between: intermediaries)
agent — An intermediary that arranges sales between a seller and buyers for a fee or commission without ever owning the goods. (first used: 2. Name the businesses in between: intermediaries)
supply chain — The whole series of businesses and steps that turn raw materials into a finished product in a buyer's hands, from the first supplier to the final sale. (first used: 3. Follow the chain: supply-chain management)
supply-chain management — The work of coordinating the materials, information, and money that flow along a supply chain so the product reaches the buyer on time and at a sensible cost. (first used: 3. Follow the chain: supply-chain management)
promotional mix — The set of tools a business uses to communicate with buyers, conventionally advertising, personal selling, sales promotion, and public relations, with direct and digital marketing often counted as a fifth; conventions differ on the count. (first used: 4. Sort the tools: the promotional mix)
advertising — A paid message about a product or business carried to many people at once, such as a printed sign, a poster, or a paid online post. (first used: 4. Sort the tools: the promotional mix)
personal selling — Promotion through a person talking one to one with a buyer, answering questions and helping the buyer choose. (first used: 4. Sort the tools: the promotional mix)
sales promotion — A short-term reward that nudges a buyer to act now or come back, such as a coupon, a sample, or a punch card; it has a cost the business must carry. (first used: 4. Sort the tools: the promotional mix)
public relations — The work of building goodwill with the public and earning attention from the news and the community, rather than paying for a message. (first used: 4. Sort the tools: the promotional mix)
direct and digital marketing — Promotion aimed straight at a buyer through channels such as social media posts, email, and online selling, often counted as a fifth element of the promotional mix. (first used: 4. Sort the tools: the promotional mix)
integrated marketing communications — Coordinating every promotional tool so that buyers hear one consistent message across every channel. (first used: 5. Say one thing: integrated marketing communications)
planned revenue — The sales in dollars a business plan expects over a period, found as the planned units times the price. (first used: 6. Set the budget: promotion as a share of planned revenue)
promotion budget — The amount a business plans to spend on promotion over a period, often set as a percentage of the revenue it plans to earn. (first used: 6. Set the budget: promotion as a share of planned revenue)
punch card — A sales promotion that marks each purchase on a card and gives the buyer a free item after a set number of paid ones, such as buy nine and the tenth is free. (first used: 7. Count the cost: the punch card is not free)
digital commerce — Buying and selling through websites, apps, and social media, including ordering ahead and paying online. (first used: 8. Sell where buyers click: digital commerce)
testimonial — A statement from a customer about their own experience with a product, used in promotion; an honest one comes from a real customer who said it. (first used: 9. Keep it honest: the claims a promotion may make)
endorsement — A message in promotion that presents a person or group as backing a product; an honest one comes only from someone who gave that backing. (first used: 9. Keep it honest: the claims a promotion may make)
deceptive advertising — Promotion that misleads buyers with a claim that is false or cannot be supported; in the United States the Federal Trade Commission is the federal agency that polices it. (first used: 9. Keep it honest: the claims a promotion may make)
Federal Trade Commission — The federal agency, known as the FTC, that polices deceptive advertising and publishes guidance for businesses on truthful claims. (first used: 9. Keep it honest: the claims a promotion may make)

Summary

Distribution is every decision about how a product reaches the buyer; place is the path, not only the address.
A direct channel has no business in between; an indirect channel passes through one or more intermediaries.
A wholesaler resells to businesses, a retailer sells to the final consumer, and an agent arranges sales without owning the goods.
A supply chain carries materials forward and information and money back; supply-chain management coordinates all three.
The promotional mix is advertising, personal selling, sales promotion, and public relations, with direct and digital marketing often counted as a fifth; the count is never tested.
Integrated marketing communications means one consistent message across every tool.
The cart's promotion budget is 0.04 × 75,000 = 3,000 dollars, the margin from 3,000 ÷ 3 = 1,000 drinks, and it already sits inside the 12,000-drink break-even.
A punch card is a cost: each free drink uses 2 dollars of supplies and gives up a 5-dollar sale.
Digital commerce adds channels as well as messages; an order page is a place decision.
A promotion's claims must be specific, true, and supportable; the FTC polices deceptive advertising, and ethics asks more than the law does.

Check your understanding

Work these before looking at the answers — they are ungraded, and the answers (with reasoning) are at the bottom of the page.

An illustrative food truck plans to sell 20,000 tacos in a year at 6 dollars each. It sets its promotion budget at 5 percent of planned revenue, and each taco has a variable cost of 2 dollars. Find the planned revenue, the promotion budget, and the tacos of per-unit margin it takes to pay for the budget. A friend takes 5 percent of the truck's 90,000-dollar break-even revenue instead; explain what went wrong.
An illustrative smoothie stand runs a punch card: buy seven, the eighth is free. A smoothie sells for 6 dollars and has a variable cost of 2 dollars. For one full card, find the revenue, the variable cost of all eight smoothies, and what the free smoothie costs the stand.
An illustrative orchard sells apples four ways. Name the role of each business in between, or say that there is none: (a) the orchard's own roadside stand; (b) a business that buys apples by the truckload and resells them to grocery stores; (c) the grocery store where a family buys a bag; (d) a broker who finds new grocery buyers for the orchard for a commission and never owns an apple.
An illustrative bike shop does four things in one month: (a) pays for a poster at a bus shelter; (b) has a mechanic fit a rider for a helmet; (c) offers a free tune-up with every new bike; (d) hosts a volunteer repair day that a local news site covers. Sort each into the promotional mix. Then judge the shop's draft ad, "Rated number one by local riders," when no rating exists.

Answers (worked reasoning — read after attempting)

Planned revenue: 20,000 × 6 = 120,000 dollars. Promotion budget: 0.05 × 120,000 = 6,000 dollars. Per-unit margin: 6 − 2 = 4 dollars a taco, so the budget takes 6,000 ÷ 4 = 1,500 tacos of per-unit margin. The friend's 0.05 × 90,000 = 4,500 dollars uses the break-even revenue as the base, but the budget rate applies to the revenue the plan expects, so the budget is 6,000 dollars.
Revenue for a full card: 7 × 6 = 42 dollars for 8 smoothies. Variable cost: 8 × 2 = 16 dollars. The free eighth smoothie brings in no revenue, still uses 2 dollars of supplies, and gives up the 6-dollar price it would have earned if sold. The card is a cost the stand's promotion budget has to carry, even though the customer pays nothing for the reward.
(a) No intermediary: a direct channel from the orchard to the buyer. (b) A wholesaler: it buys in large amounts and resells to other businesses, not to the public. (c) A retailer: it sells to the final consumer. (d) An agent: it arranges sales for a commission without owning the goods. The orchard's path to a family through (b) and (c) is an indirect channel with two intermediaries.
(a) Advertising: a paid message seen by many people at once. (b) Personal selling: one person helping one buyer. (c) Sales promotion: a short-term reward that nudges a buyer to act now. (d) Public relations: attention the shop earned rather than paid for. The draft ad is a made-up claim: no rating exists, so it is not true or supportable, and it may not be used; it is the kind of claim the FTC polices as deceptive advertising.

Next up in this module: the Readings & Resources page, the lecture tutorial, the practice set, and the quiz — and next week the four functions of management take the growing business from reaching customers to leading the people who serve them.

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