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Business Chapter 14: The marketing mix = Place (Methods of Distribution…
Business Chapter 14: The marketing mix = Place
Distribution Channels
Channel 1: Direct to consumers
advantages
very simple
suitable for products
cuts out wholesaler/retailer
products can be sold via internet
disadvantages
usually impractical (customers live far from factory)
may not be suitable for products; cannot be sent easily by post
can be very expensive (not cost effective)
common when selling directly from one manufacturer to another
example: car components are sold directly to car producer
Distribution Channels
Channel 2: Using a retailer as the only intermediary
advantages
producer sells larger quantities to retailers
reduced distribution costs
disadvantages
no direct contact with customers
price is higher than 'direct selling'; retailer has to cover costs and make profit
Distribution Channels
Channel 3: Using a wholesaler and retailer as intermediaries
involves wholesaler performing breaking bulk
advantages
wholesaler saves storage space for small retailer (reduces storage costs)
small retailers can purchase products in small quantity
wholesaler may give credit to retail customers
saving transport costs
wholesaler can give advice about what is selling well
disadvantages
may be more expensive
may not have full range of products to sell
may not be as good quality
takes longer for fresh produce to reach shops
wholesaler may be a long way from the shops
consumer price often higher than 'direct selling'
Distribution Channels
Channel 4: Using an additional intermediary such as an agent
advantages
manufacturer may not know best way to sell product in other markets
agents will be aware of local conditions
disadvantages
producer has less control over the way product is sold to customers
Methods of Distribution
Department stores
Chain stores
Discount stores
Superstores
Supermarkets
Independent retailers
Direct sales
Mail order
Inter/e-commerce
Selecting the Distribution Channel to Use
these type of questions are needed to be answered
What type of product is it?
Is the product very technical?
How often is the product purchased?
How expensive is the product?
How perishable is the product?
Where are the customers located?
Where do the competitors sell their products
Factors Affecting Distribution Channels
technical product?
expensive product?
purchased often?
perishable product?
where are competitors' products sold?
location of customers?
selling abroad?
sold to producer or consumer?