<PLACE>

--PLACE IN THE MIX--

‘PLACE’ decisions are concerned with "How products should pass from manufacturer to the final customer". Several different channels of distribution are available for firms to use.

--INITIAL THOUGHTS--

"I grow huge quantities of bananas in the Philippines for export and I know they are extremely popular in the UK?"
Imagine that it is only worth exporting if the quantity is massive"
"Imagine you know you can sell around 100 bananas per day in your shop"
Problem is you can't buy in small quantities from the producer
"Would it be easier to buy to one big buyer or to 1000's of small shops?"

--DISTRIBUTION CHANNELS--

--DIRECT SELLING--

DIRECT SELLING refers to the MARKETING and SELLING of PRODUCTS DIRECTLY TO CONSUMERS, meaning that there are NO INTERMEDIARIES like wholesalers or retail stores.

-PRODUCER -> CONSUMERS-

--PRODUCER PERSPECTIVE--

"As a new business we lack economies of scale to lower our unit costs and the product we make only sells at a low price, so we can't afford to let middlemen take any of our already low profit margins, so to survive I want to sell my product direct to the customer, also I want be 100% in control of the marketing and brand image of my product. In addition I think getting direct customer feedback will help me understand what my customers like or dislike, so I can improve and make decisions about my products quickly and more crucially I can build up strong customer relationships which builds loyalty and trust, which can lead to repeat purchases and referrals. The brilliant thing is now there are so many E-commerce opportunities so I can set up an online store, market with social media, and global shipping is much more advanced, so it's easier than ever for me to sell directly to consumers anywhere on the planet."

--CONSUMER'S PERSPECTIVE--

"I find products bought from the producer are much cheaper as the profit margin added by having middle men is not included also I like the fact that the sellers offer tailored advice and product demonstrations which builds up my trust and a relationship with the seller. In addition it's very convenient as the products are often brought/sent directly to the my home so I don't have to go out and buy them"

Farmer's markets are examples of direct selling as the farmer sells straight to the consumer.
The biggest direct selling firms in the world , Avon, Amway and Herballife are well known for offering demonstrations.

--PROS--

PRODUCER KEEPS ALL THE PROFIT, as there are no intermediaries so no mark-up or profit margin taken by other businesses
PRODUCER HAS 100% CONTROL OF THE MARKETING MIX – how the product is sold, promoted and priced to consumers
QUICKER DEIVERY TO CUSTOMER than other channels, very useful for fresh products
May lead to fresher food products
Direct contact with consumers offers useful market research.
Online selling can be used to reach a very wide market

--CONS--

PRODUCER has to BEAR ALL STORAGE + STOCK COSTS. which can be very expensive.
PRODUCER has NO RETAIL OUTLETS so CUSTOMERS HAVE NO CHANCE TO 'TRY BEFORE BUYING'.
PRODUCER has to BEAR ALL DELIVERY COSTS.
No advertising or promotion paid for by intermediaries and no aftersales service offered by shops
Can be expensive to deliver each item sold to consumers

--SINGLE CHANNEL--

SINGLE INTERMEDIARY CHANNEL SELLING refers to the MARKETING and SELLING of PRODUCTS VIA A SINGLE INTERMEDIARY ('MIDDLEMAN') TO CONSUMERS, like agents, wholesalers or retailers. We will focus on agent mainly:

-PRODUCER -> AGENT -> CONSUMERS-

Hotels/Airlines etc... -> Travel agents -> Holiday maker

Teacher -> Teacher recruitment agent -> School

Home seller -> Estate agent -> Home buyer

Writer -> Publishing agent -> Book buyer

University -> Education agent -> Potential student

Model -> Model agency -> Fashion mags/shows etc...

Football player -> Football agent -> Football team

-PRODUCER -> RETAILER-> CONSUMERS-

Local strawberry farmer -> Retailer -> Customer

-PRODUCER -> WHOLESALER-> CONSUMERS-

Producer of buses -> Wholesaler -> Bus company

--PRODUCER PERSPECTIVE--

"I want to sell my output but lack the Knowledge needed to negotiate the legal and regulatory environment. I even don't know if they want what I have to offer and how much they are willing to pay and how to get it into local stores. I'm worried I might encounter language barriers which could lead to major miscommunications. If I was to do it myself I would have to open a new office, hire staff etc...which would be very expensive and increase my financial risk in case of failure."

--AGENT'S PERSPECTIVE--

"...I have expert knowledge of the market for this type of transaction and have successfully facilitated it hundreds of times before, I know the trends and what customer's want here and now I have all the right contacts in place ready to go. This way I can save the producer a lot of time, effort, and most crucially money if I handle all the negotiations and avoid any misunderstandings then their risk will be substantially reduced Of course for all this effort I will take a commission amount".

--TWO-CHANNEL--

TWO-INTERMEDIARY CHANNEL SELLING refers to the MARKETING and SELLING of PRODUCTS VIA TWO INTERMEDIARIES TO CONSUMERS, selling to wholesalers who sell to retailers.

-PRODUCER -> WHOLESALER -> RETAILER -> CONSUMERS-

--WHOLESALER--

A WHOLESALER is a business that BUYS a large number of products from the producer 'IN BULK' which means the AVERAGE COST THEY PAY IS LOW, then they SELL SMALLER AMOUNTS AT HIGHER PRICES to shops (retailers) to MAKE PROFITS.

--RETAILER--

A RETAILER is a business that SELLS DIRECTLY TO CUSTOMERS usually in SMALL AMOUNTS.
They most often buy from WHOLESALERS.

--PRODUCER'S PERSPECTIVE--

"The factors of production in my country Ecuador makes it perfect for me to specialize in growing huge quantities of bananas. This fruit is so popular worldwide, especially the auk, but its only profitable to export it there in huge quantities and to only a few major port-destinations"

--UK WHOLESALER'S PERSPECTIVE--

"Hmmmm! as Ecuadorean bananas are so in demand in the UK and the producer will only sell in large quantities we should negotiate large bulk orders so we can get a lower average cost (purchasing economies of scale) and then store them at accessible locations in the UK, then sell at a higher price in smaller quantities to smaller shops?"

-UK RETAILER'S PERSPECTIVE--

"We get customers everyday at our Stratford-Upon-Avon store asking for bananas, but the amount we could sell daily is limited just to just a few hundred so it makes no sense ordering a large quantity directly from Ecuador, that's why we go to the wholesaler that has already bought the large quantity and we pay them for a smaller amount, of course we pay a higher price than they did, but they do all the delivery and storage"

-UK CONSUMER'S PERSPECTIVE--

"I can now get a few of my favourite Ecuadorean bananas from the other side of the world for an affordable price, this is fantastic!!"

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