3.3.23.3.3 PLACE3.3.4

Once the PRODUCT and its PRICE have been decided, the next big decision the firm has to make is "HOW TO GET THE PRODUCT TO THE 'PLACE' WHERE YOUR TARGET CUSTOMERS AT WANTS TO BUY IT FROM?"

THIS DISTRIBUTION CHANNEL INVOLVES THE PRODUCER SELLING DIRECT FROM THEIR FACTORY OR SHOP TO THE CONSUMER ('F2C') OR FROM FACTORY TO FACTORY ('B2B')

• (+) VERY SIMPLE, 

• (+) SUITABLE FOR FRESH AGRICULTURAL PRODUCTS E.G FARMER'S MARKET

• (+) HIGHER PROFIT MARGIN, 

• (+) EASY TO SELL VIA THE INTERNET.

• (+) MORE CONTROL OVER BRAND IMAGE.

• (-) EXPENSIVE TO SEND BY POST (E.G. CARS)

• (-) NOT SUITABLE FOR PRODUCTS THAT CAN'T BE MAILED.

• (-) FACTORIES ARE NOT USUALLY NEAR WHERE CUSTOMERS SHOP.

• (-) IF SELLING FROM OWN RETAIL SHOP, HIGHER RENT COSTS.

• (-) HAVE TO PAY FOR ALL ADVERTISING.

THIS DISTRIBUTION CHANNEL INVOLVES THE PRODUCER SELLING TO RETAIL OUTLETS (HIGH-STREET SHOPS), IN WHICH CUSTOMERS SHOP AND PURCHASE THE PRODUCT.

• (+) CAN SELL LARGE QUANTITIES TO THE RETAILER 

• (+) ONLY NEED TO DELIVER TO RETAILER SO LESS DISTRIBUTION COSTS THAN CHANNEL # 1 

• (+) RETAILERS USUALLY LOCATED IN 'HIGH FOOTFALL' AREAS, SO GOOD SALES PROSPECTS

• (-) NO CONTACT WITH THE CUSTOMER, SO HARD TO GET FEEDBACK QUICKLY

• (-) REDUCED PROFIT MARGIN AS RETAILER ALSO NEEDS TO TAKE A CUT.

THIS DISTRIBUTION CHANNEL IS ONLY APPLICABLE TO WHEN THE PRODUCT IS 'EXPORTED', AND THE PRODUCER APPOINTS AN 'OVERSEAS AGENT' TO ACT ON THEIR BEHALF. THIS AGENT WILL IN TURN SELL TO THE LOCAL WHOLESALER, WHO BUYS. A HUGE BULK ORDER WHICH IN TURN 'BREAKS' BULK', INTO SMALLER QUANTITIES FOR SALE TO LOCAL RETAIL OUTLETS, IN WHICH CUSTOMERS SHOP AND PURCHASE THE PRODUCT.

PROS & CONS TO PRODUCER

• (+) THE AGENT WILL HAVE LOCAL KNOWLEDGE ABOUT WHERE BEST TO SELL THE PRODUCT

• (+) THE AGENT WILL SPEAK THE FOREIGN LANGUAGE SO NO MISCOMMUNICATIONS WILL OCCUR

• (-) LESS CONTROL OF HOW IT IS SOLD TO CUSTOMER WHICH CAN IMPACT BRAND IMAGE.

(TT) Consider the following three channels of distribution (1. Sell to wholesaler, 2. Sell directly to large retailers, 3. Open own shop in mall) TT could use for its products in country P.  Recommend the best channel to gain the highest sales.  Justify your answer. 

• Q1. IS IT SOLD TO CONSUMERS OR PRODUCERS?​ IF SOLD TO PRODUCERS THERE IS NO NEED TO INVOLVE RETAILERS​

• Q2. IS THE PRODUCT VERY TECHNICAL? ​IF YES, IT SHOULD BE SOLD BY AN EXPERT-DIRECT SALES EG AEROPLANE ENGINE​

• Q3. HOW OFTEN IS IT PURCHASED?​ IF SOLD DAILY THEN RETAIL OUTLETS SHOULD SELL THEM E.G. NEWSPAPERS​

• Q4. HOW EXPENSIVE IS IT?​ IF ITS IMAGE IS EXPENSIVE THEN IT NEEDS TO BE SOLD IN LIMITED HIGH-QUALITY OUTLETS​

• Q5. HOW PERISHABLE IS IT?​ IF IT GOES ROTTEN QUICKLY THEN IT MUST BE READILY AVAILABLE TO BE SOLD QUICKLY​

• Q6. WHERE ARE THE CUSTOMERS LOCATED?​ IF IN THE CITY, THEN RURAL OUTLETS ARE NOT NEEDED-IF ABROAD ETC...​

• Q7. WHERE DO COMPETITORS SELL THEIR PRODUCTS?​ WE NEED TO PLACE OUR PRODUCT IN DIRECT COMPETITION.

(P&P) P & P has developed a new type of paint. Consider the following three factors that will affect the channel of distribution the company will use [1. Where customers are located, 2. How often the product is purchased, 3. Where competitors sell their products]  Which factor will be the most important when deciding the best channel of distribution? Justify you answer. 

Answer each of these questions for your chosen product in the MYP project.

12-MARKERS

• (TT) Consider the following three channels of distribution (1. Sell to wholesaler, 2. Sell directly to large retailers, 3. Open own shop in mall) TT could use for its products in country P.  Recommend the best channel to gain the highest sales.  Justify your answer. 

• (P&P) P & P has developed a new type of paint. Consider the following three factors that will affect the channel of distribution the company will use [1. Where customers are located, 2. How often the product is purchased, 3. Where competitors sell their products]  Which factor will be the most important when deciding the best channel of distribution? Justify you answer. 

• (CB) Chris has to decide on the ‘place’ part of his marketing mix. Consider the advantages and disadvantages of the three following methods of distributing his biscuits to the target market [1. Selling through his own stalls in shopping malls, 2. Selling through a website, 3. Selling to large supermarkets]. Recommend which will be the best one to use. Justify your choice.