Embedded Files
--WHAT IS THE ROLE OF 'PLACE' WITHIN THE MIX?--
--WHAT IS THE ROLE OF 'PLACE' WITHIN THE MIX?--
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 WANTS TO BUY IT FROM?"
--DISTRIBUTION CHANNELS--
--IMPORTANT DEFINITIONS--
--IMPORTANT DEFINITIONS--
--PRODUCERS--
--PRODUCERS--
PRODUCERS are the businesses that CREATE GOODS or SERVICES. using the factors of production labor, capital, and raw materials.
--INTERMEDIARY: WHOLESALERS--
--INTERMEDIARY: WHOLESALERS--
WHOLESALERS are businesses that BUYS GOODS in VERY, VERY LARGE QUANTITIES FROM PRODUCERS and then SELL THEM in SMALLER BULK QUANTITIES that match RETAILERS' NEEDS, and NOT DIRECTLY to the CONSUMER.
Don't forget large producers desire to sell very large quantities and retailers do not immediately want or need large quantities so someone in the middle agrees to buy IN BULK (With a very low unit cost to account for storage and risk) and BREAK IT UP, into retailer size amounts and sell it to them at a higher unit rate.
--INTERMEDIARY: RETAILERS--
--INTERMEDIARY: RETAILERS--
RETAILERS are businesses that PURCHASE PRODUCTS from WHOLESALERS and then SELL THEM DIRECTLY TO CONSUMERS FOR PERSONAL USE, at a higher price than they bought them from the wholsalers, through physical stores or online platforms.
--INTERMEDIARY: AGENT--
--INTERMEDIARY: AGENT--
AGENTS are intermediaries who ARRANGE SALES BETWEEN BUYERS AND SELLERS BUT DO NOT USUALLY TAKE OWNERSHIP OF THE GOODS.
Agents earn a commission or fee for their services. They are commonly used in industries like real estate, insurance, and international trade to negotiate on behalf of producers or clients.
NOTE: In IGCSE we are more focused on overseas agents when a producer attempts to sell their products overseas.
--END-USER: CONSUMERS--
--END-USER: CONSUMERS--
CONSUMERS are individuals or households that PURCHASE GOODS or SERVICES FOR PERSONAL USE, not for resale or business purposes. They are the END-USERS in the distribution chain and play a key role in driving demand in the economy.
--CHANNEL TYPES--
--CHANNEL TYPES--
PRODUCER -> CONSUMER
PRODUCER -> CONSUMER
This type of distribution channel involves the PRODUCER selling DIRECT ('DIRECT SELLING') to the CONSUMER, meaning that there are NO INTERMEDIARIES.
(+) VERY SIMPLE,
(+) SUITABLE FOR FRESH AGRICULTURAL PRODUCTS
(+) HIGHER PROFIT MARGIN, as you don't pay middlemen
(+) EASY TO SELL VIA THE INTERNET.
(+) MORE CONTROL OVER BRAND IMAGE.
(-) EXPENSIVE TO SEND BY POST/SHIPPING (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.
PRODUCER -> RETAILER -> CONSUMER
PRODUCER -> RETAILER -> CONSUMER
This type of distribution channel involves the PRODUCER selling to a RETAILER in which the CONSUMER shops. Below are the pros and cons when compared to CHANNEL # 1:
(+) PRODUCER CAN SELL LARGER QUANTITIES TO THE RETAILER AT ONE TIME, UNLIKE CHANNEL # 1
(+) ONLY NEEDS TO DELIVER TO THE RETAILER SO LESS DISTRIBUTION COSTS THAN CHANNEL # 1
(+) RETAILERS USUALLY LOCATED IN 'HIGH FOOTFALL' AREAS, SO LESS NEED TO ADVERTISE FOR CUSTOMERS.
(-) NO CONTACT WITH THE CUSTOMER, SO HARD TO GET FEEDBACK.
(-) REDUCED PROFIT MARGIN AS RETAILER'S TAKE A % CUT.
PRODUCER -> WHOLESALER -> RETAILER -> CONSUMER
PRODUCER -> WHOLESALER -> RETAILER -> CONSUMER
This type of distribution channel involves the PRODUCER selling a very large quantity ('IN BULK') to a WHOLESALER at a low unit price who in turn sells a smaller quantity ('BREAKS-BULK') to RETAILERS, at a slightly higher price, who in turn sells DIRECTLY to the CONSUMER.
Below are the pros and cons when compared to CHANNEL # 2:
PROS & CONS TO RETAILERS
(+) WHOLESALERS OFTEN GIVE CREDIT TO RETAILERS
(+) WHOLESALERS MAY OFFER DELIVERY
(+) RETAILER DOESN'T NEED TO HOLD A LOT OF STOCK
(+) RETAILER CAN BUY THE EXACT QUANTITY THEY NEED
(+) WHOLESALERS CAN GIVE ADVICE TO RETAILERS ON WHAT GOODS ARE SELLING WELL
(-) WHOLESALERS ADD A MARK-UP SO RETAILER PAYS MORE
(-) THIS EXTRA LINK IN THE CHAIN MEANS THE GOODS TAKE LONGER TO GET TO THE CUSTOMER
(-) WHOLESALERS MAY BE FAR FROM THE RETAILER
PROS & CONS TO PRODUCERS
(+) PRODUCER/MANUFACTURER HAS LESS PAPERWORK
(-) EVEN SMALLER PROFIT MARGIN AFTER WHOLESALER AND RETAILER CUTS
PRODUCER -> AGENT -> WHOLESALER -> RETAILER -> CONSUMER
PRODUCER -> AGENT -> WHOLESALER -> RETAILER -> CONSUMER
In the IGCSE this type of distribution channel is only ever considered if the product is being sold overseas ('Exported') and involves the PRODUCER appointing an 'Overseas expert' who will act as intermediary between the producer and overseas WHOLESALER and so on...
PROS & CONS TO PRODUCERS
(+) 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.
--PP TASK--
--PP TASK--
(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.
--METHODS OF DISTRIBUTION--
SOGO
7-11
POUNDLAND
RETAIL PARKS
WET MARKET
--TASK--
--TASK--
FIND A REAL WORLD EXAMPLE FOR EACH METHOD IN HK.
--WHICH METHOD IS BEST?--
--HOW TO DECIDE?--
--HOW TO DECIDE?--
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.
--HOW TO DECIDE?--
--HOW TO DECIDE?--
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.
--TASK--
--TASK--
--PAST PAPER: PLACE--
--PAST PAPER: PLACE--
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.
Page updated
Google Sites
Report abuse