THE 

FIRST CULTURE 

Chapter 8 
PLACE
1. Distribution is often seen as the Cinderella of the marketing mix.

2. The purpose of distribution is to facilitate purchase.

3. Distribution: a key marketing function: the process of getting products to consumers. Although
some manufacturers can and do sell direct to consumers, practical considerations require most to
use distribution system composed of independent middlemen, usually wholesalers and retailers.

4. Distribution can also refer to a measure of market penetration: the number of retail outlets which
stock and sell a particular product as a percentage of all outlets that could possibly sell that product.
Pocket Marketing

5. Distribution Channel: the means of getting the goods to the consumer.

6. Intermediary: any firm which buys from one post of the chain and sell to another in the process of
transferring the goods from the producer to the consumer.

7. The definition of distribution is that it does not only cover the physical distribution of products.
It is concerned with all aspects of getting the product to the consumer, involving the choice of
which outlets, channels and intermediaries to use.

8. The five ‘right’ of distribution

1. The RIGHT product

2. In the RIGHT place
3. At the RIGHT time
4. In the RIGHT quantity
5. For the RIGHT price

9. The right product means the product which the customer asks for, whether by brand or by type.

10. The right place means where the customer would expect to be able to buy the product and where
the customer wants to buy the product.

11. The right time may be considered on a seasonal basis; the products which are seasonal such as
produce in the greengrocer or fashion in the shops is subject to the customers normal expectations
of timeliness. Religious holidays and back-to-school are other examples.

12. The right quantity is a clear expectation of customers. They expect to be able to buy in convenient
forms and in convenient amounts for their rate of usage, storage and capacity to carry products.

13. The right price is the price that meets the customer’s expectations and provides value. Price is
a function of the value concept. Customers expect value which is reflected by the relationship of
price and performance.
14. Independently owned and operated distributors may well have their own objectives, strategies
and plans.

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15. Direct distribution is common for many industrial and/or customized systems suppliers and used
to be common in some consumer markets, such as dairy products, insurance and newspapers.

16. The growth of Internet retailing has led to a resurgence of direct distribution in some markets,
including groceries.

17. For consumer goods, holding stock at the point of sale can be very costly especially in city centre
retail locations. A good stock control system is essential, designed to avoid ‘stockouts’ while
keeping stockholding costs low.

18. Display
Presentation of the product at the local level is often a function of the local distributor. Again,
specialist help from merchandisers can be bought in but decision on layout and display need to be
taken by local distributors, often following patterns produced centrally.

19. Retailers
These are traders operating outlets which sell directly to households. They may be classified by:
(a) Type of goods sold (for example, hardware, and furniture)
(b) Type of service (sell-service, counter service)
(c) Size
(d) Location (rural, city-centre, suburban shopping mall, out-of-town shopping centre).

Another classification is:

(a) Independent retailers (including the local corner shop, although independents are not
always as small as this)
(b) Multiple chains. Some of these are associated with one class of product: others are
variety chains, holding a wide range of different stocks; still others are voluntary groups
of independents, usually grocers.

20. Wholesalers
These are intermediaries who stock a range of products from competing manufacturers to sell on to
other organization such as retailers. Many wholesalers specialize in particular products. Most deal
in consumer goods, but some specialize in industrial goods (for example, steel stockholders and
builders’ merchants.)

21. Distributors and dealers

These are organizations which contract to buy a manufacturer’s goods and sell them to customers.
Their function is similar to that of wholesalers, but they usually offer a narrower product range,
sometimes (as in the case of most car dealers) the products of a single manufacturer.
In addition to selling on the manufacturer’s product, distributors often promote the products and
provide after-sales service.
22. Agent
Agent differs from distribution in the following ways.
(a) Distributors buy the manufacturer’s goods and re-sell them at a profit.
(b) Agents do not purchase the manufacturer’s goods, but earn a commission on whatever
sales they make.

23. Franchisees

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These are independent organizations which in exchange for an initial fee and (usually) a share of
sales revenue are allowed to trade under the name of a parent organization.

24. Multiple stores

These stores (for example, supermarkets) buy goods for retailing direct from the producer, many of
them under their own label brand name.

25. Direct selling

This can take place by various means:
(a) Mail order
(b) Telephone selling
(c) Door- to- door selling
(d) Personal selling in the sale of industrial goods
(e) A vertically-integrated organization which includes both manufacturing and retail outlets
(f) Computer-shopping or TV shopping

26. The Internet has contributed to a process known as disintermediation, giving the consumer direct
access to information that would otherwise require in intermediary, such as a sales person or retail
outlet.

27. Direct distribution means the product going directly from producer to consumer without the use of
a specific intermediary.

28. Indirect distribution refers to systems of distribution, common among manufactured goods, which
make use of an intermediary; a wholesaler, retailer or perhaps both.

29. In setting up a channel of distribution, the supplier has to take into account.
 Customers
 Product characteristics
 Distribution characteristics
 The channel chosen by competitors
 The supplier’s own characteristics

30. Some product characteristics have an important effect on design of the channel of distribution.
(a) Perishability or durability
(b) Customization
(c) After-sales service/technical advice

31. The capacity of the distributor to take on the distributive functions is obviously an important
influence on the supplier’s choice.

32. Factors favouring the use of intermediaries are

(a) Insufficient resources to finance a large sales force.
(b) A policy decision to invest in increased productive capacity rather than extra marketing
effort.
(c) The supplier may have insufficient in-house marketing expertise in selling to retail stores.
(d) The assortment of products may be insufficient for a sales force to carry. A wholesaler
can complement a limited range ad make more efficient use of his sales force.
(e) Intermediaries can market small lots as part of a range of goods. The supplier would
incur a heavy sale overhead if its own sales force took ‘small’ individual orders.

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(f) Large number of potential buyers spread over a wide geographical area (typically
consumer markets).

33. Multi-channel decisions

A producer serving both industrial and consumer markets may decide to use intermediaries for his
consumer division and direct selling for his industrial division.

34. Trust: the degree to which partners are confident that each will act in the best interests of
the relationship.

35. Commitment: the desire to maintain a valuable relationship.

36. Logistics involves order processing, transportation, stock management, warehousing and customer
services.

37. Customer service involves defining adequate levels of performance for

(a) order cycle time (order to delivery)
(b) accuracy of order processing and
(c) quality of delivered goods

38. Logistics management includes physical distribution and materials management. It therefore
encompasses the inflow of raw materials and goods together with the outflow of finished products.

39. Logistics management has developed because of an increased awareness of;

(a) Customer benefits
(b) The cost savings
(c) Trends in industrial purchasing

40. Logistics managers organize inventories, warehouses, purchasing and packaging to product
an efficient and effective overall system.

41. JIT: an inventory control system which delivers input to its production or distribution site only at
the rate and time it is needed. Thus it reduces inventories whether it is used within the firm or as
a mechanism regulating the flow of products between adjacent firms in the distribution system
channel. It is a pull system which replaces buffer inventories with channel member co-operation.

42. JIT aims to produce instantaneously, with perfect quality and minimum waste.

43. Problem with JIT have been identified, according to some commentators. These include the
following.
(a) Conflicts over customers
(b) Conflicts with the workforce
(c) Disruption

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