Republic of the Philippines

Department of Education
Region V SHS
Division of Sorsogon

PRINCIPLES OF MARKETING
Quarter 4, LAS 11, Week 11
Place and the Distribution Channels, Its Functions and Nature of Supply Chain Management

Name of Student: __________________________________________________

Learning Area-Grade Level: ________________________________________
Date: _________________________________________

I. Introductory Concept

The third P in the four P’s of marketing (marketing mix), Place, is covered in this
activity sheet. It includes issues such as types and functions of distribution channels and
the nature of supply chain management. It will give a clear idea on making channel
decisions.
II. Learning Competencies

Discuss the structure of distribution channels, its functions, and the nature of supply chain
management. (ABM_PM11-IIae-18)
After going through this Learning Activity Sheet, you are expected to:
1. Discuss the structure of distribution channels
2. Identify types and functions of distribution channel
3. Explain the nature of supply chain management

III. Activities

A. LET US STUDY

The Place
In the marketing mix, the process of moving products from the producer to the
intended user is called place (a.k.a. distribution channel). In other words, it is how your
product is bought and where it is bought. This movement could be through a combination of
intermediaries such as distributors or wholesalers and retailers.

Through the use of the right place, a company can increase sales and maintain these over a
longer period of time. In turn, this would mean a greater share of the market and increased
revenues and profits.

Correct placement is a vital activity that is focused on reaching the right target audience at the
right time. It focuses on where the business is located, where the target market is placed, how
best to connect these two, how to store goods in the interim and how to eventually transport
them.
Types of Distribution Channels There are four main types of distribution channels.
These are:

Direct

In this channel, the manufacturer directly provides the product to the consumer. In this
instance, the business may own all elements of its distribution channel or sell through a
specific retail location. Internet sales and one on one meetings are also ways to sell directly to
the consumer. One benefit of this method is that the company has complete control over the
product, its image at all stages and the user experience.

Indirect

In this channel, a company will use an intermediary to sell a product to the consumer. The
company may sell to a wholesaler who further distributes to retail outlets. This may raise
product costs since each intermediary will get their percentage of the profits. This channel
may become necessary for large producers who sell through hundreds of small retailers.

Dual Distribution

In this type of channel, a company may use a combination of direct and indirect selling. The
product may be sold directly to a consumer, while in other cases it may be sold through
intermediaries. This type of channel may help reach more consumers but there may be the
danger of channel conflict. The user experience may vary and an inconsistent image for the
product and a related service may begin to take hold.

Reverse Channels

The last, most non tradition channel allows for the consumer to send a product to the
producer. This reverse flow is what distinguishes this method from the others. An example of
this is when a consumer recycles and makes money from this activity.

Types of Intermediaries

1. Agents
The agent is an independent entity who acts as an extension of the producer by representing
them to the user. An agent never actually gains ownership of the product and usually make
money from commissions and fees paid for their services.

2. Wholesaler
Wholesalers are also independent entities. But they actually purchase goods from a
producer in bulk and store them in warehouses. These goods are then resold in smaller
amounts at a profit. Wholesalers seldom sell directly to an end user. Their customers are
usually another intermediary such as a retailer.
3. Distributors
Similar to wholesalers, distributors differ in one regard. A wholesaler may carry a variety of
competition brands and product types. A distributor however, will only carry products from
a single brand or company. A distributor may have a close relationship with the producer.

4. Retailers
Wholesalers and distributors will sell the products that they have acquired to the retailer at
a profit. Retailers will then stock the goods and sell them to the ultimate end user at a profit.

Functions of a Channel

The primary purpose of any channel of distribution is to bridge the gap between the producer
of a product and the user of it, whether the parties are located in the same community or in
different countries thousands of miles apart. The channel of distribution is defined as the most
efficient and effective manner in which to place a product into the hands of the customer. The
channel is composed of different institutions that facilitate the transaction and the physical
exchange.

Institutions in channels fall into three categories:

 The producer of the product: a craftsman, manufacturer, farmer, or other extractive
industry producer
 The user of the product: an individual, household, business buyer, institution, or
government
 Certain middlemen at the wholesale and/or retail level

A channel performs three important functions. Not all channel members perform the
same function. The functions are:

 Transactional functions: buying, selling, and risk assumption

 Logistical functions: assembly, storage, sorting, and transportation
 Facilitating functions: post-purchase service and maintenance, financing, information
dissemination, and channel coordination or leadership

These functions are necessary for the effective flow of product and title to the customer and
payment back to the producer.

The Supply Chain

is a system of organizations, people, activities, information, and resources involved in

moving a product or service from supplier to customer. Supply chain activities involve the
transformation of natural resources, raw materials, and components into a finished product
that is delivered to the end customer.

The marketing channel generally focuses on how to increase value to the customer by having
the right product in the right place at the right price at the moment the customer wants to buy.
The emphasis is on the providing value to the customer, and the marketing objectives usually
focus on what is needed to deliver that value.

Supply chain management takes a different approach. The Council of Supply Chain
Management Professionals (CSCMP) defines supply chain management as follows:

Supply Chain Management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third-party service providers, and customers.

Supply Chain vs. Distribution Channels

Successful organizations develop effective, respectful partnerships between the marketing and
supply chain teams. When the supply chain team understands the market dynamics and the
points of flexibility in product and pricing, they are better able to optimize the distribution
process. When marketing has the benefit of effective supply chain management—which is
analyzing and optimizing distribution within and beyond the marketing channels—greater
value is delivered to customers.

B. LET US PRACTICE

Exercise 1. Direction: Tick (/) the sentence that expresses what is true about supply chain
management.

________1. The supply chain is broader than distribution channels.

________2. Distribution channels involve the transformation of natural resources, raw
materials and components into a finished product.
________3. There is a need to manage the full chain of organization and transactions from
raw materials to final delivery.
________4. The emphasis of supply chain is on providing value to the customer.
________5. Distribution channel is broader than supply chain.
________6. Distribution channels are purely customer facing.
________7. Supply chain professionals are specialists in the delivery of goods.
________8. Supply chain is part of the marketing mix.
________9. Distribution channel emphasize a stronger market view of the customer
expectations.
________10. Supply chain management can analyze and optimize distribution within and
beyond the distribution channels.

C. LET US REMEMBER

Distribution channels are important to business as they allow for the smooth delivery of
goods or services to a customer. It is said that location is one of the most important parts of
marketing strategy.
 Marketing channels play an important role in the marketing of goods and services.
Specifically, they perform the following functions: they routinize decisions and work; they
finance the process for moving goods from the producers to the consumers; they are active
participants in the pricing process; they serve as a channel of communication between the
producers and the consumers’; they assist in the promotional aspects of marketing; and they
minimize the number of transactions in the system.

Distribution channel intermediaries are middlemen who play a crucial role in the
distribution process. These middlemen facilitate the distribution process through their
experience and expertise.

´Fair chain deduce market dynamics that enables optimization of distribution process.’

D. LET US APPRECIATE

Exercise 2. Direction: Fill in the necessary distribution channel so that products will
reach the consumer. Take note that marketing channels listed in the word pool can be
used as many times as it is necessary.

E. EVALUATION

Exercise 3. Directions: Fill in the blanks to complete the conceptual information about
place (distribution).

In the marketing mix, the process of moving products from the producer to the intended user
is called 1. _______________________. In other words, it is how your product is bought and
2. _______________________ it is bought. This movement could be through a combination
of 3. _______________________ such as distributors or wholesalers and retailers. Through
the use of the 4. _______________________, a company can increase sales and maintain
these over a longer period of time. In turn, this would mean a greater share of the market and
 increased revenues and profits. Correct placement is a vital activity that is focused on
reaching the right target audience at the right time. It focuses on where the business is 5.
_______________________, where the target market is placed, how best to connect these
two, how to store goods in the interim and how to eventually transport them. There are four
main types of distribution channels. These are: Direct, Indirect, Dual Distribution and 6.
_______________________. Distribution channel intermediaries are 7.
_______________________ who play a crucial role in the distribution process. These
middlemen facilitate the 8. _______________________ through their experience and
expertise. 9. _______________________ encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics management
activities. Importantly, it also includes coordination and collaboration with 10.
_______________________, which can be suppliers, intermediaries, third-party service
providers, and customers.

IV. Answer Key

Let Us Practice Let Us Practice More Evaluation

Exercise No. 1 Exercise No. 2 Exercise No. 3

What I Can What is It:
Do:
1.Place
1./ 2.Where
1.Producer
2. 3.Intermediaries
2.Producer
3./ 4.Right place
4. 3.Producer
4.Agent 5.Located
5.
5.Wholesaler 6.Reverse channel
6./
7./ 6.Retailer 7.Middlemen
8. 7.Consumer 8.Distribution process
9./ 8.Wholesaler 9.Supply chain
10./ 9.Retailer management
10.Consumer 10.Channel partners

V. References

Alcoran Alaric Brian. 2018. Principles of Marketing. Philippines: Bookline Publishing Corporation.
"Geographical Pins | Free SVG". 2020. Freesvg.Org. https://freesvg.org/geographical-pins.
.

Prepared by: Validated by:

MICHAEL F. AREVALO DAISY G. ERESTAIN

Bulan National High School Casiguran Technical Vocational School

JESSICA B. LIM
Bulan National High School