CHAPTER 6

PLACE
6.53
L E A R N I N G O U T C O M E S

6.1 Channel intermediaries and their

functions
6.2 Consumer channel structure
6.3 Level of channel distribution intensity
6.4 Understanding retailing
6.4.1 Major types of retail operations
6.4.2 Non store retailers
6.5 Franchising
6.5.1 Franchisor and franchisee
6.5.2 Basic forms of franchises
LO 1 : CHANNEL INTERMEDIARIES
AND THEIR FUNCTIONS
Channel Intermediaries
Marketing channel (also called a channel of
distribution) is a business structure of
interdependent organizations that are involved
in the process of making a product or service
available for use or consumption by end
customers or business users.
Market ing c h ann el s f a c i l i t a t e t h e p h y s i c a l
movement of goods from location to location,
thus representing “place” or “distribution” in
the marketing mix and encompassing the
processes involved in getting the right product to
the right place at the right time.
LO 1 : CHANNEL INTERMEDIARIES
AND THEIR FUNCTIONS
Channel Intermediaries
Many different types of organizations
participate in marketing channels. Channel
members also sometimes referred to as
intermediaries, resellers, and middlemen
which includes :
• wholesalers,
• distributors, and
• retailers,
They negotiate with one another, buy and
sell products, and facilitate the change of
ownership between buyer and seller in the
course of moving the product from the
manufacturer into the hands of the final
consumer.
 LO 1 : CHANNEL INTERMEDIARIES AND
THEIR FUNCTIONS
Channel Intermediaries
Many different types of organizations participate in marketing
channels. Channel members also sometimes referred to as
intermediaries, resellers, and middlemen which includes :
• Retailers
• Merchant Wholesalers
• Agent and brokers
They negotiate with one another, buy and sell products, and
facilitate the change of ownership between buyer and seller in the
course of moving the product from the manufacturer into the hands
of the final consumer.
LO 1 : CHANNEL INTERMEDIARIES
AND THEIR FUNCTIONS

Retailer Merchant wholesaler Agents and brokers

A channel intermediary An institution that Wholesaling

that sells mainly to buys goods from intermediaries who
customers manufacturers, takes facilitate the sale of a
title to goods, stores product by representing
them and resells and channel members
ship them

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LO 1 : CHANNEL INTERMEDIARIES AND
THEIR FUNCTIONS
Channel functions performed by intermediaries
 LO 1 : CHANNEL
INTERMEDIARIES AND
THEIR FUNCTIONS
Channel functions performed by intermediaries
 LO 2 : CONSUMER CHANNEL
STRUCTURE
A product can take many routes to reach its final
consumer. Marketers search for the most efficient
channel from the many alternatives available.
Marketing a consumer convenience good like gum or
candy differs from marketing a specialty good like a
Mercedes-Benz. The two products require very different
distribution channels.
LO 2 : CONSUMER CHANNEL STRUCTURE
LO 3 : LEVEL OF CHANNEL
DISTRIBUTION INTENSITY
LO 4 : UNDERSTANDING RETAILING

Retailing refers to all activities directly related to the sale

of goods and services to the ultimate consumer for
personal, nonbusiness use—has enhanced the quality of our
daily lives.
When we shop for groceries, hairstyling, clothes, books,
and many other products and services, we are involved in
retailing. The millions of goods and services provided by
retailers mirror the needs and styles of Malaysian
consumers.
LO 4 : UNDERSTANDING RETAILING

Major types of retail operations

LO 4 : UNDERSTANDING
RETAILING
N o n s t o r e
retailers
LO 5 : FRANCHISING
A franchise is a continuing relationship in which a
franchisor grants to a franchisee the business rights to
operate or to sell a product.
• Franchisor is the originator of a trade name, product,
methods of operation, and so on, that grants operating
rights to another party to sell its product.
• Franchisee is an individual or business that is granted
the right to sell another party’s product.
The franchisor originates the trade name, product,
methods of operation, and so on. The franchisee, in
return, pays the franchisor for the right to use its name,
product, or business methods.
LO 5 : FRANCHISING
A franchise agreement between the
two parties usually lasts for 10 to 20
years, at which time it can be renewed
if both parties are agreeable.
To be granted the rights to a franchise,
a franchisee usually pays an initial,
onetime franchise fee. The amount of
this fee depends solely on the individual
franchisor.
In addition to this initial franchise fee,
the franchisee is expected to pay
royalty fees, usually in the range of 3
to 7 percent of gross revenues. The
franchisee may also be expected to pay
advertising fees, which usually cover
the cost of promotional materials and,
if the franchise organization is large
enough, regional or national
advertising.
LO 5 : FRANCHISING
Basic forms of franchises
THANK YOU

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