CHAPTER 6

Place
LEARNING OUTCOMES
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.
Marketing channels facilitate the physical 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
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
Non store 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