Chapter 14 The marketing mix – Place

Distribution channels

1
Place
Place refers to how the product is distributed from the producer to the final consumer. There are
different distribution channels that a product can be sold through.

Distribution
Channel Explanation Advantages Disadvantages

– Delivery costs
may be high if
there are
customers over a
wide area
– All of the profit is – All storage costs
The product is sold to the earned by the producer must be paid for
consumer straight from the – The producer controls by the producer
manufacturer. A good example all parts of the – All promotional
is a factory outlet where marketing mix activities must be
products directly arrive at their – Quickest method of carried out and
Manufacturer own shop from the factory and getting the product to financed by the
to Consumer are sold to customers. the consumer producer

– The retailer
takes some of the
profit away from
the producer
– The producer
loses some control
– The cost of holding of the marketing
The manufacturer will sell its inventories of the mix
products to a retailer (who will product is paid by the – The producer
have stocks of products from retailer must pay for
other manufacturers as well) – The retailer will pay for delivery of
who will then sell them to advertising and other products to the
customers who visit the shop. promotional activities retailers
Manufacturer For example, brands like Sony, – Retailers are more – Retailers usually
to Retailer Canon and Panasonic sell their conveniently located for sell competitors’
to Consumer products to various retailers. consumers products as well

The manufacturer will sell large – Another

volumes of its products to a middleman is
wholesaler (wholesalers will added so more
have stocks from different profit is taken
manufacturers). Retailer will – Wholesalers will away from the
buy small quantities of the advertise and promote producer
Manufacturer product from the wholesaler the product to retailers – The producer
to Wholesaler and sell it to the consumers. – Wholesalers pay for loses even more
to Retailer One good example is the transport and storage control of the
to Consumer distribution of medicinal drugs. costs marketing mix

2
 Distribution
Channel Explanation Advantages Disadvantages

The manufacturer will sell their

products to an agent who has
specialized information about
the market and will know the
best wholesalers to sell them to.
This is common when firms are – Another
Manufacturer exporting their products to a middleman is
to Agent foreign country. They will need added so even
to Wholesaler a knowledgeable agent to take – The agent has more profit is
to Retailer care of the products’ specialised knowledge of taken away from
to Consumer distribution in another country the market the producer

What affects place decisions?

 The type of product it is: if it’s sold to producers of other goods, distribution would either be
direct (specialist machinery) or wholesaler (nuts, bolts, screws etc.).
 The technicality of the product: as lots of technical information needs to be passed to the
customer, direct selling is usually preferred.
 How often the product is purchased: if the product is bought on a daily basis, it should be sold
through retail stores that customers can easily access.
 The price of the product: if the products is an expensive, luxury good, it would only be sold
through a few specialist, high-end outlets For example, luxury watches and jewellery.
 The durability of the product: if it’s an easily perishable product like fruits, it will need to be sold
through a wide amount of retailers to be sold quickly.
 Location of customers: the products should be easily accessible by its customers. If customers are
located over the world, e-commerce (explained below) will be required.
 Where competitors sell their product: in order to directly compete with competitors, the
products need to be sold where competitors are selling too.

3
4
5
6
7
Chapter 16 - Technology and marketing mix

8
E-commerce
 Selling of goods and services through the internet
 Benefits to the business:
o Cheaper
o Customers encouraged to buy in bulk
o Business-2-Business e-commerce is cheaper
o Wider options for customers, brand image and loyalty
 Problems to business:
o Website must be maintained
o High distribution costs
o No direct contact
o Returns – higher costs
o Stock system will be needed
 Benefits to consumers:
o No need to go out
o Wide options
o Easy comparison
o Payment through net banking
o Easy access to imported goods
o Low prices
 Problems to consumers:
o Internet needed
o High chances of fraud and theft
o Products can’t be physically examined
o No direct contact

9
10