CHAPTER - FIVE

5.3 PLACE
/DISTRIBUTION
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 Introduction and definition
• It is the last of the marketing mix tools – place.

• an individual firm’s success depends not only on how

well it performs but also on how well its entire
marketing channel competes with competitors’ channels.

• For example, Mercedes can make the world’s best cars

but still not do well if its dealers perform poorly in sales
and service against the dealers of Ford, Toyota, BMW or
Honda.

• In order to bring value to customers, Mercedes must

choose its channel partners carefully and practice
sound partner relationship management.
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 Cont…
• The basic functions in distribution are buying,
selling, transporting, and warehousing.

• Through these activities distribution adds

place, time and possession utility to goods.

• Channel of distribution and physical

distribution

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 CHANNELS OF DISTRIBUTION
• A set of interdependent organizations involved in
the process of making a product or service available
for use or consumption by the consumer or
industrial user.
• Most producers do not sell their products directly to
final users, rather work with marketing
intermediaries to bring their products to market.
• The distribution system consists of all institutions
involved in the buying and selling functions when a
product moves from the producer to the final user.

 Direct and indirect channel of distribution

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 Major channels of distribution

 Distribution channels for consumer goods

• Producer Consumer
• Producer__ retailer Consumer
• Producer __ wholesaler retailer Consumer
• Producer __agent __wholesaler __retailer-Consumer

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 Cont….
 Distribution channels for industrial goods
• Producer ______________________ Industrial user
• producer ___industrial distributor ___Industrial user
• producer ________ agent ________Industrial user

• Producer_ agent _industrial distributor Industrial –

user
 Distribution channels for services
Producer____________ consumer/user
Producer ______ agent _____consumer/user
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 marketing intermediaries
• People or institutions who specialize in
performing operations or rendering services
which are involved directly in the transfer of
goods from producers to users.

• Marketing intermediaries (also called

middlemen) are classified into two major
categories; merchant and agent middlemen.

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 Channel functions
• Information
• Promotion.
• Contact.
• Matching.
• Negotiation
• Physical distribution
• Financing
• Risk taking
The question is not 'whether these functions need to be
performed, but rather who is to perform them.
The producer can eliminate or substitute institutions in the
channel system, but the functions cannot be eliminated.
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 Factors Affecting Channel Decision / Choice
1. Market Considerations:

A logical starting point is to consider the target

market -its needs, structure, and buying
behavior.

Type of market.
Number of potential customers.
Geographic concentration of the market.
Order size.
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 Cont….
2. Product Considerations:

• While there are numerous product- related

factors to consider, we will highlight three.

Unit value.
Perish ability.
Technical nature of a product

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 Cont….
3. Intermediary considerations:
Here we begin to see that a company may not be
able to arrange exactly the channel it desires:

- Services provided by intermediaries.

- Availability of desired intermediary.
- The intermediary’s attitude towards
the producer policies.

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 Cont….
4. Company Considerations:
Before choosing a distribution channel for a
product, a company should consider its own
situation.

- Desire for channel control.

- Service provided by seller.
- Ability of management.
- Financial resources

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 Determining The Intensity Of Distribution
• Intensity: refers to the number of middlemen to
be employed in transferring the goods from
producers to consumers.

 Three possible strategies are available:

A. intensive (widespread market coverage, channel

acceptance, and high volume sales.),
B. selective, and
C. exclusive distributions.
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 PHYSICAL DISTRIBUTION
• Once firms have selected channels of distribution
to carry their products to final markets, they have
to examine the physical side of distribution.

• that is, how firms arrange for the efficient storing,

handling, and transporting goods so that they will
be at the place and time needed.

• Customer attraction and satisfaction is deeply

affected by the seller’s physical distribution
capabilities.
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 Cont….
• Physical distribution comprises the tasks
involved in planning and implementing the
physical flows of materials and final goods from
points of origin to points of use or consumption
to meet the needs of customers at a profit.
• Companies can attract additional customers by
offering better service, or by cutting prices
through reducing physical distribution costs of
which transportation is the major one.
• Firms can lose customers when they fail to
make their goods available.
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 Cont….
• The major objective of physical distribution
may be stated as getting the right goods to
the right place at the right time for the least
possible cost.
• In fact, increasing customer service and
minimizing the cost of the physical
distribution may be contradictory.
• But a firm should be active enough to balance
them in a way it can generate reasonable
profit without adversely affecting the
satisfaction of its customers.
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 Cont….
• Accordingly, the starting point of designing the
physical distribution system is to analyze what
the customers want in the way of service and
what the competitors are offering.

• Therefore, in designing its physical distribution

system that will minimize the cost of achieving
its established objectives, the major decision
issues are:

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 Functions of physical distribution

• How should orders be handled? (order

processing)
• Where should stocks be located? (warehousing)
• How much stock should be kept on hand?
(inventory management)
• How should goods be shipped? (transportation)

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