The Marketing Mix
The 4 P’s
Place
Learning Objectives
Discuss different distribution channels and
assess their appropriateness in different
circumstances
HL – Evaluate the effectiveness of distribution
channels
HL – Examine how organisations can increase
the efficiency of the supply chain
Place
• Decisions concerned with how products
should pass from manufacturer to the final
customer
• There are several different channels of
distribution available for firms to use
– Channel of distribution
• This refers to the chain of intermediaries a product
passes through from producer to final consumer
Wholesalers
Direct
selling
Agents
e.g.Ticket agents
Place
Personal selling
Retailers
Authorised
dealers
Channels of Distribution
Producer
Consumer
Producer
Retailer
Consumer
Producer
Wholesaler
Retailer
Consumer
Producer
Agent
Retailer
Consumer
Wholesaler
Retailer
Consumer
Producer
Agent
Intermediaries
Types of distribution channels
Distribution channels are the routes to the market that a product takes from
producers to the final customer
There are a number of distribution channels available to firms
Short distribution channels are where the producer sells either directly to the
customer or through a retailer
Long distribution channels are where there are more than one intermediary
(middle person) between the producer and the customer
Types of distribution channels
Short distribution routes are from the producer direct to the customer (direct
selling) or via a retailer:
PRODUCER
CONSUMER
RETAILER
Types of distribution channels
Long distribution channels can go through a number of intermediaries:
PRODUCER
WHOLESALER
RETAILER
CONSUMER
Types of distribution channels
Producers can use direct selling whereby they sell directly to the final
consumer
Often, producers use retailers who sell products on to the general public
Wholesalers buy large quantities of supplies from producers and sell them on
in smaller quantities. For example, a corner shop might go to a wholesaler to
buy their products
Increasingly, firms are using e-commerce benefiting from the power of the
internet to sell on their products
Wholesaler
• Act as a link between
producer and retailer
• Buy in bulk and break
down to smaller units to
retailer
• They act as a storage
place
Choosing a distribution channel
• Important because
– Consumers may need easy access to a firms
products
– Manufacturers need outlets for their products
that give as wide a market coverage as possible
– Retailers will sell producers’ goods and will
demand a mark up so using few intermediaries
would be an advantage
Choose the right channel of distribution.
1.
2.
3.
4.
Direct to consumer
Through a retail outlet
Through a wholesaler
Using an agent
Choosing appropriate outlets/distributors
Type of product
The characteristics of the product need to be taken into account. For
example Coca Cola do not ship their product to the UK from the USA.
Instead, they ship over the syrup and the actual product is then made in
the UK using British water.
The market
It is important that the customers being targeted can access the product.
High streets are accessible by public transport so that all customers can
shop, not just those with cars. Niche markets / Mass markets?
Quantity and Frequency of sales
If only a few low cost items are being delivered it would not be cost
effective to send them hundreds of miles. If a product is regularly being
delivered then a firm might invest in a delivery system.
Choosing appropriate outlets/distributors
Geographical Location
How far is the target market from the firm? The firm will have to take into
account the nearness of the market. Regional markets are far more
accessible than international markets.
Cost
This is very important for a firm. An expensive distribution method will
reduce the contribution being made to a firm’s product. Therefore, the
firm must ensure that the method is cost effective.
Competition
Firms will take into account distribution methods used by their
competitors. In fact, some firms use the same distributors as their
competitors.
Choosing appropriate outlets/distributors
Channel Strategy
Choose a product from the following:
• Hairdressing
• Newspapers
• Computers
• Health gym
•Type of Product
•Market
•Quantity and Frequency
•Geographical Location
•Cost
•Competition
Explain how the six points listed might affect the distribution of these products.
For example, furniture is large and difficult to transport.
Customers will use stores to select their product and it will be delivered at a later date.
Firms will normally deliver more than one item of furniture to different addresses at the same time.
This will save on costs, although the delivery firm is likely to charge the final customer as well.
Some firms will have their own, in-house delivery service,
but some may use the same delivery firm as their competitors.
These firms are likely to work on a regional basis to save on costs
Appropriate distribution channels
• Recent trends in distribution channels in
recent years include:
– Increased use of the internet for direct selling
– Large supermarkets performing function of
wholesaler
Effectiveness of distribution channels
Type \ main features Examples
Direct selling
•
•
•
One intermediary channel
•
Mail order from
manufacturer
Airline tickets and
hotel sold over the
phone
Farmers markets
Holiday companies
selling via travel agent
Possible benefits
Possible drawbacks
•
No intermediaries so
no mark up
Producer has complete
control over marketing
mix
Quicker
Direct contact with
customers
•
•
Retailer holds stocks
and pays for the cost of
this
Retailer has product
displays
Retailers often in
locations which are
convenient for
customer
•
Wholesaler holds
goods and buys in bulk
Reduces stock holding
costs
Maybe the best way to
enter foreign markets
•
•
•
•
•
•
•
Two intermediary channels
•
Large countries with
great distances to each
retailer, many
consumer goods are
distributed this way.
E.G. Electrical goods
•
•
•
•
•
•
•
•
•
Storage and stock costs
May not be convenient
for customer
No advertising or
promotion paid for by
the intermediaries
Can be expensive to
deliver
Intermediary takes a
profit and a mark up
Retailers may lose
some control over
marketing mix
Producer has delivery
costs to retailer
Another intermediary
takes a profit mark up
Producer loses further
control over marketing
mix
Slows down the
distribution
Supply Chain Management
• Managing the network of businesses that are involved in the
provision of products to the final consumer
SCM can increase the efficiency of a
firms supply chain by:
• Ensuring all supply companies are
kept well informed of the changing
material needs of the business
• Making appropriate transport
arrangements for materials and for
finished goods
• Reducing the total number of
suppliers
• Planning production to meet
consumer demand
• Ensuring adequate supplies are
delivered, on time, to retailers in
other intermediaries
Task
• Page 303 teacher textbook