3.3.3 - marketing mix - place

Question 1

what is a distribution channel?

Answer 1

the means by which a product is passed from the producer to the customer

Question 2

what are the four distribution channels?

Answer 2

• DC 1 - producer –> consumer
• DC 2 - producer –> retailer –> consumer
• DC 3 - producer–> wholesaler –> retailer –> consumer
• DC 4 - using an agent

Question 3

what are the benefits and drawbacks of DC 1?

Answer 3

• Lower price for customers as it cuts out the wholesaler and retailer​
• suitable for fresh produce as if it is sold direct to customer, it is delivered quicker and therefore fresh and better quality​
• impractical for many products as the consumer may not live close to the factory and so not convenient to go there to buy the product ​
• not suitable for products that cannot be easily sent by post ​
• delivery fees are high to send to customer. ​

Question 4

what are the benefits and drawbacks of DC 2?

Answer 4

• Reduced delivery costs compared to selling directly to consumers
• the producer has no direct contact with customers so may lead to a lack of personal customer service​
• the price is often higher than ‘direct selling’ as the retailer also has to cover its costs and make a profit ​

Question 5

what are the benefits and drawbacks of DC 3?

Answer 5

• wholesaler saves storage space for small retailers and reduces storage costs ​
• wholesaler may give trade credit to the retailer. Improves the retailer’s cash flow ​
• may be more expensive for a retailer to buy from a wholesaler rather than the producer ​
• takes longer for fresh produce to reach the retail store so may not be as good of quality ​
• consumer price is higher than direct selling as both the wholesaler and retailer have to cover costs and make a profit. ​

Question 6

what are the benefits and drawbacks of DC 4?

Answer 6

• producer may not know the best way to sell product in other countries. e.g. due to language/cultural barrier​
• agents will be aware of local conditions and will be in the best position to select the most appropriate places to sell​
• the agent will take a proportion of the profit, so less revenue for the producer ​
• the producer has less control over the way the product is sold to consumer. ​