Ch 14 - place

Question 1

what are the advantages of using distribution channel 1

Answer 1

lower product price if sold direct to consumers (cuts out wholesaler/retailer)

Distribution channel 1 is very simple

can be suitable for some products (food products which are sold straight from the farm)

easy source of market research - direction interaction with customers

Question 2

what are the disadvantages of distribution channel 1

Answer 2

usually impractical for most products, as consumers usually don’t live near the factory (place of production)
can be very expensive to send products to far away consumers

Question 3

what are the advantages of distribution channel 2

Answer 3

producer sells large quantities to retailers

reduced distribution costs in comparison to distribution channel 1

Question 4

what are the disadvantages of distribution channel 2

Answer 4

no direct contact with customers - lose out on a “free” source of market research

the price of the product is often higher than direct selling as the retailer has to cover its costs and make a profit

Question 5

what are the advantages of distribution channel 3

Answer 5

wholesaler saves storage space for small retailers and reduces storage costs
wholesaler may deliver

Question 6

what are the disadvantages of distribution channel 3

Answer 6

• maybe more expensive for the small shop to buy from a wholesaler than if it were bought straight -from the manufacturer
• the wholesaler may not have the full range of products to sell
• takes longer for fresh produce to reach the shops, quality might be lower
• product price might be higher as both wholesaler and retailer have to cover costs

Question 7

what are the advantages of distribution channel 4

Answer 7

agents will be aware of local conditions and will be in the best positon to select the most effective places to sell

Question 8

what are the disadvantages of distribution channel 4

Answer 8

the producer has less control over the way the product is sold to its customers
products have a higher price as agent, retailer and wholesaler will have to cover up costs and make a profit

Question 9

how do business select their distribution channel

Answer 9

what type of product is it
is the product very technical
how often is the product purchased
how expensive is the product
how perishable is the product
where are the customers located
where do the competitors sell their products