Ch 19 The marketing mix – place

Question 1

Define channel of distribution

Answer 1

This refers to the chain of intermediaries of product passes through from producer to final consumer

Question 2

Why the distribution channel choice is important?

Answer 2

• Consumers may need easy access to a firm’s products to allow them to try and see them before they buy, to make purchasing easy and to allow, if necessary, for the return of goods
• Manufacturers need outlets for their products that give as wide a market coverage as possible, but with the desired image of the product appropriately promoted
• Retailers - firms that sell goods to the final consumer - will sell producers’ goods but will demand a mark-up to cover their costs and make a profit

Question 3

Concept of distribution

Answer 3

Getting the right product to the right consumer at the right time in a way that is most convenient to the consumer

Question 4

What is the determinant of channel strategy?

Answer 4

• Should product be sold directly to consumers
• Should product be sold through retailers
• How many intermediaries should there be
• Where should the product be available
• How much will it cost to keep the stock of products
• How will distribution channel support other components of marketing mix

Question 5

What are the 3 types of channel?

Answer 5

• Direct selling (manufacturer to consumer). e.g mail, airline tickets
• Single intermediary (manufacturer to retailer to consumer). e.g. holiday companies, large supermarket
• Two intermediaries (manufacturer to wholesaler to retailer to customer)

Question 6

Benefits of direct selling

Answer 6

• No intermediaries, so no mark-up or profit margin taken by other businesses.
• Producer has complete control over the marketing mix - how the product is sold, promoted and priced to consumers
• Quicker
• May lead to fresher food products
• Direct contact with consumers offer useful market research

Question 7

Drawbacks of direct selling

Answer 7

• All storage and stock costs have to be paid for by producer
• No retail outlets limits the chances for consumers to see and try before they buy
• May not be convenient from for consumer
• No advertising or promotion paid for by intermediaries and no after-sales service offered
• Can be expensive to deliver each item sold to consumers

Question 8

Benefits of one intermediary channel

Answer 8

• Retailer hold stocks and pays for cost of this
• Retailer has product displays and offers after-sales service
• Retailers often in locations that are convenient to consumers

Question 9

Drawbacks of one intermediary channel

Answer 9

• Intermediary takes a profit mark-up and this could make the product more expensive to final consumers
• Producers may lose some control over marketing mix
• Retailers may sell products from competitors too, so there is no exclusive outlet
• Producer has delivery costs to retailer

Question 10

Benefits of two intermediaries channel

Answer 10

• Wholesaler holds goods and buys in bulk from producer
• Reduces stock holding costs of producer
• Wholesaler pays for transport costs to retailer
• Wholesaler breaks bulk by buying in large quantities and selling to retailers in small quantities
• May be the best way to enter foreign markets where producer has no direct contact with retailers

Question 11

Drawbacks of two intermediaries channel

Answer 11

• Another intermediary takes a profit mark-up - may make final good more expensive to consumer
• Producer loses further control over marketing mix
• Slows down the distribution chain