Chapter 14 Marketing Mix: place

Question 1

what is a distribution channel

Answer 1

is the means by which a product is passed from the place of production to the customer

Question 2

what is distribution channel 1

Answer 2

direct to consumers

producer —> consumers

Question 3

what are the advantages of using distribution channel 1

Answer 3

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 4

what are the disadvantages of distribution channel 1

Answer 4

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 5

what is distribution channel 2

Answer 5

producer sells directly to retail outlets and then they sell the products to the consumer, common in larger retailers

producers —-> retailers —-> consumers

Question 6

what are the advantages of distribution channel 2

Answer 6

producer sells large quantities to retailers

reduced distribution costs in comparison to distribution channel 1

Question 7

what are the disadvantages of distribution channel 2

Answer 7

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 8

what is distribution channel 3

Answer 8

this distribution channel involves using a wholesaler, who performs the function of breaking bulk

producer —–> wholesaler —-> retailer —-> consumer

Question 9

what is breaking bulk

Answer 9

where wholesalers buy products from manufacturers in large quantities and then divide up the inventory into much smaller quantities for retailers to buy

Question 10

what are the advantages of distribution channel 3

Answer 10

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

Question 11

what are the disadvantages of distribution channel 3

Answer 11

• 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 12

what is distribution channel 4

Answer 12

when products are exported, the manufacturer may use an agent in the other country to sell their product in that country

producer ——> agent —-> wholesaler —-> retailer —–> consumer

Question 13

what is an agent

Answer 13

an agent is an independent person or business that is appointed to deal with sales and distribution of a product or range of products

Question 14

what are the advantages of distribution channel 4

Answer 14

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

Question 15

what are the disadvantages of distribution channel 4

Answer 15

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 16

how do business select their distribution channel

Answer 16

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