Marketing Mix: Place

Question 1

What are the four types of intermediaries?

Answer 1

1) Wholesalers

2) Retailers

3) Distributors or dealers

4) Franchises

Question 2

What are wholesalers?

Answer 2

Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers and other wholesalers.

They fall into three major groups:
1) Merchant wholesalers:
2) Brokers and agents
3) Manufacturers’ sales branches and offices

Question 3

What are retailers?

Answer 3

Retailers are involved in selling directly to final consumers for personal, non-business use.

They can be classified in terms of several characteristics.

Question 4

What are distributors or dealers?

Answer 4

Distributors or dealers offer value through services associated with selling inventory, credit and after sales services.

Often used in business-to-business markets, they also can be found dealing directly with consumers.
- Distributors usually connect producers with other intermediaries.
- Dealers usually connect consumers with other intermediaries.

Question 5

What are franchises?

Answer 5

Franchises hold a contract to supply and market an offering to the requirements, or blueprint, of the franchisor (the owner of the original offering).

The contract might cover many aspects of the design of the offering, such as marketing, product assortment or service delivering.

Question 6

What are the benefits/functions of using intermediaries?

(These functions must be performed by at least one of the channel members).

Answer 6

1) Product assortment - key role - to transform the assortments of products made by producers into the assortments wanted by consumers (physical distribution).

2) Accessibility - provide easier access to goods for consumers - provide access to a larger assortment of goods than manufacturers can.

3) Time utility

4) Information utility - gathering and distributing marketing research and intelligence info about the elements and forces in the marketing environment needed for planning and aiding marketing exchange.

5) Ownership utility

6) Specialist services

7) Improved efficiency

Question 7

What are the three channel structures?

Answer 7

1) Direct

2) Indirect

3) Multichannel

Question 8

What is DIRECT channel structure?

Answer 8

• Has no intermediary levels
• Sells directly to consumers
• E.g., small businesses producing custom made products (such as furniture or cakes) sell directly to the consumers and perform all functions of intermediaries.

Question 9

What is INDIRECT channel structure?

Answer 9

• Contains one or more intermediaries
• E.g., mass producers of cereal products use at least one intermediary to transfer the product from the manufacturing site to the consumers’ tables.

Question 10

What is MULTICHANNEL channel structure?

Answer 10

• A combination of both direct and indirect channel structure.
• E.g., Apple sells its products directly to consumers online via its own stores and other retailers (like John Lewis or Staples)
• From the producers POV, a greater number of levels means less control and greater channel complexity.

Question 11

What are the three strategies of market coverage?

Answer 11

1) Intensive

2) Selective

3) Exclusive

Question 12

What is intensive distribution?

Answer 12

• Using all available outlets to distribute a product.
• Ideal for producers of convenience products and common raw materials.
• Provides availability and reduces search time.
• Staff are not trained to sell any special categories of merchandise.

Question 13

What is selective distribution?

Answer 13

Uses more than one, but fewer than all, the intermediaries who are willing to carry and distribute a company’s products.

Selective distribution channel members provide higher levels of service to the consumers, including in-store and post-purchase support by the knowledgeable staff who often go through special training programs founded and managed by the producers.

Question 14

What is exclusive distribution?

Answer 14

Uses a single outlet for a fairly large geographic area.

When producers purposefully limit the number of intermediaries handling their products, and give only a small number of dealers the exclusive right to distribute their products.

Exclusive distribution channel members provide higher levels of service to the consumers, including in-store and post-purchase support by the knowledgeable staff who often go through special training programs founded and managed by the producers.

Question 15

What is a conventional/traditional distribution channel?

Answer 15

Consists of one or more independent producers, wholesalers and retailers.

• Each is a separate business seeking to maximise its own profits, perhaps even at the expense of the system as a whole.

Question 16

What is horizontal integration?

Answer 16

When two or more companies at one level join efforts together to follow a new marketing opportunity, they create a horizontal marketing system.

Question 17

What is vertical integration?

Answer 17

A vertical marketing system consists of producers, wholesalers, and retailers acting as a unified system.

The vertical marketing system can be dominated by the producer, the wholesaler or the retailer.

Question 18

What is channel conflict?

Answer 18

Channel conflict occurs when one channel member perceives another channel member to be acting in a way that prevents the first member from achieving its channel goals.

Question 19

What are the three types of channel conflict?

Answer 19

1) Horizontal

2) Vertical

3) Multichannel

Question 20

What is horizontal conflict?

Answer 20

Horizontal conflict occurs amongst firms at the same level of the channel.

• E.g., when one retailer is selling a new product, and offers it a lower price than all the other retailers selling the same product, this may cause conflict on the horizontal level (as they are preventing the other retailers from achieving their goals of selling and making profit).

Question 21

What is vertical conflict?

Answer 21

Vertical conflict occurs between different levels of the same channel.

• E.g., a retailer that chargers high profit margins, may negatively affect the sales in the whole channel - which will have an adverse affect on the other channel members.

Question 22

What is multichannel conflict?

Answer 22

Multichannel conflict occurs when a manufacturer has established two or more channels that compete against each other in selling to the same market.