Place Flashcards
Place
Place is the decision in regards to how a product reaches its end customer. It is about a product’s distribution and its channels of distribution. It is about getting the right product, to the right people at the right time.
Channels of distribution
Channels of distribution are the chains of people and intermediaries that a product goes through in its path from producer to end consumer.
Intermediaries
Intermediaries are organizations that act as a link between producers and consumers. Eg. Retailers, Agents, Distributors, Wholesalers and Car dealerships.
Types of Channels of distribution
- Zero Intermediaries
- One Intermediaries
- Two Intermediaries
Zero Intermediaries
Feature: The product is sold directly to consumers. No intermediaries in between.
Example: E-commerce, booking directly from a hotel and mail order catalogs.
Advantages: Faster, Low cost, Full control over distribution, Higher profit margins
Disadvantages: Time consuming because logistics have to be taken care off, costs of delivery and storage costs are covered by the producer.
One Intermediaries
Feature: One intermediary in the distribution channel. Used when the retailer operates on a large scale or when the goods are premium.
Examples: Car dealerships, selling expensive jewelry in retailers and distribution agents.
Advantages: Retailers are in charge of sales, delivery, storage and cost of holding the stock.
Disadvantages: Producer doesn’t have control over the promotional strategy chosen by the retailer, Reliance on retailers, If the producer wants the product to be sold at its original price it will have to sell it with a discount case retailers usually put higher prices to cover all the costs.
Two Intermediaries
Feature: Two intermediaries in the channel of distribution. Usually wholesalers and then retailers.
Advantages: Wholesalers break bulk for the retailer by selling large quantities in smaller batches, wide coverage of locations.
Disadvantages: More reliance, more expensive products
