place - channels of distrubution + direct selling Flashcards
what are channels of distrubution?
the possible routes taken by a product to reach the consumer from the manufacturer
what are the four different channels of distrubution?
- manufacturer –> customer
- manufacturer –> retailer –> customer
- manufacturer –> wholesalers –> retailer –> customer
- manufacturer –> wholesaler –> customer
what are the six factors that impact channels of distrubution?
- finance available
- desired image for the product
- shelf life of the product
- legal restrictions
- stage of the product life cycle
- technical qualities of the product
finance available
a manufacturer may not have the finance available to set up e-commerce or print catalogues to sell direct, so using wholesalers or retailers are the only options
desired image for the product
certain products have images that dictate where they can be sold e.g. hugo boss only sell in retailers that have built up a good reputation over the past five years
shelf life of the product
some products need to be shipped to retailers fast as they will go out of date quickly e.g. fresh fruit
legal restrictions
some products can’t be sold through certain channels e.g. prescription medicines can only be sold through pharmacists
stage of the product life cycle
products may only be sold in exclusive outlets at the beginning of a products life cycle, but may be sold in discount stores during their decline stage to encourage sales
technical qualities of the product
highly technical products may need to be demonstrated, which means personal selling is the best channel
what is direct selling?
selling directly from manufacturer to consumer
what are the advantages of direct selling?
- products can be tailored to the customers specific requirements
- cuts out the ‘middle men’ which increases profits for the manufacturer
- manufacturer has more control over how the product is marketed
what are the disadvantages of direct selling?
- increased costs due to advertising, storing stock and administration
- time and cost incurred in organising product delivery
what are the five methods of direct selling?
- e-commerce
- mail order
- direct mail
- personal selling
- online shopping channels
what is e-commerce?
the buying and selling of products over the internet
what are the advantages of e-commerce?
- customers can access goods 24/7
- allows companies to access customers in different countries
- money is saved on shop rental and overheads
- customers can shop from home
- a wide range of goods can be shown on the company website
what is mail order?
when goods are ordered through a catalogue
what are the advantages of mail order?
- customers can use credit facilities
- money is saved on shop rental
- customers can shop from home
what are the disadvantages of mail order?
- catalogues and advertising can be expensive
- can incur high levels of bad debt
- high level of returns
what is direct mail?
a business posts letters, leaflets,a business posts letters, leaflets and brochures directly to the customer
what are the advantages of direct mail?
- specific market segments can be targeted
- a wide geographical area can be reached
what are the disadvantages of direct mail?
- customers can percieve this as junk mail and throw it away
- customer mailing lists can quickly become out of date, meaning a business may target the wrong person, wasting money
what is personal selling?
a sales person sells products directly to the customer, often ‘door to door’ or over the phone
what are the advantages of personal selling?
- allows a demonstration or explanation of the product to be given
- feedback of the products can be gathered from customers
what are the disadvantages of personal selling?
- customers can find this type of selling a nuisance and may not be keen to listen
- staffing costs and commission make this method expensive and increasingly unpopular with businesses
