The Marketing Mix: Place (Chapter 14).

Question 1

Why is place important, give an example to your reply.

Answer 1

The product or service must be available where and when customers want to buy it.

If the product is not available to customers in convenient locations and they have to go searching in different shops, then they may give up and buy a competitors product.

OR

Luxury high-priced chocolates would not sell well in a local shop where people are on low incomes.

Question 2

What is a distribution channel?

Answer 2

A distribution channel is the method by which a product is passed from the place of production to the customer.

Question 3

What is distribution channel 1?

Answer 3

Producer → Consumer.

Question 4

What is distribution channel 2?

Answer 4

Producer → Retailer → Consumer.

Question 5

What is distribution channel 3?

Answer 5

Producer → Wholesaler → Retailer → Consumer.

Question 6

What is distribution channel 4?

Answer 6

Producer → Agent → Wholesaler → Retailer → Consumer.

Question 7

What are the advantages of distribution channel 1?

Answer 7

• Very simple as the manufacturers sell directly to consumers.
• Suitable for certain products e.g. food sold straight from the farm.
• Lower prices as it cuts out wholesalers/retailers.
• Products can be sold by mail order catalog or via the Internet.

Question 8

What are the disadvantages of distribution channel 1?

Answer 8

• Impractical as some consumers do not live near the factory.
• May not be suitable for products that cannot be sent by post.
• Expensive to send products by post or courier.

Question 9

Give an example of when distribution channel 1 is suitable.

Answer 9

Car components are sold directly to the car producer.

Question 10

What are the advantages of distribution channel 2?

Answer 10

• Producer sells large quantities to retailers.
• Reduced distribution costs compared to selling directly to consumers.

Question 11

What are the disadvantages of distribution channel 2?

Answer 11

• No direct contact with customers.
• The price is higher than ‘direct selling’ as retailer has to cover costs and make a profit.

Question 12

What are the advantages of distribution channel 3?

Answer 12

• Wholesaler saves storage space and reduces storage costs.
• Small retailers can purchase fresh products in small quantities from wholesalers.
• Wholesalers may save on transport costs.
• Wholesale can advise small retailers.
• Wholesalers may give credit to retail customers.

Question 13

What are the disadvantages of distribution channel 3?

Answer 13

• May be more expensive for small shops to buy from a wholesaler.
• Wholesalers may have a limited range of products to sell.
• May take longer for fresh products to reach the shops.
• Wholesalers may be a long way from the small shops.
• The consumer price is often higher as both the wholesaler and retailer have to cover costs and make a profit.

Question 14

What are the advantages of distribution channel 4?

Answer 14

• Manufacturers may not know the best way to sell the product in other markets.
• Agents will be aware of local conditions and will select the best most effective place to sell.

Question 15

What are the disadvantages of distribution channel 4?

Answer 15

• The producer has less control over they way the product is sold.

Question 16

Give 9 methods of distribution.

Answer 16

• Department stores.
• Chain stores.
• Discount stores.
• Superstores.
• Supermarkets.
• Independent retailers.
• Direct sales.
• Mail order.
• Internet/ e-commerce.

Question 17

What 7 questions do manufacturers ask themselves when deciding on which distribution channel to use?

Answer 17

• What type of product is it?
  Is it sold to other businesses or to consumers?
• Technical product?
  The product must be sold to someone with technical knowledge who how it works etc.
• Pruchased often?
  If it is bought every day, it will need to be sold in many retail outlets e.g. newspapers.
• Expensive product?
  Would a Rolex sell in a discount jewelry shop?
• Perishable product?
  If the food rots like fruit, it will need to be widely available.
• Location of customers?
  If customers are in the city don’t sell in only rural areas. If customers are located in another country, online trading would be necessary.
• Where do the competitors sell their products?
  Manufacturers will sell their products in the same outlets as competitors so that they can compete directly for customer.