Unit 2 KA3.2- Marketing Mix - Place Flashcards
What is a channel of distribution?
The channel of distribution is the way in which the product gets from the manufacturer to the consumer.
What are the three main channels of distribution?
Direct from manufacturer
Wholesaler
Retailer
What is a wholesaler?
A wholesaler is a business that buys products in bulk from the manufacturer who then sells on smaller quantities.
What is a retailer?
A retailer is a business that sells smaller quantities of products directly to consumers. They can either buy products from the manufacturer or from a wholesaler.
What are the factors that impact the channels of distribution?
Finance - Companies may not have the money required to set up direct distribution so turn to retailers and wholesalers.
Image - Where a product is sold can influence how it is perceived. Luxury items are typically sold in up market stores
Legal restrictions - Some products such as alcohol and medicines can only be sold through licensed premises.
Product - type of product, it may have perish quickly or be extremely technical. This may cause the seller to need special equipment or training.
Stage of the product life cycle - Products at the maturity stage of the product life cycle need to be widely available.
Size - If a product has a large market, such as popular brands of food or drink, the company will need to use wholesalers and retailers to ensure that demand for the product is met.
Define and explain the costs and benefits to direct selling
Direct selling: This is when the product goes directly from the manufacturer to the consumer. There are different methods of direct selling including; mail order, e-commerce, direct mail, personal selling
Costs
-Increased costs due to advertising, storing stock and administration
-Time and cost incurred in organising product delivery
Benefits
-Products can be tailored to the consumers specific requirements
-Cuts out the ‘middle men’ which increases profits for the manufacturer
-Manufacturer has more control over how the product is marketed
Define and explain the costs and benefits to mail order
Mail order: This is when goods are ordered though a catalogue.
Costs
-Catalogues and advertising can be expensive
-Can incur high levels of bad debt
-High level of returns
Pros
-Customers can use credit facilities
-Money is saved on shop rental
-Customers can shop from home
Define and explain the costs and benefits to e-commerce
E-commerce. This involves the buying and selling of products over the internet.
Costs
-Time delay between order and delivery
-Customers unable to try/see goods before purchase
-Can be time consuming and expensive to create an attractive web site -Costs incurred on delivery and return
-Security issues (personal and credit details)
Benefits
-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
Define and explain the costs and benefits to direct mail
Direct mail. This is when a company posts letters or advertising leaflets to consumers with details of their products.
Costs
-Very low response rate as many customers will perceive leaflets as junk mail
Pros
-Specific market segments can be targeted directly
Define and explain the costs and benefits to personal selling
Personal selling. This is when a sales person will come to your door or sell to you over the phone.
Costs
-High staffing and administration costs
Benefits
-Allows for the product to be demonstrated to the customer
Explain the costs and benefits to wholesale
Costs
-Manufacturer will lose some profit to the wholesaler
-Manufacturer loses control of how the product is sold and marketed
-The wholesaler may damage the reputation of the manufacturer if the product is not sold correctly
Pros
-Reduces transport costs for manufacturer as wholesalers buy products in bulk
-Wholesaler takes on the risk and cost of storing the stock
-Wholesaler can repackage and label product in smaller quantities meaning less work/costs for the manufacturer
Explain the costs and benefits of retail sales
Costs
-Manufacturer will lose some profit to the retailer
-Products in retailers are often displayed next to the competition
-Manufacturer loses control of how the product is sold and marketed
Benefits
-Convenience – retailers are located close to customers
-The retailer displays and markets the goods for the manufacturer and offers after sales service
-Retailers can provide customers with information about the product
