Unit 3: Marketing mix: place and promotion (Chap 13)

Question 1

What are the 4 channels of distribution?

Answer 1

• Producer —> Consumer
• Producer —> Retailer —> Consumer
• Producer —> Wholesaler —> Retailer —> Consumer
• Producer —> Agent —> Wholesaler —> Retailer —> Consumer

Question 2

What do we call the agent, wholesaler and retailer?

Answer 2

Middlemen

Question 3

What is the first channel of distribution called (Producer —> Consumer)?

Answer 3

Direct selling

Question 4

What happens in the third channel of distribution?

Answer 4

• Uses two middlemen - wholesalers and retailers
• Producer sells large quantities of the product to the wholesaler
• Wholesaler sells the product in smaller quantities to retailers
• Sold to the final consumer

Question 5

What happens in the fourth channel of distribution?

Answer 5

• Uses an agent
• Most commonly used when a business enters a foreign market for the first time
• Agent has specialist knowledge about the country and its markets
• Can help producer to place its product with wholesalers and retailers
• This saves the producer a lot of time and expense
• However another middleman enters the channel of distribution and this could reduce the amount of profit earned by the producer

Question 6

How do you choose a method of distribution? (Application) Page 180

Answer 6

• Cost
• Nature of the product
• The market

Question 7

Cost

Answer 7

• Cost of transporting goods to the customer needs to be considered
• Some methods are cheaper than others, but it’s important that the goods arrive on time and in perfect condition
• Cheaper alternatives might delay delivery or damage goods in transit

Question 8

Nature of the product

Answer 8

• Some goods will need special delivery conditions e.g. frozen foods and fresh fruit/vegetables will need special transport vehicles to maintain the correct temperature
• Fragile items e.g. televisions need to be handled as few times of possible to reduce risk of damage
• Perishable goods e.g. milk need to get to the final consumer rapidly so a long channel of distribution might not be appropriate

Question 9

The market

Answer 9

Markets that cover a wide geographical area are best served through wholesales who can buy the product in bulk from he producer.

Question 10

Advantages: Producer —> Consumer

Answer 10

• All of the profit is earned by producer
• Producer controls all parts of the marketing mix
• Quickest method of getting product to consumer and this may be important for perishable goods e.g. vegetables
• Producer has direct contact with consumer, providing useful market research opportunities

Question 11

Disadvantages: Producer —> Consumer

Answer 11

• Consumers aren’t always able to see or try the product before they buy, e.g. if it’s online
• Delivery costs may be high if there are many customers over a wide area
• Producer pays for all storage costs
• All promotional activities carried out and financed by the producer

Question 12

Advantages: Producer —> Retailer —> Consumer

Answer 12

• Consumers can see and the product before they buy
• Cost of holding inventories is partly paid by the retailer
• Retailer will pay for advertising and other promotional activities
• Retailers are usually more conveniently located for consumers

Question 13

Disadvantages: Producer —> Retailer —> Consumer

Answer 13

• Retailer takes some profit from producer
• Producers lose control of the marketing mix
• Producer must pay delivery costs to the retailers
• Retailers usually sell competitors’ products as well

Question 14

Advantages: Producer —> Wholesaler —> Retailer —> Consumer

Answer 14

• Wholesaler buys in bulk from producer and breaks this down into smaller quantities for retailers
• Wholesalers will advertise and promote the product to retailers
• Transport cost to the retailer is paid for by the wholesaler
• Wholesalers will pay for the storage costs of the products purchased from the producer
• Distribution of goods through wholesalers helps the producer to sell its goods to a larger market

Question 15

Disadvantages: Producer —> Wholesaler —> Retailer —> Consumer

Answer 15

• Another middleman (the wholesaler) takes part of the profit from producer
• Producer loses even more control of marketing mix

Question 16

A+D: Producer —> Agent —> Wholesaler —> Retailer —> Consumer

Answer 16

• The agent has specialist knowledge of the market, especially a foreign market
• They find wholesalers and retailers who are prepared to buy the product from producer

- Another middleman is added - less profit for producer

Question 17

What are the many aims of promotion?

Answer 17

• Attracting attention of consumers by making them aware of the product
• Reminding consumers the product is still on the market
• Persuading consumers to buy
• Explaining how a product is better than competitors’ products
• Creating/developing a brand image
• Encouraging wholesalers and retailers to stock the product
• Reassuring consumers, following a problem with the product

Question 18

What are the 5 methods of promotion?

Answer 18

• Advertising
• Sales promotion
• Personal selling
• Direct mail
• Sponsorship

Question 19

Notes on advertising

Answer 19

• Involves communicating with the customer through media such as newspapers, magazines, radio, television and the internet
• Advertising media used often depends on the available budget
• A hairdresser and taxi company are unlikely to advertise in national newspapers as their market is usually local
• A business that sells its products throughout a country is more likely to use national newspapers e.g. a car manufacturer
• This is sometimes called above-the-line promotion
• Most advertising is aimed at the final consumer, although some tries to persuade wholesalers/retailers to stock the product

Question 20

What are the two main forms of promotional advertising?

Answer 20

• Informative advertising
• Persuasive advertising

Question 21

What is informative advertising?

Answer 21

• Provides information to potential consumers about the product
• Can include information about the price of the product, what it can be used for and the place the consumer can buy it
• Often used when a new product is being launched on to the market or into a new market

Question 22

What is persuasive advertising?

Answer 22

• Most common
• Tries to convince consumers that they need the product and that its product is better than competitors’ products

Question 23

Notes on sales promotion

Answer 23

• Below-the-line promotion
• Main advantage is that it’s usually very specific to the business or its products
• Consumer must buy the product to use the vouchers or money-off coupons

Question 24

What are some activities in sales promotion?

Answer 24

• Money-off coupons and vouchers
• Point of sale displays in shops
• Loyalty reward schemes
• Competitions and games with cash or other prizes

Question 25

Notes on personal selling (Card 1)

Answer 25

• Most often used when selling expensive items that have a high profit per unit e.g. cars
• Salesperson has direct contact with the potential customer when they visit the showroom/other business premises of the seller
• Sometimes seller will visit potential buyer in their own home e.g. while selling home improvements

Question 26

Notes on personal selling (Card 2)

Answer 26

• Enables seller to build a relationship with the customer that can last after completion of the sale and result in further sales in the future
• Can be expensive since more staff are needed to provide level of personal service customers require
• Also, to provide incentives to sales staff, the business will often pay bonuses or a commission on any sales made
• Reduces profit to the business per item sold

Question 27

Notes on direct mail

Answer 27

• Involves posting leaflets or other printed material directly to the business offices or homes of potential customers
• These potential customers have usually been identified through market research
• Very good way of communicating with a large market over a wide geographical area
• So widely used in danger of being considered ‘junk mail’ and thrown away

Question 28

Notes on sponsorship

Answer 28

• Business will pay to have its name linked to an event
• Or an individual or group of individuals who are in the public eye

Question 29

What are 6 examples of e-commerce?

Answer 29

• Online shopping
• Electronic payment
• Online ticketing
• Internet banking
• Hotel reservations
• Online auctions

Question 30

What are the opportunities of e-commerce for businesses?

Answer 30

• Increased market (business is able to sell its goods and services to consumers throughout the world)
• Reduced costs (staffing/other costs of shops are saved)
• Better information ( the website can provide potential consumers with all the information they need about the goods and services available)

Question 31

What are the threats of e-commerce for businesses?

Answer 31

• Increased competition (competitors can now be from any part of the world, not just the local market)
• Unfamiliarity (consumers are less likely to buy products from new businesses they don’t know)

Question 32

What are the opportunities of e-commerce for consumers?

Answer 32

• Convenience (consumers can order their products from the comfort of their own homes at any time of day)
• Wider choice (consumers can buy goods they wouldn’t have had access to if they were only able to use their local shops)
• Lower prices (competition is worldwide, reducing prices)
• Better information (consumers are able to read about the goods/services from the websites of the different businesses and also read reviews)

Question 33

What are the threats of e-commerce for consumers?

Answer 33

• Fraud (a website might take a consumer’s money and not deliver goods)
• Hacking (a consumer’s personal details/bank account details might be “stolen”)
• No personal service
• Returning items (can be inconvenient and expensive to return goods which don’t meet the consumer’s needs e.g. clothing that doesn’t fit)

Question 34

What’s the differences between a customer and a consumer?

Answer 34

While a consumer is anyone that consumes a product or service, a customer is a person who makes the purchase.

Question 35

What are other uses of business websites other than e-commerce?

Answer 35

• A business may pay to place banner adverts or “pop-ups”
• Social media marketing e.g. using Facebook, Instagram or Twitter