Week 8 - Place (Distribution) Flashcards
Why is distribution important
Distribution is about placing products into the hands of customers
it’s a key element that determines whether
- form utility
- place utility
- time utility
Exchange Efficiencies - Making transactions as economical as possible by establishing and managing efficient exchange processes
What is a distribution channel
A distribution channel is the path or route through which goods and services travel from the producer to the end consumer through a chain of individuals and organisations
There are 2 main channels
- Direct distribution
- Indirect
What is Direct Distribution
When the manufacturer sells directly to the consumer, also called a one-level distribution.
The benefits that consumers receive are
- personalisation
- more value for money (don’t need to pay the middleman)
e.g. Apple
What is Indirect Distribution
Manufacturers use marketing intermediaries to sell indirectly to the customer.
The shift of responsibilities can
- Be more cost-effective
- Make use of more excellent knowledge/skills
- Provide better service output to the final consumer
e.g. Producer, retailer, consumer
Producer, Wholesaler, Retailer, Consumer
Producer, agent/broker, wholesaler, retailer, consumer
Some companies use both, such as Apple. Apple store + retail
Distribution channel partnerships
Each party has expectations and obligations.
Different amounts of power in the supply chain.
Relationship management is crucial.
Not all arrangements are successful.
What is horizontal integration
It’s when organisations at the same level are combined under one management structure
Usually occurs when a channel member of the same level buys out a competitor
e.g. Facebook and Instagram
What is vertical Integration
When different stages of the distribution channel are combined
A Vertical Marketing System (VMS) is a distribution strategy in which the main members of a distribution channel—such as the producer, wholesaler, and retailer—work together as a unified system to improve efficiency, control, and customer reach
e.g. Netflix streamed licensed shows and movies created by other studios. However, to gain more control over its content, Netflix began producing its own original movies and series
Franchising
Type of business where you sell products to the
right to use the main elements of the business
model are licensed to each other
Franchisor
Rights to use the business model
Provides services such as advertising, business know-how and supplier network
Stipulates standards and rules by which the franchisee must abide
Promises exclusive rights to a certain area
Franchisee
Pays the franchisor a fee/or percentage of the sales
Supplies labour and capital
Operates the business in accordance with the standards
What is wholesaling
Wholesaling comprises exchanges in which products are bought for resale, for use as inputs in other products, or for some other use in a business
Wholesaling does not include transactions with end consumers
What are some wholesaling functions
Wholesalers act as the connection between producers and retailers and offer benefit to both
For many producers, these benefits - and the fact that wholesalers, being specialists, can provide the services more efficiently than the producer can perform them itself - outweigh the financial costs of dealing with wholesalers in the marketing channel
Types of wholesalers
Merchant wholesaler: Independently owned (not owned by the producer)
Manufactuers’ wholesalers: also known as manufacturers’ sales branches and offices, are similar to merchant wholesalers, but are owned by the producer itself and thus represent a form of vertical integration
What is retail
Retailing describes any exchange in which the buyer is the ultimate consumer of the product
Retailing excludes transactions in which the buyer intends to resell the product or use it in the making of another product
Many types of organisations undertake retailing, whether or not they are primarily retailers
Considerations of retail
Location:
The natural geographic area from which customers will be drawn
Proximity to competitors
Proximity to complementary retailers
Customer access to public transport and public parking
Positioning :
Retail positioning refers to the practice of identifying a gap in the market and targeting it by creating some distinguishing feature in the minds of customers.
