Aqa bus2-marketingplace
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Aqa bus2-marketingplace

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Aqa bus2-marketingplace Aqa bus2-marketingplace Presentation Transcript

  • Place (Distribution)
  • What this topic is about
    • The meaning and purpose of place (distribution)
    • Different distribution channels
    • Factors to consider when choosing distribution channels
  • Think about…
    • How can a business ensure that its products reach existing and potential customers?
    • How and where do customers prefer to buy the product?
    • How important are factors such as stock availability, price, speed?
  • The Objective of Distribution To make products available in the right place at the right time in the right quantities
  • What is a distribution channel? A distribution channel moves a product from production to consumption
  • Channels can have various levels Each party in a distribution channel is called an “intermediary” Producer Producer Producer Wholesaler Distributors / Agents Retailer Customer Customer Customer
  • Main Types of Intermediary Retailer Distributor Wholesaler Agent
  • Retailers - Introduction
    • Retailer is the final step in the chain – deals directly with the customer
    • Focused on consumer markets
    • Various kinds of retailer:
      • Multiples – chains of shops owned by a single company (e.g. Sainsbury’s or Next)
      • Specialist chains (e.g. fast fashion, perfume)
      • Department stores (e.g. Debenhams, John Lewis)
      • Convenience stores (e.g. Spar, Costcutter)
      • Independents – a shop run by an owner
      • Franchises (retail format operated by franchisee)
  • Key Trends in Retailing
    • Trend towards out-of-town stores
    • Decline in independents
    • Growth of retailer “own label” brands
    • Continued growth in franchising
    • Increase in international retailing within Europe
    • Increasing technology in retailing
  • Key Advantages of Retail Distribution
    • Convenience for customers
    • Often UK-wide reach to customers
    • Retailer chooses the final price
    • Retailer handles the financial transaction
    • Retailer holds the stock
    • After-sales support (e.g. returns)
  • Wholesalers
    • Wholesalers “break bulk”
      • Buy in large quantities from producers
      • Break into smaller quantities to sell to retailers
    • Advantages
      • Reduce the producer’s transport costs (fewer journeys to the wholesaler rather than many journeys to retailers)
      • Retailers can order in smaller amounts from wholesalers
    • Wholesaler makes money by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer
  • Wholesaler - Example Producer Wholesaler Retailer Customer Sale of Daily Newspapers Newspaper Publisher – e.g. The Sun, The Times – who send bulk print runs of newspapers to large depots run by wholesalers Wholesaler (e.g. John Menzies) packs newspapers into bundles for retailers (e.g. newsagents) Retailer (e.g. newsagent; petrol station) displays newspaper in store and delivers to homes Customer = newspaper buyer
  • Distributors
    • Distribute (sell on) products and serve as a local sales point
    • Usually specialise in a particular industry
      • Examples – building supplies, electrical components, industrial clothing
    • Offer products from many producers = greater choice
    • Different from agents in that a distributor holds stock
    Producer Distributor Customer
  • Agent
    • Specialist type of distributor
    • Does not hold stock
    • Tend to operate in tertiary sector (services)
      • Travel
      • Insurance
      • Publishing
    • Earn commission based on sales achieved
    Producer Agent Customer
  • Functions of a distribution channel
    • Provide a link between production and consumption
    • To gather market information
    • Communicate promotional offers
    • Find and communicate with prospective buyers
    • Physical distribution - transporting and storing
    • Financing – other parties finance the stock
    • Risk taking – other parties take some risk
  • Channel strategy decisions
    • Channel length - direct or indirect?
    • Choice of intermediary
    • Use just one or several channels?
    • How to move the goods through the channel?
    • Control over the channel – e.g. who decides price, promotion, packaging?
  • Direct or Indirect Channels?
    • A business faces a choice of using direct (short) or indirect (long) channels
    • Direct
      • Channel where a producer and consumer deal directly with each other without the involvement of an intermediary
    • Indirect
      • Involves the use of intermediaries between the producer and consumer
  • Direct Channels
    • Increasingly popular
    • Various Methods:
      • Direct mailing
      • E-commerce
      • Telemarketing (telephone selling)
    • Examples
      • QVC (TV Selling)
      • Boden (clothes from catalogue)
      • Direct Line (insurance online)
    Producer Customer
  • So why use intermediaries?
    • Geography- customers may live too far away to be reached directly or spread widely
    • Consolidation of small orders into large ones
    • Better use of resources elsewhere
    • Lack of retailing expertise
    • Segmentation - different segments of the markets can be best reached by different distribution channels
  • Short or long channels?
    • Short distribution channels
      • Few if any intermediaries used
      • Greater control over the marketing of the product
      • Keeps greater proportion of profit
      • But means increased distribution costs
    • Long distribution channels
      • Reduced costs
      • Reduces the producer’s control over marketing
  • Factors to Consider (1)
    • Nature of the product
      • Perishable/fragile?
      • Technical/complex?
      • Customised
      • Type of product – e.g. convenience, shopping, speciality
      • Desired image for the product
  • Factors to Consider (2)
    • The market
      • Is it geographically spread?
      • The extent and nature of the competition
    • The business
      • Its size
      • Its nature
      • Does it have established distribution network?
  • Short channels are used for…
    • Industrial products
    • Expensive and complex goods
    • Bulking products
    • Customized products
    • Services
    • Products sold in geographically concentrated market
    • Products bought infrequently by relative small numbers of customers
  • Long channels are used for…
    • Consumer goods
    • Inexpensive and simple goods
    • Small products
    • Standardised products
    • Goods sold in dispersed markets
    • Goods sold frequently and to many customers
  • Test Your Understanding http://www.tutor2u.net/business/quiz/place/quiz.html
  • Place (Distribution)