Aqa bus2-marketingplace

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Aqa bus2-marketingplace

  1. 1. Place (Distribution)
  2. 2. What this topic is about <ul><li>The meaning and purpose of place (distribution) </li></ul><ul><li>Different distribution channels </li></ul><ul><li>Factors to consider when choosing distribution channels </li></ul>
  3. 3. Think about… <ul><li>How can a business ensure that its products reach existing and potential customers? </li></ul><ul><li>How and where do customers prefer to buy the product? </li></ul><ul><li>How important are factors such as stock availability, price, speed? </li></ul>
  4. 4. The Objective of Distribution To make products available in the right place at the right time in the right quantities
  5. 5. What is a distribution channel? A distribution channel moves a product from production to consumption
  6. 6. 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
  7. 7. Main Types of Intermediary Retailer Distributor Wholesaler Agent
  8. 8. Retailers - Introduction <ul><li>Retailer is the final step in the chain – deals directly with the customer </li></ul><ul><li>Focused on consumer markets </li></ul><ul><li>Various kinds of retailer: </li></ul><ul><ul><li>Multiples – chains of shops owned by a single company (e.g. Sainsbury’s or Next) </li></ul></ul><ul><ul><li>Specialist chains (e.g. fast fashion, perfume) </li></ul></ul><ul><ul><li>Department stores (e.g. Debenhams, John Lewis) </li></ul></ul><ul><ul><li>Convenience stores (e.g. Spar, Costcutter) </li></ul></ul><ul><ul><li>Independents – a shop run by an owner </li></ul></ul><ul><ul><li>Franchises (retail format operated by franchisee) </li></ul></ul>
  9. 9. Key Trends in Retailing <ul><li>Trend towards out-of-town stores </li></ul><ul><li>Decline in independents </li></ul><ul><li>Growth of retailer “own label” brands </li></ul><ul><li>Continued growth in franchising </li></ul><ul><li>Increase in international retailing within Europe </li></ul><ul><li>Increasing technology in retailing </li></ul>
  10. 10. Key Advantages of Retail Distribution <ul><li>Convenience for customers </li></ul><ul><li>Often UK-wide reach to customers </li></ul><ul><li>Retailer chooses the final price </li></ul><ul><li>Retailer handles the financial transaction </li></ul><ul><li>Retailer holds the stock </li></ul><ul><li>After-sales support (e.g. returns) </li></ul>
  11. 11. Wholesalers <ul><li>Wholesalers “break bulk” </li></ul><ul><ul><li>Buy in large quantities from producers </li></ul></ul><ul><ul><li>Break into smaller quantities to sell to retailers </li></ul></ul><ul><li>Advantages </li></ul><ul><ul><li>Reduce the producer’s transport costs (fewer journeys to the wholesaler rather than many journeys to retailers) </li></ul></ul><ul><ul><li>Retailers can order in smaller amounts from wholesalers </li></ul></ul><ul><li>Wholesaler makes money by buying at a lower price from the producer and adding a profit margin onto the price paid by the retailer </li></ul>
  12. 12. 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
  13. 13. Distributors <ul><li>Distribute (sell on) products and serve as a local sales point </li></ul><ul><li>Usually specialise in a particular industry </li></ul><ul><ul><li>Examples – building supplies, electrical components, industrial clothing </li></ul></ul><ul><li>Offer products from many producers = greater choice </li></ul><ul><li>Different from agents in that a distributor holds stock </li></ul>Producer Distributor Customer
  14. 14. Agent <ul><li>Specialist type of distributor </li></ul><ul><li>Does not hold stock </li></ul><ul><li>Tend to operate in tertiary sector (services) </li></ul><ul><ul><li>Travel </li></ul></ul><ul><ul><li>Insurance </li></ul></ul><ul><ul><li>Publishing </li></ul></ul><ul><li>Earn commission based on sales achieved </li></ul>Producer Agent Customer
  15. 15. Functions of a distribution channel <ul><li>Provide a link between production and consumption </li></ul><ul><li>To gather market information </li></ul><ul><li>Communicate promotional offers </li></ul><ul><li>Find and communicate with prospective buyers </li></ul><ul><li>Physical distribution - transporting and storing </li></ul><ul><li>Financing – other parties finance the stock </li></ul><ul><li>Risk taking – other parties take some risk </li></ul>
  16. 16. Channel strategy decisions <ul><li>Channel length - direct or indirect? </li></ul><ul><li>Choice of intermediary </li></ul><ul><li>Use just one or several channels? </li></ul><ul><li>How to move the goods through the channel? </li></ul><ul><li>Control over the channel – e.g. who decides price, promotion, packaging? </li></ul>
  17. 17. Direct or Indirect Channels? <ul><li>A business faces a choice of using direct (short) or indirect (long) channels </li></ul><ul><li>Direct </li></ul><ul><ul><li>Channel where a producer and consumer deal directly with each other without the involvement of an intermediary </li></ul></ul><ul><li>Indirect </li></ul><ul><ul><li>Involves the use of intermediaries between the producer and consumer </li></ul></ul>
  18. 18. Direct Channels <ul><li>Increasingly popular </li></ul><ul><li>Various Methods: </li></ul><ul><ul><li>Direct mailing </li></ul></ul><ul><ul><li>E-commerce </li></ul></ul><ul><ul><li>Telemarketing (telephone selling) </li></ul></ul><ul><li>Examples </li></ul><ul><ul><li>QVC (TV Selling) </li></ul></ul><ul><ul><li>Boden (clothes from catalogue) </li></ul></ul><ul><ul><li>Direct Line (insurance online) </li></ul></ul>Producer Customer
  19. 19. So why use intermediaries? <ul><li>Geography- customers may live too far away to be reached directly or spread widely </li></ul><ul><li>Consolidation of small orders into large ones </li></ul><ul><li>Better use of resources elsewhere </li></ul><ul><li>Lack of retailing expertise </li></ul><ul><li>Segmentation - different segments of the markets can be best reached by different distribution channels </li></ul>
  20. 20. Short or long channels? <ul><li>Short distribution channels </li></ul><ul><ul><li>Few if any intermediaries used </li></ul></ul><ul><ul><li>Greater control over the marketing of the product </li></ul></ul><ul><ul><li>Keeps greater proportion of profit </li></ul></ul><ul><ul><li>But means increased distribution costs </li></ul></ul><ul><li>Long distribution channels </li></ul><ul><ul><li>Reduced costs </li></ul></ul><ul><ul><li>Reduces the producer’s control over marketing </li></ul></ul>
  21. 21. Factors to Consider (1) <ul><li>Nature of the product </li></ul><ul><ul><li>Perishable/fragile? </li></ul></ul><ul><ul><li>Technical/complex? </li></ul></ul><ul><ul><li>Customised </li></ul></ul><ul><ul><li>Type of product – e.g. convenience, shopping, speciality </li></ul></ul><ul><ul><li>Desired image for the product </li></ul></ul>
  22. 22. Factors to Consider (2) <ul><li>The market </li></ul><ul><ul><li>Is it geographically spread? </li></ul></ul><ul><ul><li>The extent and nature of the competition </li></ul></ul><ul><li>The business </li></ul><ul><ul><li>Its size </li></ul></ul><ul><ul><li>Its nature </li></ul></ul><ul><ul><li>Does it have established distribution network? </li></ul></ul>
  23. 23. Short channels are used for… <ul><li>Industrial products </li></ul><ul><li>Expensive and complex goods </li></ul><ul><li>Bulking products </li></ul><ul><li>Customized products </li></ul><ul><li>Services </li></ul><ul><li>Products sold in geographically concentrated market </li></ul><ul><li>Products bought infrequently by relative small numbers of customers </li></ul>
  24. 24. Long channels are used for… <ul><li>Consumer goods </li></ul><ul><li>Inexpensive and simple goods </li></ul><ul><li>Small products </li></ul><ul><li>Standardised products </li></ul><ul><li>Goods sold in dispersed markets </li></ul><ul><li>Goods sold frequently and to many customers </li></ul>
  25. 25. Test Your Understanding http://www.tutor2u.net/business/quiz/place/quiz.html
  26. 26. Place (Distribution)
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