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Key Words

Distribution channel; Agent

The Marketing mix – Place

Explain and apply knowledge on:
•

The role of place decisions in the marketing
mix

•

Advantages and disadvantages of different
channel

•

How to recommend and justify an appropriate
distribution channel in given circumstances

11/06/2023

Key words

Keywords

Definition

Distribution channel The means by which a product is passed from the place of production to

the customer

Agent

An independent person or business that is appointed to deal with the sales
and distribution of a product or range of products

The role of place decisions in the marketing
mix

• Place (or its more common name “distribution”) is about how a

business gets its products to the customers.

• The objective of distribution is to make products available in the right

place at the right time in the right quantities.

• Consumers should be able to get to the product easily, and the

product has to be in the right place

• Getting distribution right is a key part of being competitive.

Distribution channel

The means by which a product is passed from the place of production
to the customer

Distribution channel 1-Direct to customer

This channel is also common when selling directly from one manufacturer to another
manufacturer, e.g: car component sold directly to the car producer.

Advantages

Disadvantages

Very simple

Impractical for most products due to factory
location being away from the customers

Suitable for products such as certain types of
products directly sold from the farm

Not suitable for product which can not be easily
sent by post

Lower price – cuts out wholesaler and retailer

May not be cost effective to send products by
post or courier

Products can be sold by mail order catalogue or
via internet

Distribution channel 2-Using retailer as the
only intermediary

Most common when the retailer is large (e.g.:large supermarket) or when the products are
expensive (e.g.: jewellery, furniture, etc.)

Advantages

Disadvantages

Large quantities to be sold to retailers

No direct contact with customers

Reduced distribution cost compared to selling
directly to customers

Higher price than ‘direct selling’ – to cover the
cost and profit for retailers

Distribution channel 3-Using a wholesaler and
retailer as intermediaries

Wholesaler performs the function of breaking bulk.
Breaking bulk: wholesalers buy products in large quantities and then divide up the inventory into
much smaller quantities for retailers to buy

Without wholesaler

With wholesaler

Distribution channel 3-Using a wholesaler and
retailer as intermediaries

Advantages

Disadvantages

Reduced storage cost for retailers due to less
storage space needed

Higher price maybe charged by the wholesalers
to retailers compared to buying directly from
manufacturer

Retailers can purchase fresh products in small
quantities from wholesalers to prevent waste

Limited product ranges available from the
wholesaler

Retailers may get credit facility from wholesalers

Quality concern for fresh product as it takes
longer to reach the customer

Reduced transport cost as wholesaler delivers to
small retailers

Wholesalers may be a long way from the small
shops

Wholesaler can give advice about which product
on demand to retailer as well manufacturer

Higher price charged to customers to cover costs
and profit for wholesalers and retailers.

Distribution channel 4-Using an additional
intermediary such as an agent

•An agent is an independent person or business that is appointed to deal with the sales and
distribution of a product or range of products

•Agent is commonly used when firms are exporting their products to a foreign country.

•Agent is compensated through the additional amount on the price to cover its expenses or
commission on sales

Advantages

Disadvantages

Manufacturer will be assisted to sell the product
in other market

Producer have less control over the way product
is sold to customers

Agents knows the local condition and able to
identify the most effective place to sell the
products

Methods of distribution

Method of distribution

Description

Department stores

Large stores, in the center of towns or cities selling wide variety of
products from wide range of suppliers

Chain stores

Two or more stores with the same name and characteristics

Discount stores

Retail stores offering wide range of products often of a similar type,
many branded products, at discount prices

Superstores

Very large out-of-town stores which sell a wide range of food and non-
food products

Supermarkets

Retail grocery stores with dairy produce, fresh meat, packaged food and
non-food departments

Independent retailers

Single shops, often small, that offer a local, personalized service with
often high price.

Methods of distribution Cont’d

Method of distribution

Description

Direct sales

Manufacturers directly sell products to customers (consumer or another
business)

Mail order

Customers look through catalogue or magazine and order by post,
telephone or internet.

Internet/e-commerce

Products are viewed on the business’s website or other specialist
website (e-bay, Alibaba, etc.) and ordered through internet, phone or
mail

Selecting the distribution channel to use

Selection of distribution channel to use will depend on:

• The type of product it is: if it’s sold to producers of other goods, distribution would either be

direct (specialist machinery) or wholesaler (nuts, bolts, screws etc.).

• The technicality of the product: as lots of technical information needs to be passed to the

customer, direct selling is usually preferred.

• How often the product is purchased: if the product is bought on a daily basis, it should be sold

through retail stores that customers can easily access.

• The price of the product: if the products is an expensive, luxury good, it would only be sold

through a few specialist, high-end outlets, for example, luxury watches and jewellery.

• The durability of the product: if it’s an easily perishable product like fruits, it will need to be sold

through a wide amount of retailers to be sold quickly.

• Location of customers: the products should be easily accessible by its customers. If customers are

located over the world, e-commerce (explained below) will be required.

• Where competitors sell their product: in order to directly compete with competitors, the

products need to be sold where competitors are selling too.

I have been

learning
to………

Key Words

Distribution channel; Agent

Explain and apply knowledge on:
•

The role of place decisions in the marketing
mix

•

Advantages and disadvantages of different
channel

•

How to recommend and justify an
appropriate distribution channel in given
circumstances