Place - Channels of Distribution/ International Marketing AS3 Marketing MODULE 3.03 Place - Channels of Distribution/ International Marketing

General Introduction Getting goods from producers in the right quantities at the right time.

General Introduction Approximately 20% of unit costs. Just as essential to success as product, price, promotion. Concerns: Physical distribution; Channels of Distribution.

Channels of Distribution The different ways the goods and services produced by business organisations are made available to the end customer / user.

Size and complexity of firm The product The target market Choice of Channel of Distribution Factors influencing choice of channel: The firm’s objectives Size and complexity of firm The product The target market

Availability of wholesalers and retailers Factors influencing choice: competitors Availability of wholesalers and retailers

Channels of Distribution Some producers sell: direct to customer / end user, others use: Retailers (R) Wholesalers (W) Agents (A)

End Customer / User (Consumer) Channels of Distribution Producer End Customer / User (Consumer) R W A Direct

End Customer / User (Consumer) Channels of Distribution Producer End Customer / User (Consumer) Direct

Intermediaries Explained Wholesalers Businesses who buy large quantities of goods from producers or Agents acting on behalf of producers, for resale in smaller quantities to retailers or other businesses.

Known as ‘breaking bulk’. Intermediaries Explained Wholesalers Known as ‘breaking bulk’. Store goods until needed, will regularly deliver to retailer. May pack and brand goods for producer or large retailer. Add on a profit margin before selling the good on.

Allows producer to concentrate on production rather than marketing. Intermediaries Explained Wholesalers Advantages Disadvantages Can be highly cost-effective method for producers to reach large and dispersed market. Allows producer to concentrate on production rather than marketing.

Reduces the need for producer and / retailer to carry large stocks. Intermediaries Explained Wholesalers Advantages Reduces the need for producer and / retailer to carry large stocks.

Intermediaries Explained Wholesalers Disadvantages Wholesaler may not put as much effort into promoting the product - may put most effort into profitable lines(s).

Intermediaries Explained Wholesalers Disadvantages Price the end customer pays increases as wholesaler adds their own margin.

Intermediaries Explained Retailers Business organisations who buy from wholesalers or direct from the manufacturers for resale in smaller quantities to the general public in shops or other retail outlets.

Usually situated near to where people live. Intermediaries Explained Retailers Usually situated near to where people live. Often advertise the goods they sell. Provide feedback to wholesalers and manufacturers on customer demand / reaction to products.

Add on profit margin before selling the good on. Intermediaries Explained Retailers Provide advice and after sales services to public and may also provide credit. Add on profit margin before selling the good on.

Types of retail outlets Intermediaries Explained Retailers Types of retail outlets Independents Multiple specialist shops Multiple variety stores

Types of retails outlet Intermediaries Explained Retailers Types of retails outlet Department stores Supermarkets Superstores or hypermarkets

Allows producer to concentrate on production rather than marketing. Intermediaries Explained Retailers Advantages Disadvantages Can be highly cost-effective method for producers and / or wholesalers to reach large, dispersed market. Allows producer to concentrate on production rather than marketing.

Intermediaries Explained Retailers Advantages Provides storage facilities - reduces the need for producer to carry large stocks.

Intermediaries Explained Retailers Disadvantages May require considerable marketing effort as competition for shelf space in major outlets is high. Major retailers have considerable power - push margins down, pay on credit which can effect cash flow.

Intermediaries Explained Retailers Disadvantages Price the end customer pays increases as wholesaler adds their own margin.

Intermediaries Explained Agents An independent person or business contracted to negotiate sales and handle the distribution of a product on behalf of the seller.

Usually adds mark-up or earns commission on each sale. Intermediaries Explained Agents Usually adds mark-up or earns commission on each sale. Widely used in importing and exporting.

Reduced distribution costs. Intermediaries Explained Agents Advantages Disadvantages Reduced distribution costs. May work harder than salaried sales-force as the more they sell, the more money they make.

Intermediaries Explained Agents Disadvantages Agents of several products may not give sufficient attention to one particular product if others are more profitable.

Create Barriers. It is argued that intermediaries: Add to Costs Intermediaries Explained Summary of the use of Intermediaries It is argued that intermediaries: Add to Costs Create Barriers.

May be specialists, have contacts and know-how. Intermediaries Explained Summary of the use of Intermediaries On the other hand.. Reduce marketing effort & risk, allowing producer to concentrate on production. May be specialists, have contacts and know-how.

Intermediaries Explained Summary of the use of Intermediaries On the other hand: Manufacturers may lack finance & resources required eg know-how, contacts.

E-Commerce This involves the use of the internet to advertise and sell goods and services and much emphasis is being given to this type of distribution method/advertising recently.

Relatively cheap, easy to set up. Easily updated. Types of Advertising Media - Internet Company Web Site Advantages Disadvantages Relatively cheap, easy to set up. Easily updated. Number of ‘hits’ can be monitored - useful to measure effectiveness.

Possible technical problems of connecting, viewing and maintaining. Types of Advertising Media Company Web Site Disadvantages Limited audience. Possible technical problems of connecting, viewing and maintaining.

Exposure to larger audience. Costs based on results. Types of Advertising Media - Internet Banner Ads Advantages Disadvantages Exposure to larger audience. Costs based on results.

Statistics show not very effective. Types of Advertising Media - Internet Banner Ads Disadvantages Statistics show not very effective. May not produce ‘quality’ leads.

Free and simple to set up. Greater exposure to new audience. Types of Advertising Media - Internet Link Exchanges Advantages Disadvantages Free and simple to set up. Greater exposure to new audience. Increases ranking with some search engines.

May not produce ‘quality’ leads. Types of Advertising Media Link Exchanges Disadvantages May not produce ‘quality’ leads. Visitors may leave web site via an exchange link.

Vastly increases web presence. Types of Advertising Media - Internet Search Engine / Directory Listing Advantages Disadvantages Mainly free. Vastly increases web presence. Most web traffic comes from search engines.

Can be costly. Needs monitoring. Disadvantages Types of Advertising Media - Internet Search Engine / Directory Listing Disadvantages Can be costly. Needs monitoring.

Targeted / receptive audience. Types of Advertising Media - Internet Ezine Sponsorship Advantages Disadvantages Targeted / receptive audience. Greater exposure.

Reliance on Ezine producers for targeted audience. Types of Advertising Media - Internet Ezine Sponsorship Disadvantages Reliance on Ezine producers for targeted audience.

To spread risk into other countries/economies 3.04 - International Marketing Reasons for a business wanting to market its products internationally: Home market too small Home Market saturated To spread risk into other countries/economies To grow/benefit from economies of scale/increase sales/profits

3.04 Problems with International Marketing Exchange rate differences Language/communication problems Time zone differences Cultural differences/protocol Different laws in different countries Trade barriers Political instability in some countries

Place - Channels of Distribution AS3 Marketing - END - Place - Channels of Distribution