1. Unit 3: The Marketing Mix
Chapter 14 What Is Place?

2. Learning Goals Explain the purpose of channel distribution
Explain the difference between a wholesaler and a retailer and why a business would use each
Explain why a company would use an agent or broker
Distinguish between direct distribution and indirect distribution
Describe the four components of physical distribution
Summarize the advantages and disadvantages of each of the five modes of transportation
Explain how businesses process orders

3. Day 1 Response Journal
Have you ever gone to a store (or online) to buy a product and found it was out of stock? What was your reaction? Why do you think this situation happens? *** Save As June 1 in your Response Journal folder ***

4. What Is Place? Place is one of the Four Ps of the marketing mix
Place is about making sure the …
right products get to the right place at the right time and in the right quantities

5. Place Decisions The purpose of place decisions are to …
make products conveniently available to the target market
Place decisions include;
Location
Hours of operation
Channels of distribution
Transportation

6. Channels of Distribution
A _______________________ is the route a good takes from its original source to its final customer
The channel of distribution for most consumer goods involves three types of businesses;
A Producer
A Wholesaler
A Retailer
Channel of Distribution

7. Wholesalers and Retailers
_______________ are the businesses between the original source of the product (the producer) and the customer (you)
Two types of intermediaries are;
Wholesalers
Retailers
Intermediaries

8. Wholesalers and Retailers
A _______________ is a business that buys products from a producer, and then sells them to another business
Wholesalers are …
B2B businesses
Also called distributors
A ____________ is a business that buys products from a producer or a wholesaler, and then sells the product to the final customer in the consumer market
Wholesaler
Retailer

9. Wholesalers and Retailers
Retailers are …
B2C businesses
Stores, restaurants, theatres, etc.
Also ______________ retailers
A nonstore retailer is a business that sells directly to consumers through ways other than a retail store
E.g. e-tailers, TV shopping channels, mail-order catalogues, sales reps, etc.
Nonstore

10. Channels of Distribution
Think of an apple you ate recently. What route did the apple take to get to you?
The apple started out in an apple orchard owned by an apple farmer (_____________)
The apple farmer then sells the apples to an apple buyer (______________)
The apple buyer then sells apples to your local grocery store (____________)
You then go to the grocery store and buy the apple
Producer
Wholesaler
Retailer

11. Channels of Distribution
You could have bought the apple directly from the apple farmer
However, you may live very far away from any apple farms
The apple buyer and the grocery store make the apple convenient to you
The apple orchard, apple buyer, and the grocery store are the channel of distribution for the apple

12. Channel of Distribution

13. Supply Chain
A channel of distribution is like a chain that links a raw material to the final customer
For this reason, another term for channel of distribution is _________________
Each step in the channel of distribution can be visualized as a link in a chain
The supply chain is visualized vertically, with the raw material at the top and the final customer at the bottom
Products start at the top and move from link to link to reach the final customer
Supply Chain

14. Supply Chain
Each step in a supply chain can be referred to as a ______________
In the simple supply chain, the producer, wholesaler, retailer, and final consumer are segments of the supply chain
In a supply chain, each segment is the customer of the preceding segment
Similarly, each segment is the supplier of the following segment
Segment

15. Supply Chain

16. Supply Chain Supply chains can be _______ or ________ Long Short
_____________ usually have very short supply chains because the service producer provides the service directly to the consumer
________________________ often have very long supply chains because hundreds of raw materials and manufactured parts are needed to make the goods
Long
Short
Services
Manufactured Goods

17. A Common Channel of Distribution

18. Agents and Brokers
Another type of intermediary is the _________ or _________
An agent is an intermediary who brings buyers and sellers together
Broker is another term for agent
They connect buyers and sellers
They never own or physically handle the product
May be hired by the seller or the buyer
They know the market extremely well
Often used in situations where it is hard for buyers and sellers to find each other
E.g. may be used when a Canadian manufacturer wants to sell in a foreign country
Agent
Broker

19. Day 1 Assigned Work Students please complete the following;
Watch the Retailing & Wholesaling Case study video
Mother’s Market & Kitchen

20. Day 2 Video & Discussion
Watch the Walmart Supply Chain Video and be prepared to discuss afterwards.

21. Types of Distribution There are 2 types of distribution;
____________________ is a channel of distribution with no intermediaries
Many services have direct distribution
The service producer “distributes” the service directly to the service user
E.g. A manicure is not produced until the manicurist actually files and polishes the nails of a customer
Buying products from a local farmer is also direct distribution (because you are buying direct from the producer)
Direct Distribution

22. Indirect Distribution
Types of Distribution
___________________ is a channel of distribution with more than one intermediary
Most goods have indirect distribution, that is, most producers use one or more intermediaries
Indirect Distribution

23. Role of Intermediaries
Choosing the best channel of distribution for a product is critical to the success of the product
A producer might have the best product in the world, but poor distribution decisions can cause the product to fail
Why do producers use intermediaries?
Because intermediaries provide many important services to producers
Intermediaries are experts at _______________
Most producers are experts at making a product, not at distributing it
Remember distribution includes shipping, inventory and stocking
Distribution

24. Role of Intermediaries
One of the major services that intermediaries provide is __________________________
_____________ means to make an action easier
Intermediaries make the exchange process easier
Intermediaries facilitate exchanges for both consumers and for producers
Facilitating Exchanges
Facilitate

25. Customers: One Place, Many Goods
Suppose you need apples, bread, canned soup, and eggs
If there were no intermediaries, you would have to go to the apple orchard for the apples, the bakery for the bread, the soup factory for the soup, and the chicken farm for the eggs
Instead, an intermediary, the grocery store, can facilitate these purchases for you
For customers, intermediaries facilitate exchanges by; Gathering many types of products in one place

26. Customers: One Place, Many Goods
The grocery store takes on the task of contacting the apple orchard, the bakery, the soup factory, and the chicken farm
The grocery store buys products from the four producers
The grocery store handles the four transactions with those producers
You now have the convenience of picking up the apples, bread, soup, and eggs in one place
You also only have one transaction, that is, with the grocery store

27. Producer: One Transaction, Many Customers
Now think of the producer's situation
The apple farmer wants to sell as many apples as possible
Imagine that there are no intermediaries
In order to sell his apples, the farmer would have to go to where the customers are
Suppose the farmer wants to sell 200 kilos of apples
The most that one customer might buy is 20 kilos, therefore, the farmer would have to handle at least 10 individual transactions with at least 10 separate customers

28. Producer: One Transaction, Many Customers
Now think of how an intermediary could facilitate exchanges for the farmer
The farmer contacts the grocery store
The grocery store buys all 200 kilos of apples
The farmer has one transaction
The grocery store then handles the 10 or more individual transactions with each customer
For producers, intermediaries facilitate exchanges by;
Enabling producers to sell to one buyer (the wholesaler)

30. Physical Distribution
How do goods get from one step of a channel of distribution to the next?
Goods must be physically carried to the next step in the chain
Modes of transportation carry goods through the chain
______________________ is the movement of goods in the distribution channel
Physical distribution is needed to move raw materials to factories, finished goods from factories to warehouses, and finished goods from warehouses to retail stores
Physical Distribution

31. Physical Distribution
Physical distribution is also called __________
Logistics is a general term for the handling of details of any complex activity
Logistics for physical distribution consists of handling the details involved in ____________ moving goods
Logistics
Physically

32. Components of Physical Distribution
Physical distribution has 4 components;
Products to be shipped
Channel members
Transportation companies
Warehouses

33. 1. Products To Be Shipped
Products are the reason for physical distribution and are the items that need to be shipped
Products to be shipped include;
Raw materials
Manufactured goods
Finished consumer goods
Products that are shipped are also referred to as;
Freight
Cargo
Merchandise
Shipment/Order

34. 2. Channel Members
_______________________ are the businesses in the channel of distribution (supply chain)
Businesses need to distribute their products
Usually own the products that need to be shipped
Suppliers are responsible for making sure that their products are shipped to their customers in the most efficient, economical way
Some suppliers have their own transportation vehicles for moving their goods, and some hire transportation companies to move their goods for them
Channel Members

35. 3. Transportation Companies
________________ is the process of physically moving goods from buyer to seller
Also called _____________
Transportation companies are the companies that own the trucks, trains, planes, pipelines, or ships, and they provide the service of transportation
Channel members often hire transportation companies to move their products
However, the transportation companies are not part of the distribution channel because they do not own the goods they are shipping
Another term for transportation company is __________
E.g. Canada Post, FedEx, UPS, etc.
Transportation
Shipping
Carrier

36. 4. Warehouses
Products must be stored at various points along the channel of distribution
A ______________ is a building where large quantities of products are stored until needed for shipping
Products in a warehouse are _______________
Products are usually transported from a warehouse to companies in the next segment of the supply chain
E.g. the ingredients for Pepsi are stored in a warehouse until needed at the production plant. After production, cans and bottles of Pepsi are stored in another warehouse until retailers need them to sell to consumers
Warehouse
Inventory

37. Modes of Transportation
A mode of transportation is a ________ of transportation
The 5 major modes of transportation are;
Truck
Ship
Train
Plane
Pipeline
Type

38. Modes of Transportation
Each mode has advantages and disadvantages
Companies must decide which modes of transportation best meet their needs
Considerations in choosing the best mode of transportation are;
Speed
Cost
Flexibility in reaching the location
Often a combination of transportation modes is used

39. Day 2 Assigned Work Students please complete the following;
Modes of Transportation Worksheet
Handout provided

40. Day 3 Response Journal
What different modes of transportation do you use to move yourself from place to place? Do you choose different modes in different situations? Explain. *** Save As June 3 in your Response Journal folder ***

41. Distribution of Services and Ideas
Services and ideas also need to be transported to customers
The goods needed for performing services and ideas, such as furniture for a doctor’s office, are transported through one of the five modes of transportation discussed yesterday
______________ are most often _______________ by the people who perform them
People do the service
E.g. the medical examination (the service itself) is "transported" to you when the doctor actually performs the examination
Services
“Transported”

42. Distribution of Services and Ideas
_________ are delivered to the target market by _________
The target market for ideas is often called an ____________
Media that carry ideas includes radio, television, the Internet, social media, newspapers, magazines, billboards, etc.
Ideas
Media
Audience

43. The Distribution Process
The distribution process begins when a buyer contacts a seller
E.g. The buyer might be a retailer that needs more jeans; and the supplier might be a jeans manufacturer or a wholesaler of clothing
The buyer and seller then negotiate the terms of sale
_________________ are the conditions governing a sale and could include discounts, transportation arrangements, date of delivery, etc.
Terms of Sale

44. Purchase Order Then a purchase order is written
A _______________________  is a document authorizing the purchase and delivery of certain goods at specific prices and times
The document has a PO number that identifies the order
The PO becomes a sales contract between the buyer and seller
A _____________ is a legal written agreement
People representing both the selling and buying companies sign the contract
Purchase Order (PO)
Contract

45. Purchase Order
When a company needs particular items, that company writes up a purchase order
The purchase order starts the movement of goods from the supplier to the buyer
The buying company sends a signed PO to the supplier
The supplier receives the PO
The supplier signs the PO, which validates it as a contract
A confirmation is sent from the supplier back to the ordering company
It says the order has been received, will be filled and sent

46. Order Processing _____________________ is receiving and filling orders
A ______________ is created after PO received
A pick ticket is a list of all the items in one order
The orders are then picked by the warehouse staff
Items are packaged, labelled, and shipped
Bar-code scanning of each item helps keep track of orders and inventory
Order Processing
Pick Ticket

47. Computerized Order Processing
Order processing can be automated through _______________ linkages
The buyer sets up computer linkage with the supplier
The buyer’s computer then sends a message to the supplier’s computer when inventory is low
The supplier’s computer orders enough goods to resupply the buyer
The supplier then ships those goods to the buyer
Computer

48. Channel Management and Physical Distribution
The role of channel management is to oversee the physical distribution of goods by selecting and evaluating the following factors;
Shipping mode
Warehouse storage
Inventory control
Risk

49. a) Shipping Mode
Choosing a shipping mode requires that companies think about several factors;
Cost
Perishability of goods
Transportation time
Security
E.g. suppose a company in Africa ships diamonds to Montreal. Because they are lightweight and very valuable, the company will likely ship the diamonds by air. Transporting by truck, ship, or train takes more time and may impact security

50. b) Warehouse Storage
Channel management decisions include choices about warehouse ______ and decisions about whether to _________ or ________ warehouses
E.g. Loblaws has multiple warehouses in strategic places across the country, because multiple warehouses allow them to quickly move products to Loblaws stores and meet customer demand
Sites
Build
Lease

51. c) Inventory Control
With motivation to keep cash flow positive and increase profits, inventory control becomes vital to a company's success
To increase profits and save money, producers, wholesalers, and retailers seek to limit large quantities of inventory in storage

52. c) Inventory Control
Just-in-time systems are a way for manufacturers and retailers to avoid having too much inventory on hand
____________________ is a distribution strategy where materials should not be delivered to the factory until the moment they are needed for production
The goal is to have no materials, supplies, or merchandise in inventory
Just-In-Time (JIT)

53. Electronic Data Interchange (EDI)
c) Inventory Control
The JIT production strategy is based on the automatic reorder system
In a factory, when inventory of a material falls to a specific number, an electronic data interchange (EDI) message is sent to the materials supplier
___________________________________ is the business-to-business exchange of data (information) by way of computers using standard formats
EDI messages include purchase orders, shipping notices, invoices, credit memos, and other documents
Electronic Data Interchange (EDI)

54. d) Risk
As distribution expands in size and complexity, risk reduction becomes a key focus of channel management
E.g. think about a German company that makes pinsetters for bowling alleys. Producing pinsetters involves buying parts from over 200 vendors on three continents. How many disruptions can occur in the shipment of these parts? Plenty! Disruptions can be as simple as production delays that impact shipping time, or they can be as major as production loss due to fire, port closings, incorrect paperwork holding up products at a port, or natural disasters

55. d) Risk
All companies can take actions to reduce and manage risk, such as;
Redesigning the supply chain
Increasing your understanding of foreign trade issues
Implementing a computerized inventory control system

56. ***Save As Ch 14 Day 3 in your Unit 3 folder***
Day 3 Assigned Work
Students please complete the following;
K&U Questions #1, 3 & 4 on page 210
Thinking Question #4 on page 210
Application Questions #3, 4 & 5 on page 211
***Save As Ch 14 Day 3 in your Unit 3 folder***