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Chapter 4 Place

What is Place?
Place is the term that we give to distribution.

Distribution is the process of getting the firms product to


the market. It can come in a variety of forms.

This is a crucial element of the marketing mix a firm


might have the best products in the market but if the market

cannot access the products then the firm will not be


successful.

Adds place value -by delivering goods to customers. Adds time value -by delivering goods when customers want them.

Where can a business sell its products from?

Wholesalers Agents Direct selling

e.g.Ticket agents

Place
Personal selling

Retailers Authorised dealers

Contact Efficiency
MFG MFG MFG MFG MFG

Consumer

Consumer

Consumer

Consumer

Consumer

With no intermediaries 25 transactions needed.

Contact Efficiency
MFG MFG MFG MFG MFG

Intermediary

Consumer

Consumer

Consumer

Consumer

Consumer

With 1 intermediary 10 transactions needed.

CHANNEL FUNCTIONS / ROLES


1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Information gathering / feedback Supply Products In Assortments Risk Sharing Helps Merchandise The Product Provides salesmanship Assists in sales promotion Provides pre-sale and after-sale service Extend credit to customers Helps in test marketing Physical Possession: Title:
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Channel Functions / Roles


1. Information gathering / feedback - Potential / current customers - Competitors - Used by companies to alter marketing mix - Can take actions to counter competition

2. Supply Products In Assortments: Example Pepsi Pepsi supplies in case of 24 bottles - Crate Suppose consumer requires - 1 Pepsi Shopkeeper - Provides 1 Pepsi Breaks products in assortments
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3. Risk Sharing

- Channel members
- Buy goods from producers

- If the goods do not sell?


- Who bears the risk

- Channel partner
Risk sharing is critical
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4. Helps Merchandise The Product Merchandising Attractive display Increases - Awareness - Interest

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5. Provides salesmanship 6. Assists in sales promotion 7. Provides pre-sale and after-sale service - TV servicing in rural areas - Company or channel - Done by channel partner

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8. Extend credit to customers - Buy now, pay later. 9. Helps in test marketing - Testing products before launch - Use channel premises

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10. Physical Possession: 11. Title:

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Marketing Intermediaries
Three Basic Facts About Intermediaries

Marketing Intermediaries
1.

1. Marketing Intermediaries can be eliminated, but their activities cannot be eliminated.

Marketing Intermediaries
22 22222222 2. 2. Intermediary organizations have survived because they have performed marketing functions faster and cheaper than others could.

Marketing Intermediaries
3. 3. Intermediaries add cost to products, but these costs are usually offset by the values they create.

Channel Strategy
1. Intensive Distribution: An intensive distribution strategy seeks to distribute a product through all available channels in an area. Eg. Cold drink

2. Selective distribution: Selective distribution is distribution of a product through only a limited number of channels.This arrangement helps to control price cutting. By limiting the number of retailers,marketers can reduce total marketing costs while establishing strong working relationshipswithin the channel.

3. Exclusive distribution: Exclusive distribution is distribution of a product through one wholesaler or retailer in a specific geographical area. Used with products that are high priced. Eg. The automobile industry -develop and maintain an image -limits marketing costs

4. Consignment Selling: 5. Franchise Selling policy:

Channel Members
1. Wholesaler 2. Retailer 3. Franchising

Types of Wholesaler
1) Merchant Wholesaler 2) Broker & Agents 3) Manufactures branches or Offices.

Types of Wholesaler
1) Merchant Wholesaler A) Full Service Wholesalers B) Limited Service Wholesalers a) Cash & Carry Wholesalers They do not provide service of delivery.

b) Truck Wholesalers TW primarily undertake the selling and delivery functions. c) Drop Shippers: DS operate in bulk industries such as coal, heavy equipment. They do not carry inventory. When they receive order they select a manufacturer who directly ships the merchandise to customer.

2) Broker & Agents They do not usually take possession of the goods, which sets them apart from more traditional wholesalers. Brokers act on a commission basis and work for clients in the manufacturing business. 3) Manufactures branches or Offices.

2. Retailers
Sell goods to final consumer for personal use. Buy products from manufacturers or wholesalers. Non-store retailers Takes title for goods. online retailing; selling products over the Internet

Types of Retailer
A) Store Based B) Non-Store Based

A) Store Based a) On the basis of Ownership i) Independent Retailer ii) A chain Retailer iii) Franchise iv)Leased Department- When a section of dept. in
retail store is leased/rented to outside party.

v) Consumer Co-operatives

b) On the basis Merchandise offered i) Convenience Stores ii) Super markets: Offering a wide variety of food and household products iii) Hypermarkets: It carries a wide range of
products under one roof, including full range of Groceries and General merchandise.

iv) Speciality stores

v) Department stores:
Generally deals with non food items.

vi) Single price stores vii) Factory outlets

B) Non-Store Based a) Direct selling b) Mail order c) Telemarketing d) Automated Vending

Meaning
Arrangement where one party (franchiser) grants another party (franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.

Advantages
Low Risk Growth Ease of financing and operational support Advertising Brand Easy to serve

Meaning of DM
The practice of delivering promotional messages directly to potential customers on an individual basis as opposed to through a mass medium. This type of marketing is typically used by companies with smaller advertising budgets, since they cannot afford to pay for advertisements on television and often do not have the brand recognition of larger firms.

Forms of DM
Face 2 Face Selling Direct mail marketing Catalogue marketing Telemarketing TV & Other direct response mktg. Kiosk marketing

Channel Levels
Channel Levels Channel levels consist of consumer marketing channels or the industrial marketing channels. A factor common among both channel levels is that both

include the producer as well as the end customer.

Channel Level No of channel partners between producer & consumer Various levels are 1. Zero level 2. One level 3. Two - level 4. Three level

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1. Zero channel No channel partners Producer directly to customers Examples Eureka Forbes - Door to door selling Boeing - Directly to Indian airlines
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2. One level channel One intermediary Example Competent motors Channel partners for Maruti 3. Two - level channel Two intermediary Example Onida black & white TV Onida sells to distributor in each district Retailer buy from distributor

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4. Three level channel Three intermediaries Example Hindustan lever

Company
Stockist . (district level) Wholesaler (town level) Retailer (village level) DISTRIBUTION
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Factors Affecting Channel Selection

1. Product Considerations: (a) Unit Value: (b) Perish ability: (c) Bulk and weight: (d) Standardisation: (e) Technical nature: (f) Product line:

2. Market considerations: (a) Consumer or industrial market: (b) Number and location of buyers: (c) Size and frequency of order: (d) Customer's buying habits: (e) Policies of competitors:

3. Company considerations: (a) Market standing: (b) Financial resources: (c) Management: (d) Volume of production: (e) Desire for control of channel: (f) Marketing Policies:

4. Middlemen considerations: (a) Availability: (b) Competitors channel: (c) Services: (d) Sales potential: (e) Costs: (f) Legal constraints: (g) Customs:

1. Product Considerations: (a) Unit Value: Products of low unit value and common use are generally sold through middlemen as they cannot bear the cost of direct selling. Low-priced and high turnover articles like cosmetics, hosiery goods, stationery and small accessory equipment usually flow through a long channel. On the other hand, expensive consumer goods

(b) Perish ability: Perishable products like vegetables, fruits, milk and eggs have relatively short channels as they cannot withstand repeated handling. Same is true about articles of seasonal nature. (c) Bulk and weight: Heavy and bulky products are distributed through shorter channels to minimise handling costs. Coal, bricks, stones, etc., are some examples.

(d) Standardisation: Custom-made and non-standardised products usually pass through short channels due to the need for direct contact between the producer and the consumers. Standardised and mass-made goods can be distributed through middlemen.

(e) Technical nature: Products requiring demonstration, installation and after sale services are often sold directly the producer appoints sales engineers to sell

(f) Product line: A firm producing a wide range of products may find it economical to set up its own retail outlets. On the other hand, firms with one or two products find it profitable to distribute through wholesalers and retailers.

2. Market considerations: The nature and type of customers is an important consideration in the choice of a channel of distribution. (a) Consumer or industrial market: Goods purchased for industrial or commercial use are usually sold directly or through agents.

(b) Number and location of buyers: When the number of potential customers is small or the market is geographically located in a limited area, direct selling is easy and economical. In case of large number of customers and widely scattered markets, use of wholesalers and retailers becomes necessary.

(c) Size and frequency of order: Direct selling is convenient and economical in case of large and infrequent orders. (d) Customer's buying habits: Customer expectations like desire for onestop shopping, need for personal attention, preference for self-service and desire for credit also influence the choice of trade channel. (e) Policies of competitors:

3. Company Considerations: The nature, size and objectives of the firm play an important role in channel decisions. (a) Market standing: Well-established companies with good reputation in the market are in a better position to eliminate middlemen than new and less known firms.

(b) Financial resources: A large firm with sufficient funds can establish its own retail shops to sell directly to consumers. (c) Management: Firms whose managements lack marketing know-how have to depend on middlemen.

(d) Volume of production: A big firm with large, output may find it profitable to set up its own retail outlets throughout the country. But a manufacturer producing a small quantity can distribute his output more economically through middlemen.

(e) Desire for control of channel: Firms that want to have close control over the distribution of their products use a short channel. (f) Marketing Policies: -Speedy delivery

4. Middlemen considerations: (a) Availability: When desired type of middlemen is not available, a manufacturer may have to establish his own distribution network. (b) Competitors channel:

(c) Services: Use of middlemen is profitable who provide financing, storage, promotion and after sale services. (d) Sales potential: A manufacturer generally prefers a dealer who offers the greatest potential volume of sales.

(e) Costs: Choice of a channel should be made after comparing the costs of distribution through alternative channels. (f) Legal constraints: Government regulations regarding certain products may influence channel decision. For instance, liquor and drugs can be distributed only through licensed shops.

(g) Customs: The channels traditionally used for a product are likely to influence the choice. For instance, locks are sold usually through hardware stores and their distribution through general stores may not be preferred.

Impact of Tech. & Internet on Distribution

PROS AND CONS OF E-COMMERCE

PROS

No checkout queues

Reduce prices
You can shop anywhere in the world Easy access 24 hours a day Wide selection to cater for all consumers

CONS

Unable to examine products personally

Not everyone is connected to the Internet


There is the possibility of credit card number theft Out of stock