Unit 4.6 - Place pg. 576

1. Unit 4.6 - Placepg. 576

2. What is Place? • The distribution of a product ie. How the product gets to the consumer • “getting the right products to the right customers at the right price in the right place and at the right time.” • Place can be through: • Warehouses • Agents • Retail stores • Internet

3. What is Place? • Stores have limited space so will only stock products that will sell • EX: Cinemas have limited seating so will only show popular movies • Marketers must convince stores to stock their product over their rival • Businesses use distribution channels (retail, internet) to get their product to customers

4. Traditional Channels of Distribution • Since most products are not sold straight from manufacturer to customers so businesses must use intermediaries – middle person in the chain of distribution – manufacturers, wholesalers, retailers • A long chain of distribution will raise or lower prices? • Types of distribution channels: • Zero-level channel • One-level channel • Two-level channel

5. Types of Intermediaries • Wholesalers • Between producer and retailer • Break large quantities into smaller units for retailers • Bear the costs of storage • Allow producers more time to focus on production • Disadvantage: producer passes responsibility of marketing to wholesaler • Distributors • Trade products of only a few manufacturers

6. Types of Intermediaries • Agents • Negotiators on behalf of buyers and vendors • Helps sell products • EX: real estate agents, insurance agents, door-to-door, telemarketing • Charge commission of % of sales made • Retailers • Sellers of products to consumer (stores) • Advantage: can reach large # of consumers • Types: • Independent – sells small range of products • Multiple – several outlets EX: McD’s • Supermarkets – sell mostly foods • Hypermarkets – superstores; sells food AND consumer durables • Department stores – sells furniture, jewelry, clothes, toys

7. Direct Marketing as a COD • Direct marketing – direct selling of products to consumers. NO intermediaries • Advantages: • No intermediaries therefore greater profit • Direct control over marketing • Boom in internet so direct marketing is more popular • Can reach customers who live far from retail outlets • Usually cheaper than ATL • EX: telesales, e-commerce, direct mail, vending machines

8. Direct Marketing as a COD • Telesales (telemarketing) – using telephones to sell products directly to customers • Can use sales people, automated voice, text message • EX: insurance, satellite tv company • Disadvantage: • Mass telephone calls can be costly • Many people do not like ‘cold calls’

9. Direct Marketing as a COD • E-commerce – trading via internet • More businesses are using websites to entice customers all around the world • Reduces costs/risks of international marketing • However, not all products can be sold online • Cars, jewelry, food • This is a growing channel of distribution

10. Direct Marketing as a COD • Direct Mail – sending promotional material thru the mail system • Used by: banks, local restaurants, fast-food • Advantages: • personalized communication service bc it uses addresses of customers • Low costs • Detailed info aimed at diff market segments can be used • Disadvantages: • Low response rate bc people ignore mail • Contact info on customers can be out of date

11. Direct Marketing as a COD • Vending Machines – specialist machines that stock certain products such as: cigarettes, drinks, snacks • Advantages: • Can be placed almost anywhere • Multiple payment methods – convenient • Low maintenance costs • Disadvantages: • Prone to vandalism • Mechanical failures stops sales • Can only sell a small range of products

12. Choosing an Appropriate Distribution Strategy • An efficient and cost-effective distribution strategy increases likelihood of customers purchasing the products • 5 factors affecting distribution decision: • Cost and benefits – agents are cheaper but retailers can reach more customers • Product – flowers/meats would need shorter COD. DVDs/CDs best sold through internet • Market – small markets need no intermediaries • Time – urgent delivery of product needs direct COD • Legal constraints – license to sell alcohol, anti-gambling laws

13. Place and Business Strategy • Marketing managers must deal w/ 2 key issues: • The best COD to use • How it will ensure that intermediaries will want to stock their products • When choosing a COD or which intermediaries to use they must decide on the most suitable TYPE: • Intensive distribution – mass produced products • Selective distribution – producer chooses suitable intermediaries • Exclusive distribution – less common; specially chosen intermediaries given the right to sell a certain product

14. Place and Business Strategy • Some companies want as many outlets to sell their products ie. Coca-Cola • Others do not want many outlets ie. Rolls-Royce, Tiffany & Co. • To ensure an outlet will sell their product, a company can: • Open their own store (expensive) ie. Nike, Adidas • Company can use franchise agreements – allow other certified people to run the store under business name ie. 7-11, Pizza Hut, Burger King

15. Place and Business Strategy • If a company wants complete control over all its marketing activities company can use: • Vertical integration – growth strategy that unifies supplier, producer, wholesalers, and retailers • Will have more direct control over its supply chain and distribution channels • However, this is usually not a realistic option, so businesses will have to go back to competing for floor space

16. Place and Business Strategy • Companies can use branding as another strategy • Companies of popular brands will have preferential distribution channels. Distributors and retail stores will want to stock their products. • Exporting has benefited international trade • However, exporting has some complications: • Fluctuating exchange rates • Government intervention • Language barriers • Cultural differences • Internet has greatly decreased costs. Rising popular distribution method