Business Studies
0450
Chapter 3.3.3
Place
3.3.3 Place
3.3.4 Promotion:
• distribution channels: • Advantages and disadvantages of
different channels, e.g. use of wholesalers, retailers or
direct to consumers
• Recommend and justify an appropriate distribution channel
in given circumstances
• The aims of promotion
• Different forms of promotion and how they influence sales,
e.g. advertising, sales promotion
• The need for cost-effectiveness in spending the marketing
budget on promotion
Place
• From where the customer buy the
product?
• Who will sell goods at a cheaper rate?
• How a product reaches to the customer?
• Who is getting more amount of profit?
• Who is getting more profit margin?
• What is competition?
• How competition works?
Channels of
distribution
1 2 3 4
Distribution channel 1 –
Producer to consumers
Advantages
• This distribution channel is very simple. It involves manufacturers selling
their products directly to the consumer.
• It is suitable for products, such as certain types of food products, which are
sometimes sold straight from the farm.
• There is a lower price if sold direct to customers – cuts out
wholesaler/retailer.
• Products can be sold by mail order catalogue or via the internet.
Disadvantages
• This is usually impractical for most products because the consumers
probably do not live near to the factory and could not go there to buy the
products.
• This method may not be suitable for products which cannot easily be sent by
post.
• It can be very expensive to send products by post or courier and therefore it
may not be cost effective.
Distribution channel 2
Producer-Retailer-Customer
The second distribution channel is where the producer sells
directly to retail outlets and then they sell the product to the
consumer. This is most common where the retailer is large, such
as a large supermarket, or when the products are expensive, such
as furniture or Jewellery.
Advantages
• Producer sells large quantities to retailers.
• Reduced distribution costs compared to selling directly to
consumers
Disadvantages
• No direct contact with customers.
• The price is often higher than ‘direct selling’ as the retailer has
to cover its costs and make a profit.
Distribution channel 3
Producer-Wholesaler-Retailer-Customer
• Advantages
• Wholesaler saves storage space for small retailer and reduces storage costs.
• Small retailers can purchase fresh products in small quantities from wholesaler because they have a relatively short
‘shelf life’ before they deteriorate.
• Wholesaler may give credit to retail customers so they can take the goods straightaway and pay at a later date.
• Wholesaler may deliver to the small retailer thus saving on transport costs.
• Wholesaler can give advice to small retailers about what is selling well. They can also advise the manufacturer what is
selling well.
• Disadvantages
• May be more expensive for the small shop to buy from a wholesaler than if it bought straight from the manufacturer.
• Wholesaler may not have the full range of products to sell.
• Takes longer for fresh produce to reach the shops, so may not be as good quality.
• Wholesaler may be a long way from the small shops.
• The consumer price is often higher than ‘direct selling’ as both the wholesaler and retailer have to cover costs and
make a profit.
Distribution channel 4
Producer-Agent-Wholesaler-Retailer-
Customer
Advantages
• Manufacturer may not know the best way to sell the product
in other markets.
• Agents will be aware of local conditions and will be in the
best position to select the most effective places in which to
sell.
Disadvantage
• The producer has less control over the way the product is
sold to customers.
Methods of distribution
Method of distribution Description
Department stores Large stores, usually in the centre of towns or cities, which
sell a wide variety of products from a wide range of
suppliers.
Chain stores Two or more stores which have the same name and the
same characteristics
Discount stores Retail stores offering a wide range of products, many
branded products, at discount prices. Often the product
ranges are of similar types of products, for example,
electrical goods.
Superstores Very large out-of-town stores which sell a wide range of food
and non-food products.
Methods of distribution
Method of distribution Description
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, personalised service. Prices are
often high
Direct sales Products are sold directly from the manufacturer to the customer – who
may be a consumer or another business
Mail order Customers look through a catalogue or magazine and order by post. Orders
can also
often be placed by telephone or internet.
Internet/ecommerce Instead of looking at a catalogue, consumers view the goods on the
business’s website and then order on the internet or possibly by telephone
or mail. Business can sell through other specialist websites such as eBay and
Alibaba.com.
Selecting the
distribution
channel to use
• What type of product is it?
• Is the product very technical?
• How often is the product purchased?
• How expensive is the product?
• How perishable is the product?
• Where are the customers located?
• Where do the competitors sell their
products?
