-distribution- Flashcards
What is distribution?
One of the four elements of the marketing mix. Involves the ways in which a product reaches the end consumer.
What is a distribution channel?
Moves a product through the stages from production to final consumption. A line with more than one stage will involve intermediaries.
What are the four intermediaries?
Retailers
Wholesalers
Distributors
Agents
Key points about retailers:
Final step in the chain
Focused on consumer markets
Involves significant loss of margin, as retailer adds a mark up to the price charged.
Convenient for customers
Broad geographical coverage
Retailer chooses final price, handles financial transactions holds stock and handles after-sales support
Key points about wholesalers:
Break bulk, e.g buy in large quantities from producers and break into smaller quantities to sell to retailers.
Reduces producers transport costs
Retailers can order in smaller amounts
Buys at a low price from producer and adds a profit margin onto price paid by retailer
Key points about distributors:
Distributes products, e.g building supplies, electrical components etc.
Offers products from many producers
Holds stock
Key points about agents:
Specialist type of distributor who doesn’t hold stock.
Operates in tertiary sector, e.g travel, insurance, publishing.
Earn commission based on sales achieved.
What is direct distribution?
Where a producer and consumer deal directly with each other without the involvement of an intermediary.
Popular, due to e-commerce/direct marketing methods
What is indirect distribution?
Involves the use of intermediaries between the producer and consumer
Useful if consumer live too far away to be reached directly
Enables consolidation of small orders to large
Allows a business to make better use of resources elsewhere
Different segments of market can be reached
What is multichannel distribution?
Involves a business using more than one type of distribution channel, e.g selling in retail stores, swell as online
Adv of multichannel distribution:
Allows more target market segments to be reached
Customers expect products to be available via multiple channels
Enables higher revenues, e.g if retailers out of stock, but in stock online
Disadv of multichannel distribution:
Potential for channel ‘conflict’ e.g competing with retailers.
Can be complex to manage.
Danger that pricing strategy becomes confused int he eye of customers
