3.3.3 Place

Question 1

What is place?

Answer 1

Place refers to how the product is distributed from the producer to the final consumer. There are different distribution channels that a product can be sold through.

Question 2

What are the 4 types of distribution channels?

Answer 2

• manufacturer to consumer
• manufacturer to retailer to consumer
• manufacturer to wholesaler to retailer to consumer
• manufacturer to agent to wholesaler to retailer to consumer

Question 3

What are the 4 types of distribution channels?

Answer 3

• direct (manufacturer to consumer)
• Modern (manufacturer to retailer to consumer)
• Traditional (manufacturer to wholesaler to retailer to consumer)
• Agent (manufacturer to agent to wholesaler to retailer to consumer)

Question 4

Explain how the direct distribution channel works:

Answer 4

The product is sold to the consumer straight from the manufacturer. A good example is a factory outlet where products directly arrive at their own shop from the factory and are sold to customers.

Question 5

What are the advantages of the direct distribution channel?

Answer 5

– All of the profit is earned by the producer
– The producer controls all parts of the marketing mix
– Quickest method of getting the product to the consumer

Question 6

What are the disadvantages of the direct distribution channel?

Answer 6

– Delivery costs may be high if there are customers over a wide area
– All storage costs must be paid for by the producer
– All promotional activities must be carried out and financed by the producer

Question 7

Explain how the modern distribution channel works:

Answer 7

The manufacturer will sell its products to a retailer (who will have stocks of products from other manufacturers as well) who will then sell them to customers who visit the shop. For example, brands like Sony, Canon and Panasonic sell their products to various retailers.

Question 8

What are the advantages of the modern distribution channel?

Answer 8

– The cost of holding inventories of the product is paid by the retailer
– The retailer will pay for advertising and other promotional activities
– Retailers are more conveniently located for consumers

Question 9

What are the disadvantages of the modern distribution channel?

Answer 9

– The retailer takes some of the profit away from the producer
– The producer loses some control of the marketing mix
– The producer must pay for delivery of products to the retailers
– Retailers usually sell competitors’ products as well

Question 10

explain how the traditional distribution channel works:

Answer 10

The manufacturer will sell large volumes of its products to a wholesaler (wholesalers will have stocks from different manufacturers). Retailer will buy small quantities of the product from the wholesaler and sell it to the consumers. One good example is the distribution of medicinal drugs.

Question 11

What are the advantages of the traditional distribution channel?

Answer 11

– Wholesalers will advertise and promote the product to retailers
– Wholesalers pay for transport and storage costs

Question 12

What are the disadvantages of the traditional distribution channel?

Answer 12

– Another middleman is added so more profit is taken away from the producer
– The producer loses even more control of the marketing mix

Question 13

explain how the distribution channel agent works:

Answer 13

The manufacturer will sell their products to an agent who has specialized information about the market and will know the best wholesalers to sell them to. This is common when firms are exporting their products to a foreign country. They will need a knowledgeable agent to take care of the products’ distribution in another country

Question 14

What are the advantages of the distribution channel agent?

Answer 14

– The agent has specialised knowledge of the market

Question 15

What are the advantages of the distribution channel agent?

Answer 15

– Another middleman is added so even more profit is taken away from the producer

Question 16

What factors affect the place decision?

Answer 16

• The type of product it is: if it’s sold to producers of other goods, distribution would either be direct (specialist machinery) or wholesaler (nuts, bolts, screws etc.).
• The technicality of the product: as lots of technical information needs to be passed to the customer, direct selling is usually preferred.
• How often the product is purchased: if the product is bought on a daily basis, it should be sold through retail stores that customers can easily access.
• The price of the product: if the products is an expensive, luxury good, it would only be sold through a few specialist, high-end outlets For example, luxury watches and jewellery.
• The durability of the product: if it’s an easily perishable product like fruits, it will need to be sold through a wide amount of retailers to be sold quickly.
• Location of customers: the products should be easily accessible by its customers. If customers are located over the world, e-commerce will be required
• Where competitors sell their product: in order to directly compete with competitors, the products need to be sold where competitors are selling too.