place Flashcards
channels of distribution
- Manufacturer
- Wholesaler
- Retailer
- Direct Selling
factors influencing the channel of distribution
- legal restrictions
- type of product
- finance available
- the product itself
- reliability of the wholesaler and retailers
- image of product
- where the product is in its life cycle
- distribution capability of the organisation
legal restrictions
certain pharmaceutical products can only be sold via prescription in a pharmacy for customer safety
type of product
suitable transportation/storage for type of product; product durability eg electrical,frozen food,flowers
finance available
if it is too expensive to have retail outlets, manufacturers are likely to use wholesalers who can save them the expense of labelling and packaging
product itself
perishable items need a fairly direct channel of distribution so customer can buy them fresh e.g fruit
reliability of the wholesaler and retailers
if past experience has shown these channels to be unreliable, manufacturers will probably sell direct to the customer
image of product
channel should reflect the quality of the product eg high quality distributed through exclusive, up-market retailers
where the product is in its life cycle
as it progresses through growth to maturity it needs to be more available to the market
distribution capability of the organisation
does it have transport or does it have to be outsourced
direct selling
costs and benefits
- Increased costs due to advertising, storing stock and administration
- Time and cost incurred in organising product delivery
- Manufacturer has more control over how the product is marketed
- Cuts out the ‘middle men’ which increases profits for the manufacturer
- Products can be tailored to the consumers specific requirements
wholesaler
costs and benefits
- Manufacturer will lose some profit to the wholesaler
- Manufacturer loses control of how the product is sold and marketed
- The wholesaler may damage the reputation of the manufacturer if the product is not sold correctly
- Reduces transport costs for manufacturer as wholesalers buy products in bulk
- Wholesaler takes on the risk and cost of storing the stock
- Wholesaler can repackage and label product in smaller quantities meaning less work/costs for the manufacturer
retailer
costs and benefits
- Manufacturer will lose some profit to the retailer
- Products in retailers are often displayed next to the competition
- Manufacturer loses control of how the product is sold and marketed
- Convenience – retailers are located close to customers
- Retailers can provide customers with information about the product
- The retailer displays and markets the goods for the manufacturer and offers after sales service
direct selling
mail order
- Catalogues and advertising can be expensive
- Can incur high levels of bad debt
- High level of returns
- Customers can use credit facilities
- Money is saved on shop rental
- Customers can shop from home
direct selling
e-commerce
- Time delay between order and delivery
- Customers unable to try/see goods before purchase
- Can be time consuming and expensive to create an attractive web site
- Customers can access goods 24/7
- Allows companies to access customers in different countries
- Money is saved on shop rental and overheads
