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Chapter 9

Chapter 9- The 4 Ps- Place


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Bill Mc Conkey
Chapter
9

Page:
of 7
Chapter 9- The 4 Ps- Place
1- Explain the distribution mix, the different channels of distribution, and
different distribution strategies
THE DISTRIBUTION MIX
Distribution mix- the combination of distribution channels a firm selects to get a
product to end-users
Intermediaries and Distribution Channels
Intermediary (middleman) – any individual or firm other than the product who
participate in a product’s distribution
Wholesalers- intermediaries who sell products to other businesses, which in
turn resell them to the end-users
Retailers- intermediaries who sell products to end-users
Distribution of Consumer Products
Distribution channel- the path a product follows from the producer to the end-user
All channels must begin with a producer and end with a consumer or an
industrial user
Direct Distribution of Consumer Products
Direct channel- a distribution channel in which the product travels from the producer
to the consumer without passing through any intermediary
Major on the internet
Retail Distribution of Consumer Products
Producers distribute products through retailers
Also offer internet sales
Requires a large amount of floor space, both for storing merchandise and
displaying it in stores
Wholesale Distribution of Consumer Products
Perform the storage function
Wholesalers store merchandise and restock it frequently
Distribution through Sales Agents or Brokers
Sales agent/broker- an independent business person who represents a business and
receives a commission in return, but never takes legal possession of the product
May be used to represent producers and sell to wholesalers and/or retailers
Agents generally deal in the related product lines of a few producers and work
on a long-term basis
Brokers match sellers and buyers as needed
The Pros and Cons of Non-Direct Distribution
1
Each link in the distribution chain makes a profit by charging a markup or
commission
Higher prices- the more members in the channel, the more intermediaries, the
higher the final price
Markups range form 10%-40% for manufacturers, 2%-25% for wholesalers, and
5%-100% for retailers
E-intermediaries- wholesalers and agents who use internet channels
Also charge markups
Creating Added Value
Intermediaries provide added value by saving consumers both time and money,
and that value accumulates with each link in the supply chain
Intermediaries provide time-saving info and make the right amount of products
available where and needed
Intermediaries exist because they do necessary jobs in cost-efficient ways
Distribution Strategies
A distribution network can make the difference between success and failure for
a company because the choice of distribution strategy determines the amount
of market exposure the product gets and the cost of that exposure
Make a product accessible in just enough locations to satisfy customers’ needs
Intensive distribution- a distribution strategy in which a product is distributed in
nearly every possible outlet, using many channels and channel members
Exclusive distribution- a distribution strategy in which a product’s distribution is
limited to only one wholesaler or retailer in a given geographic area
Most common for high-cost prestige
Selective distribution- a distribution strategy that falls between intensive and
exclusive distribution, calling for the use of a limited number of outlets for a product
2- Explain the differences between merchant wholesalers and agents/brokers
WHOLESALING
Provides a variety of functions for their customers, who are buying products for
resale to consumers/businesses
Offer delivery, credit, and info about products, in addition to storing products
and providing as assortment of products for their customers
Merchant Wholesalers
Merchant wholesaler- an independent wholesaler that buys and takes legal possession
of goods before selling them to customers
Full-service merchant wholesaler provides credit, marketing, and
merchandising services
2
Limited-function merchant wholesaler provide only a few services, sometimes
merely storage
Agents and Brokers
Serve as sales force for various manufacturers
They are independent representatives of many companies’ products
They work on commissions, usually 4%-5% of net sales
They do not own the merchandise they sell like merchant wholesalers do
The value lies in their knowledge of markets and their merchandising expertise
Provide a wide range of services, including shelf and display merchandising and
advertising layout
Maintain product saleability by removing open, torn, or dirty packages,
arranging products neatly, and generally keeping them attractively displayed
3- Identify the different types of retailing and retail stores
RETAILING
Types of Retail Outlets
Can be classified in various ways: by pricing strategies, location, range of
services, or range of product lines
Product Line Retailers
Department stores- large retail stores that offer a wide variety of high-quality items
divided into specialized departments
Stores are usually large
Handle a wide range of goods
Offer a variety of services
Supermarkets- large retail stores that offer a variety of food and food-related items
divided into specialized departments
Low prices, self-service, and wide selection
Specialty stores- small retail stores that carry one line of related products
Serve specific market segment with full product lines in narrow product fields
and often feature knowledgeable sales personnel
Bargain Retailers
Bargain retailers- retail outlets that emphasize low prices as a way of attracting
consumers
Discount houses- bargain retail stores that offer major items such as televisions and
large appliances at discount prices
Catalogue showroom- a bargain retail store in which customers place orders for items
described in a catalogue and pick up those items from an on-premises warehouse
3