M Place

Question 1

What are the different channels of distribution?

Answer 1

Manufacturer > Customer
Manufacturer > Retailer > Customer
Manufacturer > Wholesaler > Retailer > Customer
Manufacturer > Wholesaler > Customer

Question 2

Reasons for choosing different channels of distribution

Answer 2

Finance available - Using retail outlets can be very expensive so a manufacturer may use a wholesaler to save on labelling and packaging

Legal restrictions - Some products such as medicine and alcohol can only be sold at licensed premises

The product itself - If the product is perishable, it will require a quick distribution channel. If the product is very complicated, it would be best to sell directly to the customer so that it can be explained.

Stage on product lifecycle - Products which have just introduced will be in less retailers than products in maturity stage

Question 3

Describe a wholesaler

Answer 3

An organisation that buys products in bulk to sell in smaller quantities to retailers and customers.

Question 4

Benefits of using wholesaler

Answer 4

• The company can save on the costs associated with labelling and packaging
• The wholesaler is taking the risk and also the cost of storing the product
• Reduces transport costs for the manufacturer as the wholesaler buys in bulk

Question 5

Costs of using wholesaler

Answer 5

• The manufacturer loses some of the profit to the wholesaler
• The wholesaler can market and sell the product in whatever way they want, so if done poorly can damage the manufacturers reputation

Question 6

Describe a retailer

Answer 6

A retailer sells goods to customers in small quantities

Question 7

What are different types of retailer

Answer 7

• Supermarket
• Independent retailer
• Discount stores
• Department stores
• Chain stores

Question 8

Benefits of using retailer

Answer 8

• Retailers will already have loyal customer bases and can attract large amounts of customers
• It is more convenient for customers to shop at retailers
• Retailers do the job of marketing and providing after sales services for the product

Question 9

Costs of using retailer

Answer 9

• Manufacturer will lose some profit to the retailer
• The manufacturer loses control of how the product is marketed
• The retailer will often display the product next to competition, and may reduce sales
• If the retailer gains a poor reputation, this can cause people to stop buying products from the retailer

Question 10

Describe direct selling

Answer 10

When the manufacturer sells directly to the customer

Question 11

Different methods of direct selling

Answer 11

• Ecommerce
• Mail order
• Direct mail
• Personal selling

Question 12

Benefits of direct selling

Answer 12

• Cuts out the ‘middle man’, meaning that the manufacturer can keep all the profits
• The manufacturer can control how the product is marketed and sold
• Products can be personalised to customers’ requirements

Question 13

Costs of direct selling

Answer 13

• The manufacturer has to do their own advertising and promotion, which will increase costs
• There is high time and cost incurred to organise deliveries

Question 14

Benefits and costs of personal selling

Answer 14

-If the product is very complicated, the product can be explained by salesman who fully understand the product..

• This is very time consuming and only gains small customers at a time.
• It is also very costly to hire staff and to train them.

Question 15

Benefits of ecommerce

Answer 15

• Can reach customers from all over the world
• Very convenient, customers can shop 24/7
• Do not have to pay for shop premises
• Shoppers can see everything a business offers, their whole product portfolio
• Customers can shop from home

Question 16

Costs of ecommerce

Answer 16

• The product can’t be physically held, touched or tried, so some consumers will question the quality or suitability. Results in higher returns.
• There may be credit card security issues
• There are high costs for deliveries and returns
• Can be time consuming to design and run a user friendly, attractive website.