Chapter 14 What Is Place?

Unit 3: The Marketing Mix

Learning Goals

Explain the purpose of channel distribution Explain the difference between a wholesaler and a

retailer and why a business would use each Explain why a company would use an agent or

broker Distinguish between direct distribution and indirect

distribution Describe the four components of physical

distribution Summarize the advantages and disadvantages of

each of the five modes of transportation Explain how businesses process orders

Day 1 Response Journal

Have you ever gone to a store (or online) to buy a product and found it was out of stock?

What was your reaction?

Why do you think this situation happens?

*** Save As June 1 in your Response Journal folder ***

What Is Place?

Place is one of the Four Ps of the marketing mix

Place is about making sure the …

right products get to the right place at the right time and in the right quantities

Place Decisions

The purpose of place decisions are to …

make products conveniently available to the target market

Place decisions include; LocationHours of operationChannels of distributionTransportation

Channels of Distribution

A _______________________ is the route a good takes from its original source to its final customer

The channel of distribution for most consumer goods involves three types of businesses;

A Producer A Wholesaler A Retailer

Channel of Distribution

Wholesalers and Retailers

_______________ are the businesses between the original source of the product (the producer) and the customer (you)

Two types of intermediaries are;

Wholesalers Retailers

Intermediaries

Wholesalers and Retailers

A _______________ is a business that buys products from a producer, and then sells them to another business

Wholesalers are … B2B businesses Also called distributors A ____________ is a business that buys

products from a producer or a wholesaler, and then sells the product to the final customer in the consumer market

Wholesaler

Retailer

Wholesalers and Retailers

Retailers are …B2C businessesStores, restaurants, theatres, etc.Also ______________ retailers

A nonstore retailer is a business that sells directly to consumers through ways other than a retail store

E.g. e-tailers, TV shopping channels, mail-order catalogues, sales reps, etc.

Nonstore

Channels of Distribution

Think of an apple you ate recently. What route did the apple take to get to you?

The apple started out in an apple orchard owned by an apple farmer (_____________)

The apple farmer then sells the apples to an apple buyer (______________)

The apple buyer then sells apples to your local grocery store (____________)

You then go to the grocery store and buy the apple

Producer

Wholesaler

Retailer

Channels of Distribution

You could have bought the apple directly from the apple farmer

However, you may live very far away from any apple farms

The apple buyer and the grocery store make the apple convenient to you

The apple orchard, apple buyer, and the grocery store are the channel of distribution for the apple

Channel of Distribution

Supply Chain

A channel of distribution is like a chain that links a raw material to the final customer For this reason, another term for channel of

distribution is _________________ Each step in the channel of distribution can be

visualized as a link in a chain The supply chain is visualized vertically, with the

raw material at the top and the final customer at the bottom

Products start at the top and move from link to link to reach the final customer

Supply Chain

Supply Chain

Each step in a supply chain can be referred to as a ______________

In the simple supply chain, the producer, wholesaler, retailer, and final consumer are segments of the supply chain

In a supply chain, each segment is the customer of the preceding segment

Similarly, each segment is the supplier of the following segment

Segment

Supply Chain

Supply Chain

Supply chains can be _______ or ________ _____________ usually have very short

supply chains because the service producer provides the service directly to the consumer

________________________ often have very long supply chains because hundreds of raw materials and manufactured parts are needed to make the goods

Long Short

Services

Manufactured Goods

A Common Channel of Distribution

Agents and Brokers

Another type of intermediary is the _________ or _________ An agent is an intermediary who brings buyers and sellers

together Broker is another term for agent

They connect buyers and sellers They never own or physically handle the product May be hired by the seller or the buyer They know the market extremely well Often used in situations where it is hard for buyers and

sellers to find each other E.g. may be used when a Canadian manufacturer wants to

sell in a foreign country

AgentBroker

Day 1 Assigned Work

Students please complete the following; Watch the Retailing & Wholesaling Case study video

Mother’s Market & Kitchen

Day 2 Video & Discussion

Watch the Walmart Supply Chain Video and be prepared to discuss

afterwards.

Types of Distribution

There are 2 types of distribution;

1.____________________ is a channel of distribution with no intermediaries Many services have direct distribution

The service producer “distributes” the service directly to the service user

E.g. A manicure is not produced until the manicurist actually files and polishes the nails of a customer

Buying products from a local farmer is also direct distribution (because you are buying direct from the producer)

Direct Distribution

Types of Distribution

2. ___________________ is a channel of distribution with more than one intermediary

Most goods have indirect distribution, that is, most producers use one or more intermediaries

Indirect Distribution

Role of Intermediaries

Choosing the best channel of distribution for a product is critical to the success of the product

A producer might have the best product in the world, but poor distribution decisions can cause the product to fail

Why do producers use intermediaries?

Because intermediaries provide many important services to producers

Intermediaries are experts at _______________ Most producers are experts at making a product, not

at distributing it Remember distribution includes shipping, inventory

and stocking

Distribution

Role of Intermediaries

One of the major services that intermediaries provide is __________________________ _____________ means to make an action

easier Intermediaries make the exchange

process easier Intermediaries facilitate exchanges for both

consumers and for producers

Facilitating Exchanges

Facilitate

Customers: One Place, Many Goods

Suppose you need apples, bread, canned soup, and eggsIf there were no intermediaries, you would have to go to the apple orchard for the apples, the bakery for the bread, the soup factory for the soup, and the chicken farm for the eggsInstead, an intermediary, the grocery store, can facilitate these purchases for you

For customers, intermediaries facilitate exchanges by; Gathering many types of products in one place

Customers: One Place, Many Goods

The grocery store takes on the task of contacting the apple orchard, the bakery, the soup factory, and the chicken farm

The grocery store buys products from the four producers

The grocery store handles the four transactions with those producers

You now have the convenience of picking up the apples, bread, soup, and eggs in one place

You also only have one transaction, that is, with the grocery store

Producer: One Transaction, Many Customers

Now think of the producer's situationThe apple farmer wants to sell as many apples as possibleImagine that there are no intermediaries

In order to sell his apples, the farmer would have to go to where the customers are

Suppose the farmer wants to sell 200 kilos of apples The most that one customer might buy is 20 kilos,

therefore, the farmer would have to handle at least 10 individual transactions with at least 10 separate customers

Producer: One Transaction, Many Customers

Now think of how an intermediary could facilitate exchanges for the farmer The farmer contacts the grocery store The grocery store buys all 200 kilos of apples The farmer has one transaction The grocery store then handles the 10 or more

individual transactions with each customer

For producers, intermediaries facilitate exchanges by;

Enabling producers to sell to one buyer (the wholesaler)

Physical Distribution

How do goods get from one step of a channel of distribution to the next? Goods must be physically carried to the next step in

the chain Modes of transportation carry goods through the

chain

______________________ is the movement of goods in the distribution channel Physical distribution is needed to move raw

materials to factories, finished goods from factories to warehouses, and finished goods from warehouses to retail stores

Physical Distribution

Physical Distribution

Physical distribution is also called __________

Logistics is a general term for the handling of details of any complex activity

Logistics for physical distribution consists of handling the details involved in ____________ moving goods

Logistics

Physically

Components of Physical Distribution

Physical distribution has 4 components;

1.Products to be shipped

2.Channel members

3.Transportation companies

4.Warehouses

1. Products To Be Shipped

Products are the reason for physical distribution and are the items that need to be shipped

Products to be shipped include; Raw materials Manufactured goods Finished consumer goodsProducts that are shipped are also referred to as; Freight Cargo Merchandise Shipment/Order

2. Channel Members

_______________________ are the businesses in the channel of distribution (supply chain) Businesses need to distribute their products Usually own the products that need to be shipped Suppliers are responsible for making sure that their

products are shipped to their customers in the most efficient, economical way

Some suppliers have their own transportation vehicles for moving their goods, and some hire transportation companies to move their goods for them

Channel Members

3. Transportation Companies

________________ is the process of physically moving goods from buyer to seller Also called _____________ Transportation companies are the companies that own the

trucks, trains, planes, pipelines, or ships, and they provide the service of transportation

Channel members often hire transportation companies to move their products

However, the transportation companies are not part of the distribution channel because they do not own the goods they are shipping

Another term for transportation company is __________• E.g. Canada Post, FedEx, UPS, etc.

Transportation

Shipping

Carrier

4. Warehouses

Products must be stored at various points along the channel of distribution

A ______________ is a building where large quantities of products are stored until needed for shipping Products in a warehouse are _______________ Products are usually transported from a warehouse

to companies in the next segment of the supply chain• E.g. the ingredients for Pepsi are stored in a warehouse until

needed at the production plant. After production, cans and bottles of Pepsi are stored in another warehouse until retailers need them to sell to consumers

Warehouse

Inventory

Modes of Transportation

A mode of transportation is a ________ of transportation

The 5 major modes of transportation are;

1. Truck

2. Ship

3. Train

4. Plane

5. Pipeline

Type

Modes of Transportation

Each mode has advantages and disadvantages Companies must decide which modes of

transportation best meet their needs Considerations in choosing the best mode of

transportation are; Speed Cost Flexibility in reaching the location

Often a combination of transportation modes is used

Day 2 Assigned Work

Students please complete the following; Modes of Transportation Worksheet

Handout provided

Day 3 Response Journal

What different modes of transportation do you use to move yourself from place to place?

Do you choose different modes in different situations? Explain.

*** Save As June 3 in your Response Journal folder ***

Distribution of Services and Ideas

Services and ideas also need to be transported to customers

The goods needed for performing services and ideas, such as furniture for a doctor’s office, are transported through one of the five modes of transportation discussed yesterday

______________ are most often _______________ by the people who perform them People do the service E.g. the medical examination (the service itself) is

"transported" to you when the doctor actually performs the examination

Services “Transported”

Distribution of Services and Ideas

_________ are delivered to the target market by _________ The target market for ideas is often called

an ____________ Media that carry ideas includes radio,

television, the Internet, social media, newspapers, magazines, billboards, etc.

IdeasMedia

Audience

The Distribution Process

The distribution process begins when a buyer contacts a seller E.g. The buyer might be a retailer that needs more

jeans; and the supplier might be a jeans manufacturer or a wholesaler of clothing

The buyer and seller then negotiate the terms of sale _________________ are the conditions governing a

sale and could include discounts, transportation arrangements, date of delivery, etc.

Terms of Sale

Purchase Order

Then a purchase order is written A _______________________  is a document

authorizing the purchase and delivery of certain goods at specific prices and times

The document has a PO number that identifies the order

The PO becomes a sales contract between the buyer and seller• A _____________ is a legal written agreement

People representing both the selling and buying companies sign the contract

Purchase Order (PO)

Contract

Purchase Order

When a company needs particular items, that company writes up a purchase order The purchase order starts the movement of goods from the

supplier to the buyer

The buying company sends a signed PO to the supplier The supplier receives the PO The supplier signs the PO, which validates it as a

contract A confirmation is sent from the supplier back to the

ordering company It says the order has been received, will be filled and

sent

Order Processing

_____________________ is receiving and filling orders

A ______________ is created after PO received A pick ticket is a list of all the items in one order

The orders are then picked by the warehouse staff Items are packaged, labelled, and shipped Bar-code scanning of each item helps keep track of

orders and inventory

Order Processing

Pick Ticket

Computerized Order Processing

Order processing can be automated through _______________ linkages The buyer sets up computer linkage with the

supplier The buyer’s computer then sends a message to

the supplier’s computer when inventory is low The supplier’s computer orders enough goods

to resupply the buyer The supplier then ships those goods to the

buyer

Computer

Channel Management and Physical Distribution

The role of channel management is to oversee the physical distribution of goods by selecting and evaluating the following factors;

a)Shipping mode

b)Warehouse storage

c)Inventory control

d)Risk

a) Shipping Mode

Choosing a shipping mode requires that companies think about several factors; CostPerishability of goodsTransportation timeSecurity

E.g. suppose a company in Africa ships diamonds to Montreal. Because they are lightweight and very valuable, the company will likely ship the diamonds by air. Transporting by truck, ship, or train takes more time and may impact security

b) Warehouse Storage

Channel management decisions include choices about warehouse ______ and decisions about whether to _________ or ________ warehouses E.g. Loblaws has multiple warehouses in

strategic places across the country, because multiple warehouses allow them to quickly move products to Loblaws stores and meet customer demand

SitesBuild

Lease

c) Inventory Control

With motivation to keep cash flow positive and increase profits, inventory control becomes vital to a company's success

To increase profits and save money, producers, wholesalers, and retailers seek to limit large quantities of inventory in storage

c) Inventory Control

Just-in-time systems are a way for manufacturers and retailers to avoid having too much inventory on hand ____________________ is a distribution

strategy where materials should not be delivered to the factory until the moment they are needed for production• The goal is to have no materials, supplies,

or merchandise in inventory

Just-In-Time (JIT)

c) Inventory Control

The JIT production strategy is based on the automatic reorder system In a factory, when inventory of a material falls to a

specific number, an electronic data interchange (EDI) message is sent to the materials supplier

___________________________________ is the business-to-business exchange of data (information) by way of computers using standard formats

EDI messages include purchase orders, shipping notices, invoices, credit memos, and other documents

Electronic Data Interchange (EDI)

d) Risk

As distribution expands in size and complexity, risk reduction becomes a key focus of channel management E.g. think about a German company that makes

pinsetters for bowling alleys. Producing pinsetters involves buying parts from over 200 vendors on three continents. How many disruptions can occur in the shipment of these parts? Plenty! Disruptions can be as simple as production delays that impact shipping time, or they can be as major as production loss due to fire, port closings, incorrect paperwork holding up products at a port, or natural disasters

d) Risk

All companies can take actions to reduce and manage risk, such as; Redesigning the supply chain Increasing your understanding of

foreign trade issues Implementing a computerized inventory

control system

Day 3 Assigned Work

Students please complete the following;K&U Questions #1, 3 & 4 on page 210 Thinking Question #4 on page 210Application Questions #3, 4 & 5 on page 211

***Save As Ch 14 Day 3 in your Unit 3 folder***