MCD2050
Marketing 1
Lecture 9 – Topic Place (Distribution)
2
3Icons
Pages
6 - 10
Prescribed
reading. Refer
to textbook
Watch the
video via the
link
Class Activity –
Answer the
question
Case Study -
Real world
example
!
Important
point to
remember
Pages
6 - 10
Recommended
reading. Refer
to textbook
4 Understand the concept of place
 Be familiar with the functions and the different classifications of distribution
channels
 Identify major types of retailers and understand the major aspects of retailing
 Explain the role of agents, brokers, and wholesalers in marketing distribution
 Understand the basics of supply chain management
 Describe the major activities involved in the distribution of goods
Outline
5 Distribution (or place) means placing products in the hands of the
ultimate consumer or organisation buyer
 Distribution channel (or marketing channel): the chain that exists
between producers and consumers (or organisational buyers)
 Marketing intermediaries: individuals or organisations that act in
the distribution chain between the producer and end user
– Wholesalers, industrial buyers, agents or brokers, retailers
What is Distribution (or Place)?
6Why are marketing intermediaries used?
 Manufacturers lack resources and expertise to carry out all
distribution functions.
 The use of intermediaries is an efficient way to make products
available to customers.
 Intermediaries have knowledge and skills to ensure the product is
available to as many customers as possible.
The nature and importance of marketing channels
© Commonwealth of Australia, reproduced by permission
7Kellogg’s is a multi-national producer of breakfast cereal.
 Kellogg’s uses wholesalers and retailers
to distribute their product to their
customers.
 This provides Kellogg’s with an efficient
method of serving their customers.
 Kellogg’s is an expert at producing
cereal, yet lacks the skills and resources
to distribute the product.
The importance of channels: An example
© Commonwealth of Australia, reproduced by permission
8Benefits of Using Distribution Channel Intermediaries
Page
305
9 Intensive: Designed to ensure the
product is as widely available as
possible. Uses every suitable
intermediaries.
 Selective: Designed to ensure the
product is available in more than one
but less than many places.
 Exclusive: Within a geographic region
only one intermediary is used.
Types of Distribution Based on Market Coverage
Pages
304-305
10
Consumer Product Distribution Channels
Pages
306-308
11
 Channel 1: The producer directly distributes to
the end consumer. This channel is increasing in
use, examples of it’s use Apple, Domino’s and
most service providers.
Consumer Product Distribution Channels Explained
12
 Channel 2: The producer provides the product to
retailers who in turn sell the product to final
consumers. Certain companies combine this
channel with the use of channel 1. For example, the
purchase of a Qantas airline ticket from the Qantas
website (Channel 1), the purchase of Qantas airline
ticket through a travel agent (Channel 2).
Consumer Product Distribution Channels Explained
13
Consumer Product Distribution Channels Explained
 Channel 3: The producer will sell their offer to
wholesalers who then sell the product to
retailers, the retailer serves the end
consumer.
14
 Channel 4: Used primarily by exporters, that use the knowledge
and expertise of an agent/broker to deal effectively with the
international market.
 Channel 5: Most commonly used within financial services,
e.g. a mortgage broker. The bank offers the financial product,
the mortgage broker sells this to the consumer.
Consumer Product Distribution Channels Explained
15
In your groups, research and discuss how one (1) of these
companies may use any three (3) of the marketing
channels:
Activity: Distribution Channels
Lillydale Chicken
Sunny Ridge
Strawberry Farm
UGG Boots
16
 Supply-chain management: an approach to managing marketing
channels based on ongoing partnerships among distribution channel
members that create efficiencies and deliver value to customers
Supply-chain Management
Horizontal channel integration
Bringing organisations at the
same level of operation under
a single management structure
Vertical channel integration
Bringing different stages of the
distribution channel under a
single management structure
Franchising: an approach to business
in which a franchisor licenses its
business model to a franchisee Pages
308-309
17
 Distribution channels often work effectively to
achieve their shared goals.
 However, in certain circumstances channel
conflict can occur, largely due to disagreements,
miscommunication or misunderstandings.
 Conflict can have a negative impact on the
channel’s ability to serve their customers.
 To overcome channel conflict, channels are
often arranged according to Horizontal or
Vertical integration.
Distribution channel partnerships
18
Vertical Integration
1
8
© Commonwealth of Australia, reproduced by permission
Insert Figure 13.5
in here
19
 McDonald’s: cooperation between the
company (McDonald’s) and the owner
of the restaurant (Franchisee).
 Coles Supermarkets: cooperation
between the retailer and it’s suppliers,
mainly due to the power of Coles within
the supermarket industry in Australia.
Examples of Vertical Integration
20
 A channel arrangement in which two or more companies at
one level join together to follow a new marketing opportunity.
 By working together they can combine their resources to
achieve more than one organisation working on it’s own.
 These are often called strategic alliances, as together they can
create greater impact.
Horizontal Integration
2
21
 Star Alliance: Where different airlines work together to more
efficiently and effectively serve their global customers.
 Star Alliance member airlines include:
– Singapore Airlines
– Air China
– United Airlines
– Air Canada
– Air New Zealand
Example of Horizontal Integration
22
Distribution of Goods
 Outsourcing: the contracting of physical distribution tasks to third parties
Page
311
23
The following are the major activities involved in the distribution
of goods:
 Order Processing
 Inventory Management
 Warehousing
 Transportation
Distribution of goods:
Page
310-314
24
Order processing: all of the activities
involved in managing the
information required to receive,
handle and fill a sales order.
– Order processing is usually most
efficient when computerised
systems are involved.
– Paper-based ordering systems are
still common and their relative
simple and low cost for SMEs
Inventory management: managing
stocks of products to ensure availability
to customers while minimising holding
costs
– Order lead time
– Usage rate
– Safety stock
Just-in-time (JIT): an approach to
inventory management that involves
holding only that stock that is about to
be used or sold
Order Processing and Inventory Management
25
Warehousing: the use of facilities to store and
move goods.
 It is an important too in the inventory
management approach of many
businesses.
Some businesses specialise in providing
warehousing services to other businesses.
Distribution centre: a type of
warehouse that focuses on moving
rather than storing goods. They
receive goods; assemble them and
ship them to customers – this is
called Cross Docking
Material handling: the physical
management of goods in a
warehouse and on to transport
Transportation: the process of moving
products from their place of manufacture
to their place of consumption
Freight forwarders: specialist transportation
companies
Warehousing and Transportation
26
 The internet and other telecommunications technologies have
enabled great advances in the efficiency of physical
distribution.
 The term e-distribution is often used to describe the full
implementation of advanced telecommunications technologies
in the physical distribution process.
 E-distribution offers efficiencies internally and externally.
Technology in Physical Distribution
Pages
315
MCD2050
Week 9: Marketing 1
Place: Retailing, Agents & Brokers and
Wholesaling
28
 Retailing: any exchange in which the buyer is the ultimate
consumer of the product
 Retailing strategy
Retailing
Location
•The natural geographic
area from which customers
will be drawn
•Proximity to competitors
•Proximity to
complementary retailers
•Customer access to public
transport and public
parking
Positioning
•Identifying a gap in the
market and targeting it by
creating some
distinguishing feature in the
mind of customers
Pages
317-326
29
 Specialty Retailers: A retailer that focuses on a narrow
range of offers, yet within this category has significant
depth. For example: Michael’s Camera’s
– Speciality stores
– Category Killers
– Off Price retailers
– Pop Up Stores
 General Merchandise: Retailers that offer a wide variety
of products.
– Convenience stores
– Supermarkets
– Discount stores
– Department stores
Retailers
30
 Online retailing
 Door-to-door selling
 Automatic vending
Other forms of Retailing
31
 Retailers add value for customers and producers by creating or
providing the following.
– Time utility: retailers such as vending machines and 24 hour convenience
stores ensure customers can buy products when they require it.
– Place utility: Retailers move products closer to the consumers
– Form utility: Some retailers can provide customisation for different
customer’s needs and wants such as a tailor.
– Advice and personal service: Retailers can provide customer service on a
one to one basis
– Exchange efficiencies: Retailers can offer consumers a wide range of
products from numerous producers all in one place
Benefits of retailers
32
 Agent: An intermediary who has an ongoing relationship with
the producer, acting for them on a regular basis.
– Example: An Australian wine producer would use an agent to assist
the continued sales of their product within the Japanese market.
 Broker: An intermediary who works on a short-term basis with
the producer.
– Example: A home owner uses a real estate broker to sell their
home.
Agent and Brokers
Pages
326-328
33
 Wholesaling: exchanges in which products are bought for
resale, for use as inputs in other products, or for some other
use in a business.
 Wholesalers act as the connection between producers and
retailers and offer benefits to both.
 Wholesalers, being specialists, can provide the services more
efficiently than the producer can perform them itself.
Wholesaling
Pages
328-329
34
Summary
 Distribution (or place) means placing products in the hands of the ultimate consumer or
organisation buyer
 Marketing intermediaries refer to individuals or organisations that act in the distribution
chain between the producer and end user
 Marketers choose from intensive, exclusive and selective distribution
 Retailing describes any exchange in which the buyer is the ultimate consumer of the
product
 Wholesaling comprises exchanges in which products are bought for resale, for use as inputs
in other products, or for some other use in a business
 Agents and brokers are important intermediaries who earn income from commissions
 Physical distribution of goods involves order processing, inventory management,
warehousing, and transportation
35
 Reminder to complete the online weekly quiz on Moodle.
 Quiz will close 5pm Saturday
 The test is open book – you can refer to your lecture notes and
textbook(s)
 The test is timed – 60 minutes to complete from when you start it.
Online Weekly Quiz
MCD 2050: Marketing 1
Mid Trimester Test Q & A
37
Topics Tested: Weeks 1 to 8 (including Promotion & Digital Marketing)
Format:
There are two sections:
Section A: Multiple Choice Questions (10 questions – Answer All) (20 marks – Each Question is worth 2
marks)
Section B: Scenario Based Long Answer Questions (answer 1 question) – (20 marks)
Date & Time: TBC
Platform:
Online though the MCD 2050 Moodle site
Test is available within the Internal Assessments folder
Duration: 1 hour and 20 minutes (Timed Assessment)
Mid Trimester Test