Cambridge IGCSE Business Studies 3.3 Marketing mix

3.3.3 Place

1. Producer to consumer (Products sold directly to customers) – This is when the manufacturer sells the products to the customers who are the final users of the product

Advantages

• Very simple
• suitable for some types of products (e.g. products from farms)
• Lower price for consumers

Disadvantages

• Not many customers live near farms/factories so it is difficult for them to buy the products
• Transporting products to consumers can be expensive and not worth it.
• May not be suitable for some types of products

2. Producer to retailer to consumer – Producer sells products to retailers who then sell the products to the consumers

Advantages

•  Lower distribution costs (Only need to transport to the retailers not individual customers)

Disadvantages

• No direct contact with customers

3. Producer to wholesaler to retailer to consumer – Wholesaler divides large bulks of products into smaller ones for small retailers to buy.

Advantages

• Reduce storage cost for manufacturer and retailers
• Reduce transportation costs
• Small retailers can buy small bulks from wholesalers so products don’t expire
• Wholesalers can give advice to small retailers on what is selling well

Disadvantages

• Price is higher for retailers and consumers
• Wholesaler may not sell every product
• Longer time until products reach consumers which may be bad for fresh products

4. Producer to agent to wholesaler to retailer to consumer – Agent sells the products on behalf of the manufacturer in another country so the manufacturer doesn’t have to contact foreign wholesalers directly.

Advantages 

•  Agents have more knowledge about businesses in that country
• Save time for the producer as they don’t have to take care overseas distribution

Disadvantages

• Producer has to pay the agent commision / fee
• May lose control of how the product is sold to customers

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Which distribution channel to use?

• The type of product
• Does the product need explanation (e.g. technical products)
• The price of the product
• The shelf life of the product
• Location of the customers

Methods of distribution

• Department stores
• Chain stores
• Discount stores
• Supermarkets
• Internet (E-Commerce)

E-Commerce

Advantages for the business

• Lower employment costs – Online shops don’t require salespersons
• Website can encourage customers to buy more

Disadvantages for the business

• Increased competition as customers can compare products with the competitors
• Delivery costs
• No contact with customers
• Technical stock control systems are required to manage online orders (expensive)

Advantages for consumers

• Online shopping is convenient
• Prices between brands can be easily compared
• Can buy from shops all over the world

Disadvantages for customers

• Require internet connection
• Products such as clothing cannot be tried on before buying
• No staff to explain how the product works
• Risk of credit card info being stolen when buying from unsecured websites