[Music] hello students and welcome to video6 in chapter 4.5 the 7 PS of the marketing mix so it feels like we've been going forever in this chapter um but we only have two videos left so we've got this video on place and then we're going to do the final three in one video so in the place uh part of the syllabus there's only one learning objective which is the importance of different types for distribution channels um we've got about five six slides in this chapter so the first thing we're going to do is define this word place from the seven P so obviously the place is the fourth P um in our list of the seven PS and I would say it's the one of them which is the most confusing and easiest to get wrong so let's define place and I'll tell you why it's confusing so place is the process of how a product gets from the manufacturer to the final consumers so actually place is the is the way of getting from the manufacturer to to Consumer so it's not literally a place it's a method of distribution that we're going to see so it's it's the distribution Channel not a physical place and another way of saying that it is it's the journey the product goes through rather than a specific place on that journey and so one example we're going to look at is should a a business sell only online or via a retailer so if they sell online then it's going to go directly from the producer to the consumer or they can go via retailer which we're going to call an intermediary now with the example of a retailer they are actually selling in a physical place which is a shop but they don't necessarily need to so that's a slightly confusing thing about place so what we're going to do is we're going to look at three different types of distribution channels so here we can define a distribution Channel as a chain of intermediaries a product goes through from producer to Consumer so again all it is is how do we get from the producer to the consumer and behind my head there's another consumer there so I don't necessarily need to move my head this time and we're going to look at three different types where it goes direct from producer to Consumer we can sell via retailer or we can sell via a wholesaler and a retailer so in this video we're going to look at these three we're going to Define everything and we're going to look at some pros and cons so the first one we're going to look at is direct selling so direct selling is effectively when it goes straight from the producer or the manufacturer to the consumer we can also call this a zero level distribution Channel whereas distribution channel is again going from producer to Consumer and we call it zero level because there's nothing in between and we're going to see that that makes a bit more sense in a minute so some examples here um I think a really good example is Amazon so um when Amazon produces products they sell directly cons to Consumers on their website um now we have to be careful with Amazon because if of a third party sells their products on Amazon then in that situation Amazon is actually a retailer or an intermediary so in this situation it's got to be where the Amazon that they produce the products themselves plane tickets again this depends so you can go to the for example the laner website and you can buy tickets from the Lanza website and that would be direct selling um you can also go through a website like Expedia and that would not be direct selling because liander are selling via Expedia um which is going to be the next um uh the next example we look at some other examples are door too so some companies this is probably more in in the past they would go around and literally just knock on people's door and try and sell products to them or via telephone mail order and also these days farmers markets farmers markets are where the farmer goes directly to the market and they'll meet consumers there and they'll buy them like that another good example is near my house I have a milk dispenser I've never seen one of these before but I live near a farm and I can go to this milk dispenser and I can get fresh milk um straight from the farm and they have like this thing you put in a few euros and then then you get your milk there so we'll go through the pros and cons of direct cing pretty quickly this one's going to have higher profit margins because there's no retailer there's no one in between who's going to be taking Mar margins because we're selling director to customers we can kind of talk to the customers whether online or or in person and we kind of have more control over pricing and promotion as we're going to see a bit later on because effectively we're making all those decisions ourselves some cons less exposure if we sell in a re if we sell in a shop then a lot more people are going to see our product so actually getting people to see our product can be more difficult we have to handle storage and distribution so whenever we whenever we sell a product we actually have to deliver the product ourselves rather than someone else doing it for us and also because we're a manufacturer we're probably not specialized in selling and so therefore if we were to sell for a retailer that's their job is selling and so we're losing out on their expertise so moving on to uh retailer um and uh this will make a bit more sense I talk about the expertise and selling Etc so a retailer is called a single intermediary distribution Channel a very long word but basically it just means we're using a retailer and we can also call this a one level distribution Channel because we have one intermediary in getting from producer to Consumer and so this is uh selling to Consumers via one intermediary this is normally a retailer but can also be an agent or or a distributor um and some examples here would be things like a supermarket a bookstore or real estate agent in the example I've got down below are more going to be about retailers which is pretty much a shop if you like but an agent can also be a real estate agent so um if you're selling your house it's likely you're going to use an agent and then they will show potential customers and so that in this situation they would be the intermediary so let's use the example of a bookstore so let's say you write your book um and you consider direct selling so if you wrote a book and you did direct selling then you would effectively be trying to find customers yourselves but in this situation let's say you decide to sell via a bookstore whether that's online or through a physical bookstore so if Pros are doing that well number one you're going to be able to reach a wider range of customers um some customers are going to come into the book store not know your book but then they'll see your book in theory as they walk around the shop so more people are going to see your book customers can see and feel your product I guess for a book this is less important but for food and electronics and furniture and things like that it's obviously more important that customers can do that also the retail of a bookstore is going to take care of storage and distribution so if you sell the books yourselves then you have to post them to everyone or give them to everyone whereas the retailer will do those things for you some cons the bookstores obviously going to take want to take some of your profit so you're going to you know make less less per book and you also lose control of the marketing mix so the book storees going to be able to sell the book for the price they want to so they might sell it for a cheaper price than you want to or promote it in a different way this is assuming you haven't signed some sort of contract which limits those and also the product is likely to be displayed next to the competition so there might be books similar to yours and obviously your book will be displayed next to them so in theory that could reduce um the number of copies that you sell if people decide to buy the competition instead okay on to the final one which is the two intermediary distribution Channel which can also be called the two level distribution Channel where level here is also the same word as intermediaries and here we've got um a wholesaler basically so manufacturer selling to customers via two intermediaries and these two intermediaries will often be a wholesaler and a retailer and so what the wholesaler here will do is they'll buy in bulk from a manufacturer and then they'll sell smaller amounts to retailers so the idea is let's say you have a big business and you want to sell in Germany um now if you sell to supermarkets all around Germany for example then the distribution is going to be quite difficult so what you could do is you could sell to a wholesaler in Germany who will then buy all the products and then they'll do the distribution within Germany for you and so the big Advantage is they'll take care of the storage and the distribution so it makes the distribution significantly easier and it also means you've got a wider geographical reach because they're going to take care of that for you some cons of this are there's another intermediary to take profit because the wholesaler is obviously going to make want their slice of the product and in theory you lose e you lose even more control over the marketing mix because you're probably selling in a different market then you're going to be losing control of that so moving on to some general points about um the distribution channels so in general the more intermediaries you use the lower the profit margin that's because every time you use an intermediary that intermediary is a business and they're going to want to take a slice of profits so in general direct selling has the highest profit margin but has the limitations we saw earlier in general retailers are going to want to display the product and allow communication with the customer so if you sell in a supermarket or Bookshop then customers are going to get to interact with your products and get to know your product better however retail is reduced the control you have over marketing decisions so if you sell in a Bookshop or a supermarket then those businesses are going to have control over price and promotion so you lose control over how your product is marketed and if you're trying to establish a brand image that could be a negative and then um retailers and wholesalers will stock your product which reduces stock holding costs and they'll also control the whole distribution channel for you and so um if you sell via a supermarket or a wholesaler then they'll look after those things for you now one thing the manufacturers can do is they can actually control the whole distribution channel so Walmart is a is a supermarket in theory they could buy a cow farm and therefore they have guaranteed access to to be throughout their supermarkets so final thing factors to consider and determining methods of distribution so let's say you've got a business how do you know what the best way of doing it is well firstly cost in order to use intermediaries you need to have some profit margin if the profit margins are already very tight then maybe you can't use two intermediaries you can just use one or maybe use zero and sell online how much control do you want over your brand so if you're really really keen on having a certain brand image then you need to be very careful um how many medies you use because obviously they're going to want to have control over those where are the customers and so if customers are very spread out then a wholesaler might be appropriate because they like I said they're going to take care of the distribution and finally Mass Market versus niche market If the product is mass market then direct selling might not be possible because if it's Mass market then you're going to have a lot of consumers and so direct um Distributing the products to all of those consumers may be very expensive logistically very difficult so in those situations wholesaler and retailer may be more appropriate one final thing it completely depends on the product and so for some products one distribution Channel might be more appropriate so you need to look at the product first right that is it I'll see you next [Music] time