Unit 3: The Marketing Mix
Chapter 14
What Is Place?
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 Jan 8 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;
 Location
 Hours of operation
 Channels of distribution
 Transportation
Channels of Distribution
 A _______________________
Channel of Distribution 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
Wholesalers and Retailers
 _______________
Intermediaries are
the businesses
between the original
source of the product
(the producer) and the
customer (you)
Two types of
intermediaries are;
 Wholesalers
 Retailers
Wholesalers and Retailers
 A _______________
is a business that buys
Wholesaler
products from a producer, and then sells
them to another business
Wholesalers are …
 B2B businesses
 Also called distributors
 A ____________
is a business that buys
Retailer
products from a producer or a wholesaler,
and then sells the product to the final
customer in the consumer market
Wholesalers and Retailers
Retailers are …
 B2C businesses
 Stores, restaurants, theatres, etc.
 Also ______________
retailers
Nonstore
 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.
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 (_____________)
Producer
 The apple farmer then sells the apples to an
apple buyer (______________)
Wholesaler
 The apple buyer then sells apples to your
local grocery store (____________)
Retailer
 You then go to the grocery store and buy the
apple
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 _________________
Supply Chain
 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
 Each step in a supply chain can be referred
to as a ______________
Segment
 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
Supply Chain
Supply Chain
 Supply chains can be _______
Long or ________
Short
 _____________
usually have very short
Services
supply chains because the service
producer provides the service directly to
the consumer
 ________________________
often have
Manufactured Goods
very long supply chains because hundreds
of raw materials and manufactured parts
are needed to make the goods
A Common Channel of
Distribution
Agents and Brokers
 Another type of intermediary is the _________
Agent or
_________
Broker
 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
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
Direct Distribution
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)
Types of Distribution
2. ___________________
Indirect Distribution
is a channel of
distribution with more
than one intermediary
 Most goods have indirect
distribution, that is, most
producers use one or
more intermediaries
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
Distribution
 Intermediaries are experts at _______________
 Most producers are experts at making a product, not
at distributing it
 Remember distribution includes shipping, inventory
and stocking
Role of Intermediaries
 One of the major services that intermediaries
provide is __________________________
Facilitating Exchanges
 _____________
means to make an action
Facilitate
easier
 Intermediaries make the exchange
process easier
 Intermediaries facilitate exchanges for both
consumers and for producers
Customers: One Place, Many
Goods
Suppose you need apples, bread, canned soup, and
eggs
 If 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 eggs
 Instead, 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 situation
 The apple farmer wants to sell as many apples as
possible
 Imagine 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
Physical Distribution
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 is
also called __________
Logistics
 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 ____________
Physically
moving goods
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 goods
Products that are shipped are also referred to as;
 Freight
 Cargo
 Merchandise
 Shipment/Order
2. Channel Members
 _______________________
are the
Channel Members
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
3. Transportation Companies
 ________________
Transportation is the process of physically moving
goods from buyer to seller
 Also called _____________
Shipping
 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
Carrier
 Another term for transportation company is __________
• E.g. Canada Post, FedEx, UPS, etc.
4. Warehouses
 Products must be stored at various points along
the channel of distribution
 A ______________
is a building where large
Warehouse
quantities of products are stored until needed
for shipping
 Products in a warehouse are _______________
Inventory
 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
Modes of Transportation
 A mode of transportation is a ________
Type of
transportation
The 5 major modes of transportation are;
1. Truck
2. Ship
3. Train
4. Plane
5. Pipeline
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 Jan 12 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 _______________
Services
“Transported”
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
Distribution of
Services and Ideas
 _________
are delivered to the target
Ideas
market by _________
Media
 The target market for ideas is often called
an ____________
Audience
 Media that carry ideas includes radio,
television, the Internet, social media,
newspapers, magazines, billboards, etc.
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
Terms of Sale
sale and could include discounts, transportation
arrangements, date of delivery, etc.
Purchase Order
 Then a purchase order is written
 A _______________________
is a document
Purchase Order (PO)
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
Contract
• A _____________
is a legal written agreement
 People representing both the selling and buying
companies sign the 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
Order Processing
filling orders
 A ______________
is created after PO
Pick Ticket
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
Computerized Order
Processing
 Order processing can be automated through
_______________
linkages
Computer
 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
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;
 Cost
 Perishability of goods
 Transportation time
 Security
 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 ______
Sites and
decisions about whether to _________
or
Build
________
Lease 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
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
Just-In-Time (JIT)
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
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
Electronic Data Interchange (EDI)
 ___________________________________
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
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 210
 Application Questions #3, 4 & 5 on page 211
***Save As Ch 14 Day 3 in your Unit 3
folder***