Transcript Selling & Distribution

Selling & Distribution
GCSE Business Studies
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Revision Presentations 2004
Things to Think About
How can businesses ensure that their product or services
reach existing and potential customers?
What is the route that the product normally takes between the
start of production and finally being “consumed” or used by
the customer?
What are the main advantages and disadvantages of the
various options for “distribution”?
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Distribution Channels
Products reach customers via a “distribution channel”
The channel is the link between seller and buyer – but it
may have more than one stage in between; for example…
Producer
Producer
Wholesaler
Distributors
/ Agents
Producer
Retailer
Customer
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Customer
Customer
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Wholesalers
Wholesalers “break bulk”:
 They buy in large quantities from producers
 Then break them into smaller quantities to sell to retailers
Advantages
 Reduce the producer’s transport costs (fewer journeys to the
wholesaler rather than many journeys to retailers)
 Retailers can order in smaller amounts from wholesalers
Wholesaler makes his money by buying at a lower price from
the producer and adding a profit margin onto the price paid by
the retailer
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Wholesalers - Example
Sale of Daily Newspapers
Producer
Wholesaler
Retailer
Customer
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Newspaper Publisher – e.g. The Sun, The
Times – who send bulk print runs of
newspapers to large depots run by wholesalers
Wholesaler (e.g. John Menzies) packs
newspapers into bundles for retailers (e.g.
newsagents)
Retailer (e.g. newsagent; petrol station)
displays newspaper in store and delivers to
homes
Customer = newspaper buyer
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Distributors / Agents
Distributors
 Distributors distribute (sell on) products
and serve as a local sales point
Producer
 Usually specialise in a particular market
 Usually offer products from several /
many producers – so that their
customers enjoy greater choice
Distributors
/ Agents
 Agents are an example of a kind of
distributor
Examples of Agents
 Estate agents
Customer
 Travel agents
 Export/import agents
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Direct Marketing
Involves a producer selling directly
to the end customer – i.e. there are
no other parts to the distribution
channel
Producer
Various Methods:
 Direct mailing
 E-commerce
 Telemarketing (telephone selling)
 Door to door selling
Examples
Customer
 QVC (TV Selling)
 Boden (clothes from catalogue)
 Sunday Times Wine Direct (wine
through flyers in newspaper)
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Why Use Direct Marketing?
Advantages
 No intermediaries (e.g. retailers) to take part of profits
 Producer can control own marketing
 Chance to reach customers who would not have gone to shops
 Don’t use “mass marketing” techniques such as advertising –
which can save money
Disadvantages
 Costs of distribution of promotional material
 Costs of making distributional material (e.g. catalogues for Next)
 Can still be very expensive if customers do not respond to the
direct marketing materials (i.e. a low “response rate”
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Sales Promotion
Sales promotion is a term used to describe various methods
aimed at persuading customers to buy
Often used as part of other promotional activities such as an
advertising campaign
Examples
 Money off coupons (widely used by supermarkets)
 Competitions
 Discount vouchers (e.g. three for the price of two)
 Free samples (e.g. washing tablets, shampoo sachets)
 Gifts with purchase (e.g. CDs on the front of magazines)
 Point of sale material
 Frequent user / customer loyalty schemes (e.g. Nectar, Air Miles)
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Why Use Sales Promotion?
Advantages
 Short term boost to sales
 Can attract customers away from other brands
 All about “action” – encouraging customers to buy rather than
encouraging them to think about it!
Disadvantages
 Reduces profit margin on each product (depends on how much
is given away in the “promotion”)
 Usually only effective in short term, will need a longer term tactic
to boost overall sales
 Customers may come to expect sales promotions – and so wait
until the next one comes along!
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Customer Loyalty Schemes
A kind of sales promotion used by retailers
Encourage customer to return to retailer
Low cost of discounts given can be offset by profits generated
by sales made
Loyalty cards also provide information about shopping habits
of customers:
 Where do they shop
 When do they shop
 What do they buy
Examples
 Nectar
 Air Miles
 Boots Advantage Card
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Retailing
Retailer – part of the distribution channel
Retailer is the final step in the chain – deals directly with the
customer
Focused on consumer markets
Various kinds of retailer:
 Multiples – chains of shops owned by a single company (e.g.
Sainsbury’s or Body Shop)
 Convenience stores (e.g. Spar, Londis, Costcutter)
 Independents – a shop run by an owner
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Exporting
Exporting = selling overseas
An important option for a business to grow:
 UK markets may be too small or in decline
 Product or service may be attractive to customers in other
countries
Challenges faced by exporters:
 Exchange rates
 Language barriers
 Different cultures
 Trade barriers (e.g. quotas, tariffs, legislation)
Successful exporters need to have a detailed understanding
of overseas markets
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E-Commerce
Two kinds of business websites
 Marketing sites
• Promotes a business and its products or services to potential and
existing customers
 Trading sites
• Promote a business
• Allow customers to purchase online
Many Advantages of Selling Online
 Website gives a business new ways of marketing and selling its
products or service
 Provides an opportunity for its to build relationships with
customers
 Effective and lower risk way of selling in international markets
 Increasingly an essential part of doing business
Not a replacement for traditional marketing activities - website
should complement and support them
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