Marketing - Module 8 The Marketing Mix - PLACE

Principles of Marketing
Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11- ABM
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph
MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos
The marketing mix - place

Learning Objectives:
At the end of this module, student must be able to:
a. know the functions of distribution channels
b. identify the different distribution channels
c. understanding the key factors to consider when setting up a distribution channel
You may or may not have purchased something

online.
What were your bad experiences? Am sure a lot

of you have had issues with the delivery. Either you got
the wrong package, or the package was delivered
elsewhere. Others have had their package destroyed
during the trip.
Whatever your experiences, they are all relevant

to what we are going to discuss in this module as it talks
about the different ways a product is distributed to
customers.
Distribution Channels
Marketing intermediaries make up a marketing or distribution channel. A distribution channel
performs the work of moving products from manufacturers to final consumers or business users. A good
distribution channel shortens the time, place, and possession gaps between the manufacturers and
consumers, and provides convenience to consumers.
A company can sell their products through several channels. Marketing channels like
wholesalers and retailers are sets of interdependent organizations involved in the process of making
products or services available to target customers. Most often, manufacturers and principals would not
want to do the distribution themselves because it entails a different set of competencies, which may
affect profitability, efficiency and effectiveness. A manufacturer, for instance, can make a 15% return
on sales but will only make 1 or 2 % as a distributor. A wholesaler or a distributor carrying different
complementary but non-conflicting products has better economies to distribute products than a
manufacturer of limited product lines.
Example:
When Unilever launched Pureit home water system, it did not do its own distribution unlike their
fast-moving consumer goods counterpart. It decided to appoint Collins, an appliance distributor for
brands like Moulinex, to handle distribution in appliance stores as well as deal with micro-lending
institutions.
Principles of Marketing Page 1 of 9

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Distributors
Distributors are appreciated to perform the distribution function for manufacturers in making
their products available. They may cover an entire country on an exclusive distributor basis or may be
appointed to do the distribution function within a defined territory or defined store type. Distributors
may sell to wholesalers or retailers or my even go directly to consumers.
Example:
Casio timepieces are imported to the Philippines, and are exclusively distributed by Belrewmond
Trading to watch stores as well as their own retail stores, Time Depot.
Factors that Influence Channel Selection

There are several factors that influence the selection of a channel. They are the following:
1. The Nature of the Product
The nature of the product will determine which channel of distribution is best suited. Highly
expensive products like ships and airplanes, for instance, require more direct dealing with users.
2. The Nature of the Market

The nature of the market is also an important consideration. Buyers of detergent soaps,
for instance, are scattered throughout the country, so the manufacturer will have to choose a
channel that will serve this particular market.
3. The Nature of the Company

The size of the company and its organizational set-up will also be a factor in selecting a
channel. Large companies can afford to adapt even a multi-channel approach in its distribution
activities.
1. Wholesaling
Wholesaling refers to all activities involved in selling goods and services to those who intend to
resell or use the same for producing goods or services. The wholesaler is the one who performs
wholesaling activities.
Types of Wholesalers
a. Merchant Wholesalers
Merchant wholesalers are the most common type of wholesalers who buy all sorts of
different and profitable items from different manufacturers, store them, and sell them to the
retailers. They don’t have much-specialized knowledge about the products and usually operate
in the FMCG (Fast-Moving Consumer Goods) industry.
b. Speciality Wholesalers
Speciality wholesalers stock items belonging to a specific industry or product category.
They are very knowledgeable when it comes to the industry and the product and are usually
found in industries where selling efforts are required to create demand among the retailers as
well.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
c. Internet Wholesalers
These wholesalers operate and conduct transactions using the internet. They usually sell
the goods at a discounted price as they save money by having virtual offices and operating
warehouses at places that don’t charge much.
Examples of internet wholesalers are wholesalers on Alibaba or Amazon for Business.
d. Full-Service Wholesalers
Usually found in consumer durables or engineering products industries, these wholesalers
provide full service including stocking inventories, operating warehouses, order picking, delivery,
training sales associates, supplying credits promotions, etc . to the end retailer.
They handle large sales volume and deal with a narrow line of goods.
e. Limited Service Wholesalers

These wholesalers offer fewer services to their customers like only stocking, only delivering
etc. There are many types of limited-service wholesalers like:
a. Cash-and-carry wholesalers – who handle limited line of fast-moving goods, sell to small retailers
and don’t deliver goods (retailers have to deliver the goods themselves).
b. Truck Wholesalers – Who sell and deliver the goods directly from their vehicles.
f. Discount Wholesalers
These wholesalers deal in discounted stock. Usually, the stock is discounted either
because the products are discontinued, refurbished, returned, or going to expire soon.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
g. Dropship Wholesalers
Dropship wholesalers facilitate the process of dropshipping. They deliver the goods
directly to the end consumers when a retailer makes a sale. They sign contracts with several
internet-based retailers and act as their warehouse and delivery partner and only charge
money whenever a sale is made. That is, even though they are wholesalers, they sell small
quantities of goods.
*You may find more types by searching online or reading other marketing books.
2. Retailing
Retailing refers to the business activity of selling goods or services to the final consumer.
A retailer is one whose business firm sells mainly to the final consumer. A retailer in some cases
sell on a nonretail basis, i.e., wholesale.
The manufacturer and the wholesaler may, at times, also perform retailing activities, i.e., sell
directly to the final user.
The final consumer is one who uses a product or service for his own personal benefit and not as
a means of producing other goods or services. An example of a final consumer is the child who
buys lollipops to satisfy his craving for sweets.
Types of Retailers
a. Department Stores
Traditional department stores sell a wide range of merchandise that is arranged by category
into different sections in the physical retail space. Some department store categories include
shoes, clothing, beauty products, jewelry, housewares, and more.
b. Grocery Stores and Supermarkets

These retailers sell all types of food and beverage products, and sometimes also home
products and consumer electronics as well.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
c. Warehouse Retailers
Warehouse-type facilities such as Sam's Club stock a large variety of products packaged in
large quantities and sold at prices lower than retail. They generally sell in bulk or in quantities not
otherwise available in other retail outlets.
d. Specialty/Outlet Retailers
These specialize in a specific category and brand-name products. Victoria's Secret and Nike
are examples of specialty retailers, generally selling only merchandise that carries their brand
name or is associated with it.
e. Convenience Retailer
For on-the-go consumers, these are usually a retail location that primarily sells gasoline—they
sell a limited range of grocery merchandise and auto care products at a premium
"convenience" price.
f. Discount Retailer
Discounters sell a wide variety of products that are often privately labeled or generic brands
at below-retail prices. Discount retailers like Family Dollar, Dollar General, and Big Lots will often
source closeout and discontinued merchandise at lower-than-wholesale prices, which passes
savings onto consumers.
g. Internet/Mobile Retailer
Internet shopping websites ship the purchases directly to customers at their homes or
workplaces, without the expenses of traditional brick-and-mortar retailers. They usually sell
merchandise for a lower-than-retail price, using warehouses for storage and developing
relationships with warehouses, vendors, and sometimes manufacturers to provide goods at
reduced prices.
*You may find more types by searching online or reading other marketing books.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
3. Franchising
Franchising is a form of marketing and distribution in which the owner of a business system (the
franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business
selling a product or providing a service using the franchisor's business system.
Franchisees are also given permission to use the franchisor's branding, trademarks, and
identifying marks under specified guidelines. It is important for anyone deciding to start a business
by becoming a franchisee to remember that in franchising the franchisee is bound to a partnership
agreement with the franchisor for a defined period of time (some exceptions do exist).
Franchising as we know it today is widely believed to have originated with Isaac Singer in the
1850s. After Singer invented his sewing machine he encountered two main problems when
introducing it to the marketplace. The first was that customers needed to be taught how to use the
new invention before they would buy it. The second was that Singer did not have enough capital
to manufacture his machine in large numbers.
In response, Singer, along with business partners, came up with the idea of selling the rights to
sell the sewing machines as well as train those who bought one to local business people across the
country (and eventually internationally).
Once he employed this system, Singer’s enterprise expanded rapidly. The royalties earned from
the license rights helped offset manufacturing costs and, because each franchise was self-
financed, Singer Manufacturing Company was able to tap into the entrepreneurial attributes and
local market knowledge of the franchisees to help Singer become more successful than he could
have by himself.
The tipping point for franchising came in the 1950s. In 1954, Ray Kroc, a successful business man
from Illinois, saw the potential in franchising a successful southern California hamburger stand
owned by a couple of brothers. This restaurant chain, McDonald’s, is perhaps the most well-known
example of franchising in the world. Kroc has drawn comparisons to auto maker Henry Ford for
bringing an assembly line-like concept to the fast food industry through his belief that customers of
McDonald’s should have an idea of what to expect wherever in the world they may be.
When asked, the majority of people when asked for a commonly known franchise would name
a fast food franchise most often. However, franchising is extremely diverse. Name a product or
service from ATMs to yogurt and there’s likely a franchise industry for it.
Here are some of the well-known companies you can franchise in the country. You may search
online on how much each of them cost.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
4. Personal/Direct Selling
With direct selling, distributors avoid intermediaries in the supply chain and sell products directly
to consumers. In traditional retail settings, products are sold online or at a physical store, but direct
selling relies heavily on salespeople getting in front of customers in nontraditional settings.
How Direct Selling Works

Direct selling eliminates several intermediaries involved in product distribution, such as the
regional distribution center and wholesaler. Instead, products go from the manufacturer to the
direct sales company, then to the distributor or rep, and finally to the consumer. The products sold
through direct sales are usually not found in typical retail locations, which means finding a distributor
or rep is the only method to buy the products or services.
Direct selling is usually associated with party-plan and network marketing companies. Although
these companies use direct sales, they aren't the only ones; many businesses that sell business-2-
business (B2B) use direct selling to target and sell to their end customers. For instance, many
companies that sell advertising or office supplies will send their reps directly into the stores that can
use their services.
Types of Direct Selling

There are a variety of ways business owners can utilize direct selling, including:
• Single-level direct sales
• Host or party-plan sales
• Multi-level marketing
Single-level direct sales are typically performed one-on-one through door-to-door or in-
person presentations, online meetings, or catalogs. Generally, income is earned on sales
commissions, with possible bonuses for reaching target goals. Host or party-plan sales are made in
a group setting, usually involving the distributor or rep doing a presentation in their home or a
potential customer's home.In some cases, a company might sell to individuals in a business. For
example, a real estate software sales rep might do a group sales presentation to a group of
Realtors. Income can come from commissions from sales, and sometimes through the recruitment
of other reps.
Sales in multi-level marketing (MLM) are made in various ways, including those associated
with single-level and party-plan sales. Income earned through MLM is commission on sales, as well
as the sales made by other business partners the distributor recruits into the company.
Direct sales may be mistakenly referred to as MLM or network marketing, but these terms are
not interchangeable. While MLM and network marketing are a form of direct sales, not all direct
sales systems involve MLM. For instance, in single-level marketing, the sales representative is only
paid commission on the sales they personally make; there is no recruitment of other sales team
members or commissions earned from their sales.
Direct Selling vs. Pyramid Schemes

Unfortunately, it can often be hard to distinguish between a legitimate MLM business
opportunity and a pyramid scheme because they share many of the same characteristics. Both
MLM and pyramid schemes require participants (called "distributors") to recruit other people, and
both tie an individual's compensation directly to their recruiting results. The main difference
between the two is that pyramid schemes are designed to keep distributors' money flowing into the
company.
Most pyramid schemes will keep the income stream going by charging fees and requiring
distributors to regularly purchase a certain amount of products to sell—even if they don't need it.
There may be products or services to sell, but most people's income largely depends on how well
they can recruit because the company is more interested in having a steady flow of income from
distributors.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Here are some potential signs of a pyramid scheme:

• Lavish promises of getting rich quick
• Too much emphasis on recruiting other distributors
• You're required to initially "invest" a lot of money
• Promoters use emotional sales tactics to convince you to join
• Very little focus on the actual product or service
Factors to Consider in Choosing the Distribution Channel

Distribution channels help businesses to take their products from manufacturing units to their
customers. It includes wholesalers, retailers, consultants, sales teams, online media, Internet, etc. You
can choose one or more distribution channels based on the products or services you are providing.
Distribution channel is a significant factor that affects the success of your business. Hence, you
have to be really careful when selecting a distribution channel to sell your products and services. There
are certain factors you should consider before choosing a channel for distribution. Some of them are
listed below:
1. Products or Services
All distribution channels may not be suitable for every product. Hence you have to consider the
characteristics of your products for selecting a channel that is suitable for your business. Perishable
products should be delivered to the customers as soon as possible, therefore, it is better to select a
shorter route for distributing them. If the goods are durable, then diversified and longer channels
may be essential.
It is better to ensure a direct delivery for custom made products, and it is better to sell goods
with high value directly without a mediator.
2. Market
Another element that impacts the selection of a channel is your market. If you are aiming
consumer market, then a retailer can be necessary for you, but if you plan to sell your products or
services in the business market, then you can avoid retailing. If the market is large it might need
many routes for distribution, whereas direct selling is better for a small market.
3. Middlemen
You might need the help of middlemen to distribute your products. In such cases, give priority
for those who are able to provide marketing services for you. Those who offer better promotional
services can also be given preference.
4. Marketing Environment
The present condition of your market should also be considered before choosing a distribution
channel. During the time of recession or depression, selecting a cheaper and shorter channel will
be ideal. But during prosperity, you will get to choose from a wide range of channels.
5. Competitors
Closely examine the distribution channels used by your competitors to get an idea about which
channel is apt for your business. Sometimes it is better to go for the route selected by your rival,
whereas it is better to try something new in some other cases. For example, a company may decide
to by-pass the retail store channel and can choose door-to-door sales instead.
6. Customer characteristics
Learn about your potential customers. Find details about their distribution, preferences,
frequency of purchase, volume of purchase etc. This will help you to select a distribution channel
accordingly.

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
References:
• Go, J., & Escareal-Go, C. (2017). Principles and Practices in Marketing in the Philippine Setting.
14 Ilang-Ilang St., New Manila, Quezon City, Philippines: Josiah and Carolina Go Foundation.
• Medina, R. (2008). Principles of Marketing. Manila Philippines: Rex Bookstore, Inc.
• Ligaya, E. F., Jerusalem, V. L., Palencia, J. M., & Palencia, M. M. (2017). Principles of Marketing.
Sampaloc, Manila, Philippines: Fastbooks Educational Supply, Inc.
• Ilano, A. B. (2019). Principles of Marketing. Manila Philippines: Rex Bookstore, Inc.
• https://www.feedough.com/wholesale-wholesaler-definition-types-examples/
• https://www.thebalancesmb.com/what-is-retail-2892238
• https://www.franchisedirect.com/what-is-franchising-definition/
• https://www.thebalancesmb.com/what-is-direct-selling-1794391
• https://businessdist.com/distribution-business-online/important-factors-to-consider-when-
selecting-distribution-channels/

Marketing - Module 8 The Marketing Mix - PLACE

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Principles of Marketing

Governor Pack Road, Baguio City, Philippines 2600

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

The marketing mix - place

You may or may not have purchased something

What were your bad experiences? Am sure a lot

Whatever your experiences, they are all relevant

Principles of Marketing Page 1 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Factors that Influence Channel Selection

2. The Nature of the Market

3. The Nature of the Company

Principles of Marketing Page 2 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Examples of internet wholesalers are wholesalers on Alibaba or Amazon for Business.

e. Limited Service Wholesalers

Principles of Marketing Page 3 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

b. Grocery Stores and Supermarkets

Principles of Marketing Page 4 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Principles of Marketing Page 5 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Principles of Marketing Page 6 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

How Direct Selling Works

Types of Direct Selling

Direct Selling vs. Pyramid Schemes

Principles of Marketing Page 7 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Here are some potential signs of a pyramid scheme:

Factors to Consider in Choosing the Distribution Channel

Principles of Marketing Page 8 of 9

MODULE 8 – MKTG Subject Teacher: Kenny Jones A. Amlos

Principles of Marketing Page 9 of 9

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