PRINCIPLES OF MARKETING

Quarter II – Lesson 3-ABM_PM11-IIa-e18

CONTENT STANDARD:
The learners demonstrate an understanding of the essence of the new product development,
pricing, placing (distribution), and promoting a product or service.

PERFORMANCE STANDARD:
The learners shall be able to design a new product or service, decide types of pricing
approach, and choose distribution methods and promotion tools that respond to market trends.

LET US STUDY:
Place
How can a company deliver its products to its customers effectively and efficiently? This
is the next vital marketing decision. Similar to the first P (product), product distribution
decisions are almost permanent, as distribution channels do not change on a daily basis. The
product type is also a major consideration in deciding the type of distribution channel or
intermediary. Mass market or a fast-moving consumer goods may require intensive distribution,
while products like expensive fragrances may necessitate only selective, if not exclusive,
distribution.
The Need for Marketing Intermediaries
Because most companies today serve relatively large markets and their consumers are
geographically dispersed, they rarely sell their products directly to the consumer. Instead, they
utilize marketing intermediaries, also called distribution channels, to bring their products to the
customer. Although most marketing intermediaries, i.e. wholesalers and retailers, are
independently owned, some product manufacturers may decide to own a few, if not all, of their
retail outlets.
Intermediaries provide access and convenience for the product’s consumers. The following are
other key functions of intermediaries:
1. Information collection and dissemination. – marketing intermediaries, particularly
retailers, provide product manufacturers with vital marketing research information on
consumer profiles and product movements. These are valuable for decision-making.
2. Product storage and movement – the warehousing facilities of manufacturers are
relieved of large amounts of merchandise. Intermediaries or channels take care of storage and
transport of products to the customer.
3. Operational financing – distribution channels that take care of storage and transport
assumes the costs of these activities
4. Product promotion – intermediaries, particularly retailers, help in the development and
implementation of communications programs to enhance product sales
5. Risk-taking – most marketing intermediaries eventually pay for merchandise they
carry. They assume financial risk if the product does not sell as expected.
The use of marketing intermediaries increases the price of the product. However, the
absence of intermediaries would result in greater expense for the customer. A customer wanting
to drink a bottle of soda will have to go to the bottling plant because the soda is not available in
the convenience store (a marketing intermediary). A customer has to buy a piece of candy from
the manufacturer because it cannot be purchased at the sari-sari store (another marketing
intermediaries)
Supply Chain
A supply chain is the network of all the individuals, organizations, resources, activities, and
technology involved in the creation and sale of a product. The chain starts from the delivery of
materials from the supplier to the manufacturer, to the eventual delivery of the finished product
to the user. The supply chain segment involved in the delivery of the product from the
manufacturer to the consumer is known as distribution channel.
With supply chain management, partnerships and collaborative efforts are established
among product material suppliers, the labor force, warehousing, shipping and transportation
companies and product intermediaries. The objective is to optimize the supply chain that results
in better product manufacturing and distribution. This also leads to overall cost reduction and
higher sales.
Product Distribution Types
There are three general ways on how a product can be distributed using marketing
intermediaries:
1. Exclusive distribution – distribution is limited to a select number of dealers, usually
one or a few. The objective of exclusive distribution is to have more control over how a
particular brand is priced, displayed and promoted. Products that are distributed exclusively
usually enjoy higher markups and better brand equities. The major disadvantage of this type of
product distribution is that brands are not very accessible to customers. Customers need to
travel long distances to get where the product is available. OshKosh B’Gosh, a popular and
upscale children’s apparel brand, for example, is exclusively distributed in the Philippines by
Cinderella Marketing Corporation.
2. Intensive distribution – this product distribution type, used mostly by fast-moving
consumer goods and convenience goods, involves making a product available in as many retail
outlets as possible.
This type of product distribution gives consumers the highest level of utility and
convenience. However, product manufacturers have very little control on how the product is
priced, displayed or promoted. When a local soft drink was launched in the market to compete
against lower-priced soft drinks, the bottler implemented an extensive advertising campaign,
promoting its low P7.00 price to customers. However, few sari-sari stores sold the soft drink at
P8.00 suggested retail price (SRP). The stores continued to sell the product at P8.00. This
reduced the company’s effort to erode the market share of competitor brands.
Some examples of products sold via intensive distribution are bottled drinking water,
candy, and snack foods, etc.
3. Selective distribution – positioned between exclusive and intensive distribution, this
type of product distribution involves the use of more than one but not as many dealers as in
intensive distribution. This allows adequate manufacturer control over retail prices, displays
and promotions. However, it permits selected product distributors some level of independence.
Products commonly sold through selected distribution are brands of canned foods, seasoning,
and personal care products.
Wholesaling and Retailing
Wholesalers and retailers are two of the most crucial distribution intermediaries, most
especially in providing place utility for a product’s customers.
Wholesaling – is the sale of goods for resale. Wholesaling is an important product distribution
function. Without wholesalers, product manufacturers would have to deliver goods directly to
retailers.
Because wholesalers perform a valuable distribution function, manufacturers allow them a
markup for the goods distributed. Wholesalers perform the following key functions:
• Information collection and dissemination
• Bulk-breaking
• Assortment-building
• Product storage and transportation
• Financing
• Risk-taking
Retailing – is defined as the sale of goods/services to the final customer for his personal
consumption. Typical examples of retailing establishments are drug stores, sari-sari stores,
restaurants, movie houses. Convenience stores and supermarkets.
Among others, product retailers perform the following key functions:
• Information collection and dissemination
• Product assortment selection
• Product storage Financing
• Product promotion Risk-taking
Retail stores are accessible to its customers where purchases are done in a single and
simple transaction.

LET US REMEMBER:
The product is not necessarily produced and consumed in the same place. The place of
production or the plant site can be different from the place of distribution or selling. The service
is produced and consumed in the same place. It cannot be owned and taken away from the
location.
Activity #1 (write the answer in your notebook)
LET US APPLY WHAT YOU HAVE LEARNED

Three different kinds of stores are presented below. Identify what you believe makes each one
different from the other.
Store In Terms of Size In Terms of Items In Terms of Prices
Supermarkets

Groceries

“Sari-sari” stores

HOW MUCH HAVE YOU LEARNED FROM THIS MODULE?

1. Give an example of a locally made product that you believe will have a good chance of
competing in a regional market. Explain why?

2. What advantages can a convenience store chain, such as 7-eleven have over traditional
sari-sari stores?

3. What is your favorite grocery store destination? Explain why it is your destination of
choice. What does the place provide?