HAP TER 7

C
PLACE MIX
Presented by: GROUP 6
 R E P O RT E R S
0 02 03 04 05
1

ISIDRO, TOLENTINO, ARCILLAS, COLALJ O, BALUBOG,

J ULLIANNE GED CHERRY CARLOS MARVIN
RENEE LOUYSSE PIE
CHAPTER OBJECTIVES
At the end of this chapter, the student must be able to:

1 DEFINE
PLACE/ DISTRIBUTION;
2 DISTINGUISH BETWEEN DIRECT & INDIRECT MARKETING
CHANNEL

3 ENUMERATE FUNCTIONS OF DISTRIBUTION CHANNELS;

4 IDENTIFY THE DIFFERENT DISTRIBUTION STRATEGIES AND;

5 EXPLAIN THE BASIC ASPECTS OF PHYSICAL

DISTRIBUTION
Place means distribution channels and physical
distribution. Distribution refers to the process of
making a product available for the consumption or
use of the consumer or business user. It is very vital
element of the total marketing mix that ensures the
adequate availability and visibility of the right
products , in the right target markets, at the right
quantity, at the right cost, at the right condition,
and at the right time.
D is tr ib u tion
Channel
is a set of interdependent organizations
involved in making a product or service
available for use by the target market. It is
the route along which the right product flow
from the manufacturer to the final
consumption.
A company may decide to sell it's product directly to
consumers. This is called direct marketing channel.

Most companies, however, make use of the so-

called marketing intermediaries to sell their goods
and services to target markets. This is known as an
indirect marketing channel.
 MARKETING
IN T E R M E D IA R IE S
 are companies that act as a middleman who
facilitates the transfer of products from the
company to the consumer.
T H E DISTRIBUTION CHANNEL
O R MARKETING CHANNEL
It is the configuration of organizations and
individuals between the hospitality marketer
and his potential customer which is used to
make the product more accessible and
convenient.
 Each organization or individual is known as a "marketing
intermediary" or "channel member". The intermediaries include:

 HOTELREPRESENTATIVES  INCENTIVE TRAVEL PLANNERS

 TRAVEL AGENTS  AIRLINES
 TOUR OPERATORS'  COMPUTERIZED RESERVATION
CENTERS
REFERRAL
 CONVENTION BUREAU
 ORGANIZATIONS TOURIST
 CAR RENTAL COMPANIES etc.
BOARDS
 TOURIST INFORMATION
CENTERS
 FUNCTION AND
DISTRIBUTION
CHANNELS
1. INFORMATION GATHERING AND DISSEMINATION
Performing marketing research need for planning and aiding
exchange.

2. PROMOTION
Developing and spreading persuasive communication to attract buyers.

3. CONTACT
looking and communicating with prospects.
4. MATCHING
Shaping and fitting customer requirements with the company activities
like manufacturing, assembly, packaging, etc.;

5.NEGOTIATION
Reaching an agreement with customers to make an exchange possible;

6. PHYSICAL DISTRIBUTION
Transporting and warehousing products:

7. FINANCING
Acquiring and using funds to cover costs of channel work; and

8. RISK-TAKING
Assuming the risk that go with the carrying out channel work.
D IS T R IB UT IO N
S T R AT E G I E S
THIS ARE THREE S TRATEG IES IN D EC ID ING O N
THE NUM BER O F M ID D L EM EN TO US E AND
THES E ARE:

1. INTENS IVE
2 D IS TRIBUTIO N
. EXC L US IVE
3 D IS TRIBUTIO N
1. INTENSIVE
D IS T R IB UT IO N
In this strategy, the company stock-up its
product lines in as many sales outlets as
possible, in both the traditional and non-
traditional markets.
2. EXCLUSIVE
D IS T R IB UT IO N
This distribution strategy limits the number of
sales outlets given the exclusive right to
distribute then products in a given territory,
area, or region.
3. SELECTIVE
D IS T R IB UT IO N
This distribution strategy has very selected
middlemen to carry the manufacturer's
product lines for better control of market
coverage and better rapport in the long run.
PHYSICAL
D IS T R IB UT IO N
SYSTEM
 PHYSIC AL DISTRIBUTIO N SYSTEM

It involves the following:

Customer Service, Warehousing,

Transportation, Inventory
Management
and C ontrol, Packaging, Receiving,
Materials Handling, and Store
L ocation
Physical Distribution, encompasses
the broad range of activities
concerned with
The objectives of
implementing and controllingplanning
P hysical Distribution are
,p hysical the of raw ,
flow spelled out in terms of
semifinished andmaterials,
finished products
to designated places, at the getting the places, at
designated time and in proper the right time for the
promptly meet the needs
conditions to least cost possible.
of customers at a profit.
 BASIC ASPECTS OF

PHYSICAL DISTRIBUTION
1. O R D E R
P RO CESSIN G
means customer sales orders being facilitated by the order
department by way of invoices, and billing documents using
computers. Sales orders submitted by sales representatives
to the manufacturer's main office are being processed on
schedule by the Sales and Credit Departments.
2 . WA R E H O U S I N G
means customer sales orders being facilitated by the order
department by way of invoices, and billing documents using
computers. Sales orders submitted by sales representatives
to the manufacturer's main office are being processed on
schedule by the Sales and Credit Departments.
 3. I N V E N T O R Y
Companies ideally would want to carry just enough finished
goods inventory to satisfy market demands, at the right time
and right quantity. Large inventories have to be evaluated
carefully if these would mean incremental sales and profits.
Inventory decisions involve two major concerns: 1.) When to
order and 2.) How much to order. This requires entreprenurial
decisions in the right stock quantities to maintain in order not
to suffer out-of-stock or over-the-stock situations.
T h e s e a r e four (4)
a s p e c t s of invent ory
management
A. S tock turnover
B. When to order
C. How much to
order
D. Warehousing
Stock turnovers
T h is th e b a la n c e
is s a les and
between
inventory o n hand,
exp r es s ed by s to c
turnover, the o f tiMes k
during a specified p eri o d
that a v e r a g e inventory o n
h a n d is sold.
 No. of units sold during the
A n n u a l Rate of S t o c k year
T u r n o v e r (in units) Average Inventory on hand (in
units)

A n n u a l Rate of S t o c k Cost of Goods

Tu r n o v e r Sold
Average Inventory on hand (in
(in P e s os ) Pesos)
 T h e a d v a n t a g e s of h i g h i n v e n t o r y
t u r n o v e r are:

1. Inventory investments are productive

2. Merchandise are fresh
3. Losses from changes in styles and packaging are
reduce; and
4. The cost of maintaining inventory is lessened to the
minimum
W h e n to R e o r d e r
Inventory
The reorder point establishes an inventory level at which new sales
orders must be placed. The reorder point depends on order lead
time, usage rate, and safety stock. Order lead time is the period
from the date a sales order is placed until the date goods are ready
for sale or use (received, checked, and altered if necessary).

Usage rate means the average sales in units per day or the rate at
which a product is used in a production process. Safety stock is the
extra merchandise kept on hand to protect against out-of stock
conditions resulting from unexpectedly high demand, greater-than-
anticipated production volume, and delivery delays.
 The Reorder Point formula
is:
Reorder Point = (Order Lead Time x Usage rate) + Safety
Stock
 H o w m u c h to R e o r d e r
There are two types of costs related to the maintenance of inventory in a firm. The
carrying cost refers to the cost of carrying one unit of inventory into stock. On the
other hand, ordering cost refers to the cost of placing an order for an item. These
two inventory-related costs go in opposite directions. The carrying cost is directly
proportional to the number of units on stock (or the level of inventory maintained),
that is, as the number of units of a stock goes up, so does the carrying cost. Thus,
more units will mean higher carrying costs. Ordering cost and inventory level have
an inverse relationship. This means that more inventories on stock do not require
frequent orders, resulting in lower ordering costs.
To illustrate, see the figure
below:

COS CARRYING
T COST

EO
Q
ORDERING
COST
INVENTORY
LEVEL
 B e h a v i o r of C a r r y i n g v s
Ordering Cost

The level of inventory to be maintained by a firm

is that level that will put total inventory cost at a
minimum. Total inventory cost simply refers to the
sum of carrying and ordering cost. The total
inventory cost at its lowest level under the inventory
level where carrying amount and ordering costs are
equal. This level is known as Economic order
quantity or EOQ.
 2xDX
EOQ 0

Where:
= C

EOQ = economic order quantity

D= demand or requirement units for the
period O = ordering cost
C = carrying cost
4 . Tr a n s p o r t a t i o n
Companies in the light of rapidly
changing trends in physical distribution
area engaged in transportation
decisions, more specifically in the
choice of transportation carriers which
have substantial bearings in the pricing
of the products.
There are basically four common modes of
transportation used by companies in the
shipment of goods:

a. Wa t e r w a y s
The cost of water transportation is low for shipping bulky, low-
value, and non-perishable products. However, water transportation
is also the slowest transportation mode and is always affected
significantly by weather conditions.
b. R ai l roa ds.
Railroads are one of the most cost-effective
models for shipping large amounts of bulk
products. Railroads normally carry heavy
items that are low in value (relative to their
weight) over long distances. Railroads ship
items too heavy for trucks.
c. Tr u c k / M o t o r
Carriers.
Trucks are highly flexible in their routing and time
schedules. They are efficient in hauling high-value
merchandise over short distances. Motor Carriers are
more flexible than rail because they can readily pick
up packages at a factory or warehouse and promptly
deliver them to the customer's door. For all intents
and purposes, trucks are faster than rail for short
distances.
 d. A i r w a y s .
Airways are the fastest but the air freights
are much higher than rail or truck rates.
This mode of transportation is common for
perishables and high-value, low-bulk
items.
D IS T R IB U T IO N
CHANNELS OF
H O S P I TA L I T Y
I N D U S T RY
 TO INCREAsE AND ENHANCE THE
sALEs OF THE HOTELs, HOTEL
mANAGEmENT REquIREs usING THE
DIsTRIBuTION CHANNELs
sabre
amadeus

hotels.com
expedia.com
In today's cut-throat competition,
technology is the only medium through
which one can really push hard to stand in
the crowd. But what technology would you
choose to solve your problems? In
hospitality, there are numerous software
that can really help your hotel to gain new
customers and facilitate seamless activities.
Technology has really changed the hotel industry. There were days
when there was no reliability or guarantee on an arrival - guest, and
when they arrive, they will stay if there was a room or else they are
gone. This seriously hampers the business in the long run when the
guests start assuming that your hotel would be fully occupied. So
rather than coming to you, they go to check different hotels for the
rooms. Now, to avoid such scenario in the current market scene, it is
important to use the latest technology which helps you to provide an
actual status of your hotel to the customer before they plan or leave
their homes.
The digital revolution has really come of age with the
latest online reservation solutions. Today the guests can
book their rooms by using their iPad or mobile phone
months in advance or while moving. As a hotel owner, you
are required to consider the changes. You cannot escape
the digitalization of business processing; it helps in the
long-run strategy and planning. This revolution opens
multiple distribution channels for the hotels which allow
the hotels to increase their visibility on the internet among
online users. There are several blogs, websites, review sites
which helps the hotels to grow on the internet.
 For anyone to understand the advantages of online
reservations, he/she should look into the facts that
nowadays people are more likely to book and reserve
rooms online than travel agents. It is a lot cheaper in
comparison to the services of the travel agents.

Distribution channel for hotels is an approach currently

accepted by most of the hotels for aggressive sales and
distribution purposes. The ultimate goal of the hotels is to
create better visibility on all distribution channels so that
customers can find them easily and book a room.
Having a better distribution channel for hotels will mean that you can enhance your
reputation among the users and guests. But it requires better management to handle the online
distribution channels.
A lot of hotels rely on the distribution channels to set their pricing after looking at their
competitors. This can be misleading. The guests always pay for the services that you are
offering than the price you have placed for things that don't interest him/her. So
maintenance of a standard of services will increase customers than the emphasis on pricing.
The distribution channels for hotels allow the hoteliers to earn from direct sales.
Effective management of distribution channel for hotels require an eye on the reviews and
optimization of the hotel on the internet.
THANK YOU FOR LISTENING
EVERYONE!