tutor2u ™ gcse business studies revision presentations 2004 selling & distribution

tutor2ututor2u™™

GCSE Business GCSE Business StudiesStudiesRevision Presentations 2004Revision Presentations 2004

Selling & Distribution


GCSE Business GCSE Business StudiesStudies

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”?



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 Producer

WholesalerDistributors

/ Agents

Retailer

Customer Customer Customer



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



Wholesalers - Example

Producer

Wholesaler

Retailer

Customer

Sale of Daily Newspapers

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



Distributors / Agents

Distributors

Distributors distribute (sell on) products and serve as a local sales point

Usually specialise in a particular market

Usually offer products from several / many producers – so that their customers enjoy greater choice

Agents are an example of a kind of distributor

Examples of Agents

Estate agents

Travel agents

Export/import agents

Producer

Distributors / Agents

Customer



Direct Marketing

Involves a producer selling directly to the end customer – i.e. there are no other parts to the distribution channel

Various Methods:

Direct mailing

E-commerce

Telemarketing (telephone selling)

Door to door selling

Examples

QVC (TV Selling)

Boden (clothes from catalogue)

Sunday Times Wine Direct (wine through flyers in newspaper)

Producer

Customer



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”



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)



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!



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



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



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



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

tutor2u ™ gcse business studies revision presentations 2004 selling & distribution

Documents