Selling

1
Selling Distribution
GCSE Business Studies
tutor2u
Revision Presentations 2004
2
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?

3
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
Wholesaler
Distributors / Agents
Retailer
Customer
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 producers 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

5
Wholesalers - Example
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
Producer
Wholesaler (e.g. John Menzies) packs newspapers
into bundles for retailers (e.g. newsagents)
Wholesaler
Retailer
Retailer (e.g. newsagent petrol station)
displays newspaper in store and delivers to homes
Customer
Customer newspaper buyer
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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
7
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
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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
• Dont 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

9
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)

10
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!

11
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

12
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. Sainsburys or Body Shop)
• Convenience stores (e.g. Spar, Londis,
  Costcutter)
• Independents a shop run by an owner

13
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

14
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