10.2^THE 4PS OF MARKETING: PLACE^318^323^,,^9773^9916%
THE 4PS OF MARKETING: PLACE
Section Outline
The 4Ps of Marketing: Place
  • Merchant Wholesalers

  • Agents and Brokers

  • Retail Intermediaries

Consider the pair of shoes you most recently purchased. Now try to imagine the challenge of getting the raw materials together, making millions of pairs of shoes, as Nike does, and then distributing those shoes to stores throughout the world. That hurdle is what thousands of manufacturing firms—making everything from automobiles to toys—have to deal with every day. There are hundreds of thousands of marketing intermediaries whose jobs are to help move goods from the raw-material state to producers, and then on to consumers, which is what we mean by “place” or distribution. Place also refers to the marketing of services, in that the services must be accessible to the people who want them, according to researchers of the marketing mix, Boom and Bitner.1 From a product perspective, there are several players in “place”:

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REAL WORLD BUSINESS APPS

Wei Zhang is the owner of a small retail store that sells ethnic foods, such as spices and packaged foods. Wei has lived in the United States for only three years, but he knows there is a market for his products because he did extensive research and customer surveys. However, once he opened his store, he found that on a good day he might have 15 customers, which did not always equate to 15 paying customers. Wei has begun to realize that he must take steps to bring more paying customers into the store and he wants to expand his business through successful marketing activities, but he doesn't have a lot of money. He needs some direction as to how to get started. He hopes that this chapter of the text will provide some answers.

Channels of distribution keep communication, the exchange of currency, and title of the goods flowing openly among the parties. These channels also help ensure that the right quantity and assortment of goods will be available when and where they are needed.2 Figure 10.1 depicts selected channels of distribution for both consumer and industrial (or B2B) goods. After this introduction to the complicated process of distribution, we will discuss specific intermediaries that assist in marketing distribution: merchant wholesalers, agents and brokers, and retail intermediaries.

figure 10.1
EXAMPLES OF DISTRIBUTION CHANNELS FOR CONSUMER AND INDUSTRIAL GOODS
Merchant Wholesalers

Merchant wholesalers are independently owned firms that take title to the goods they handle (in other words, they buy the goods they handle). About 80 percent of wholesalers fall into this category. There are two types of merchant wholesalers: full-service wholesalers and limited- function wholesalers. Full-service wholesalers perform all of the distribution functions (see Figure 10.2). Limited-function wholesalers perform only selected functions, but try to do them especially well. Three common types of limited-function wholesalers are rack jobbers, cash-and-carry wholesalers, and drop shippers.

Merchant Wholesalers Independently owned firms that take title to the goods they handle.

 
figure 10.2
INTERMEDIARIES CREATE EXCHANGE EFFICIENCYAdding a wholesaler to the channel of distribution cuts the number of contacts from 25 to 10.
figure 10.3
THE SUPPLY CHAIN AND CHANNEL OF DISTRIBUTION
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Rack jobbers furnish racks or shelves full of merchandise to retailers, including display products, and sell, for all practical purposes, on consignment, which means that they keep title to the goods until they are sold to customers, and then they share the profits with the retailer. Merchandise such as music, toys, hosiery (L'eggs panty hose), and health and beauty aids are sold by rack jobbers.

Rack Jobbers Furnish racks or shelves full of merchandise to retailers, display products, and sell on consignment.

Cash-and-carry wholesalers serve mostly smaller retailers with a limited assortment of products. Traditionally, retailers went to such wholesalers, paid cash, and carried the goods back to their stores—thus the term cash-and-carry. Today, stores such as Office Depot and Staples allow retailers and others to also use credit cards for wholesale purchases.

cash-and-carry wholesalers Serve mostly smaller retailers with a limited assortment of products. Office Depot would be an example.

Drop shippers solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer. They own the merchandise but do not handle, stock, or deliver anything. That task is done by the producer. Drop shippers tend to handle bulky products, such as coal, lumber, and chemicals.

Drop Shippers Solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer.

Whole Foods is a marketing intermediary that sells to consumers.
Agents and Brokers

Agents and brokers bring buyers and sellers together and assist in negotiating an exchange. However, unlike merchant wholesalers, agents and brokers never own the products they distribute. As a rule, they do not carry inventory, provide credit, or assume risks. While merchant wholesalers earn a profit from the sale of goods, agents and brokers earn commissions or fees based on a percentage of the sales revenues. Agents and brokers differ in that agents maintain long-term relationships with the people they represent, whereas brokers are usually hired on a temporary basis.

Study Skills Importance of Study Partners

What has been your experience using a study partner? Consider the advantages:

However, there are some potential disadvantages to look out for:

Sharing information with others is a great way to study—choose your study partners wisely!

Agents who represent producers are known as manufacturer's agents or sales agents. As long as they do not represent competing products, manufacturer's agents may represent multiple manufacturers in a specific territory. Manufacturer's agents are often used in the automotive supply, footwear, and fabricated steel industries.

Sales agents represent a single producer in a typically larger territory. Sales agents are used by small producers in the textile and home furnishing industries.

Brokers have no continuous relationship with the buyer or seller. Once they negotiate a contract between a buyer and seller, their relationship ends. Brokers are used by the producers of seasonal products (e.g., fruits and vegetables) and in the real estate industry.

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Retail Intermediaries

Perhaps the most useful marketing intermediaries, as far as we as final consumers are concerned, are retailers. They are the ones who bring goods and services to our neighborhoods and make them available to us. Next time you go to the supermarket to buy groceries, stop for a minute and look at the tremendous variety of products in the store. Think of how many marketing exchanges were involved to bring you the 18,000 or more items that you see.3 Some products, such as spices, may have been imported from halfway around the world. Other products have been processed and frozen so that you can eat them out of season (e.g., corn and green beans). We will discuss retailers further later in the chapter.

SELF-CHECK QUESTIONS
  1. What are marketing intermediaries? Why are they useful?

  2. What is the difference between a merchant wholesaler and an agent/broker?