Topic 7 (BBA 211)

ELEMENTS OF MARKETING

LEARNING OUTCOMES
Upon successful completion of this topic, a student will be able to:
 Define marketing and trace its development as an area of activity.
 Identify the operation of marketing in a number of different contexts.
 Identify the various elements of marketing.
 Explain how these elements form the basis of the marketing mix and
articulate how this operates.
 Critically assess the significance of branding and market segmentation and
the value of the product life-cycle.
 Explain the role of marketing in relation to the economy.

1. INTRODUCTION
1.1 What is a market?
A market is where buyers and sellers come together and exchange their products for
money. It can be in the streets, on the internet, in shops around the world, etc… Customers
and sellers exchange both goods and services for money.

Product-orientated and market-orientated businesses

A product orientated business focuses on the quality and price of the product before finding
a market for it to sell in. These type of businesses usually produce basic needs. New
technology could be developed this way, and customer wants are created by advertising.

Other big companies cannot afford to produce a product that will not sell, so they have to do
market research first to find consumer wants before developing a product. They are called
market-orientated businesses. They will need to set up a marketing budget for this, which
is a financial plan for marketing of a product, which contains the amount of money the
Marketing department may spend on marketing.

1.2 What is marketing?

Marketing is the management process which identifies consumer wants, predict future
wants, create wants and find ways to use these wants to the fullest (most profitably). In
other words, businesses try to satisfy wants in the most profitable way possible. Marketing
covers a wide range of activities such as: advertising, packaging, promotion, etc…

The Marketing department

Most businesses will have a Marketing department, which will have a Marketing Director.
He will be in charge of things such as R&D, distribution and pricing. Here is an
organisational chart showing what departments the marketing director controls:

Sales department: Responsible for sale and distribution of products for each region. There
may also be an export department.

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Research and Development department: Responsible for finding out consumer wants and
developing new products. They also need to find ways to improve an existing product.
Promotion department: In charge of advertising and promotion. It will need a marketing
budget which limits the amount of money it can spend.
Distribution department: It transports products to their markets.

The objectives of marketing

A successful marketing department should be able to achieve these objectives for the
business:
 To increase sales revenue and profitability.
 To increase market share (percentage of sales a product has in a market).
 To maintain or improve image of a product or company.
 To target a new market or market segment.
 To develop new products or improve existing ones.

SWOT analysis
This is a method to evaluate the statistics of a product of business. It assess these things:
 Strengths (internal)
 Weaknesses (internal)
 Opportunities (external)
 Threats (external)

Strengths and weaknesses of a product are its internal factors, while opportunities and
threats are external factors.

Market segments
Market segments are parts of a market which contains people which have similar
preferences for their products. The Marketing department should know which segment
their product fits the most, so that they can advertise and sell their products to it.

There are two ways to segment markets. By the type of product or the attributes of the
customers buying it. Here are two types of markets which are segmented based on the
product:
 Mass market: Where there is a large number of sales of a product. (e.g. Pepsi can be
bought anywhere)
 Niche market: A small market for specialised products. (e.g. Ferrari cars)

Here is how a market can be segmented regarding people buying the product:
 Income
 Age
 Region
 Gender
 Use of product
 Lifestyle

It is very important to target the right market segment since it can increase sales by a lot. If a
business can analyse all of these market segments, they may find a market segment whose
needs are not being met. This is when the business finds a gap in the market, and it could
produce goods to take advantage of this gap and again increase sales.

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The marketing mix
The marketing mix is a term that describes how products are marketed. You must
remember that before marketing can be achieved, market research is needed. The rest is
summarized into the four P's. Let's look at them briefly first, since they will be covered in
other sections:
 Product: Design and quality, competitiveness, packaging, etc…
 Price: There are different pricing strategies. Businesses need to use them so that they
increase sales.
 Promotion: Advertising and promotion. Discounts, TV adverts, sales, packaging,
etc…
 Place: The location of the point of sale (the shop). Channels of distribution. Type of
shop (wholesaler or retailer?)

A successful product require effective use of the four P's. However, businesses must be
careful to not let each of these factors counteract each other (e.g. expensive but low quality
goods), else the product will fail.

2. DIFFERENCE BETWEEN MARKETING AND SELLING

In general we use ‘marketing’ and ‘selling’ as synonyms but there is a substantial difference
between both the concepts. It is necessary to understand the differences between Marketing
vs. Selling for a successful marketing manager. Selling has a product focus and mostly
producer driven. It is the action part of marketing only and has short – term goal of
achieving market share. The emphasis is on price variation for closing the sale where the
objective can be stated, as “I must somehow sell the product”. This short – term focus does
not consider a prudential planning for building up the brand in the market place and
winning competitive advantage through a high loyal set of customers. The end means of any
sales activity is maximizing profits through sales maximization.

When the focus is on selling, the businessman thinks that after production has been
completed the task of the sales force starts. It is also the task of the sales department to sell
whatever the production department has manufactured. Aggressive sales methods are
justified to meet this goal and customer’s actual needs and satisfaction are taken for granted.
Selling converts the product in to cash for the company in the short run.

Marketing as a concept and approach is much wider than selling and is also dynamic as the
focus is on the customer rather than the product. While selling revolves around the needs
and interest of the manufacturer or marketer, marketing revolves around that of consumer.
It is the whole process of meeting and satisfying the needs of the consumer.

Marketing consists of all those activities that are associated with product planning, pricing,
promoting and distributing the product or service. The task commences with identifying
consumer needs and does not end till feedback on consumer satisfaction from the
consumption of the product is received. It is a long chain of activity, which comprises
production, packing, promotion, pricing, distribution and then the selling. Consumer needs
become the guiding force behind all these activities. Profits are not ignored but they are built
up on a long run basis. Mind share is more important than market share in Marketing.

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According to Prof. Theodore Levitt ‘The difference between selling and marketing is more
than semantic. A truly marketing minded firm tries to create value satisfying goods and
services which the consumers will want to buy. What is offers for sale is determined not by
the seller but by the buyers. The seller takes his cues from the buyer and the product becomes
the consequence of the marketing effort, not vice versa. Selling merely concerns itself with
the tricks and techniques of getting the customers to exchange their cash for the company’s
products, it does not bother about the value satisfaction that the exchange is all about. On the
contrary, marketing views the entire business as consisting of a tightly integrated effort to
discover, create, arouse ad satisfy customer needs’.

SELLING
1. Emphasis is on the product
2. Company Manufactures the product first
3. Management is sales volume oriented
4. Planning is short-run-oriented in terms of today’s products and markets
5. Stresses needs of seller
6. Views business as a good producing process
7. Emphasis on staying with existing technology and reducing costs
8. Different departments work as in a highly separate water tight compartments
9. Cost determines Price
10. Selling views customer as a last link in business

MARKETING
1. Emphasis on consumer needs wants
2. Company first determines customers needs and wants and then decides out how to
deliver a product to satisfy these wants
3. Management is profit oriented
4. Planning is long-run-oriented in today’s products and terms of new products,
tomorrow’s markets and future growth
5. Stresses needs and wants of buyers
6. Views business as consumer producing process satisfying process
7. Emphasis on innovation on every existing technology and reducing every sphere, on
providing better costs value to the customer by adopting a superior technology
8. All departments of the business integrated manner, the sole purpose being
generation of consumer satisfaction
9. Consumer determine price, price determines cost
10. Marketing views the customer last link in business as the very purpose of the
business

3. THE MARKETING MIX

3.1 The Marketing Mix: Product and Packaging

The role of product in the marketing mix

The product itself is the most important element in the marketing mix. Without it, the other
three wouldn't exist. Most companies today are market oriented, and will identify a suitable
product for the market before moving on to determine the other 3 elements. Large
companies have R&D departments which spends all its time developing new product and
analysing the pros and cons of competitors' products.

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Types of products:
 Consumer goods: Goods that are used up by consumers. (e.g. food, cake)
 Consumer services: Services that are produced for people. (e.g. education)
 Producer goods: Goods produced for businesses. (e.g. machinery)
 Producer services: Services for businesses. (e.g. accounting, insurance)

Each type of product determines the price, promotion and place to sell the product. Here are
what make products successful.

Products need to satisfy consumer wants/needs to be successful.

The product must be at the right quality so that customers are willing to pay for it.
Costs should be low enough to make a profit.
Design of a product is important. This means that its quality and durability should meet
expectations and match the price of the product. The design should also enhance the
products brand image.
Products are novelties (newly introduced to the market).
Products can stimulate new wants.

Product development
Most businesses use a general process to develop any product:

Generate ideas: Ideas can be generated by:

 Employees.
 Customers.
 Competitor's products.
 R&D department.
 Sales department.

Further research: The best ideas are selected and further research is done to see their pros
and cons.
Will there be enough sales?: To see whether there will be enough sales of the product to
break-even (development costs included).
Develop a prototype: To see how a product could be manufactured and identify its
problems.
Test launch: To see if the product can sell or not.

Full launch.
The importance of branding
Traditionally, a product's unique features and quality were explained by the sellers who
made the product. However, since products are usually sold in private retail shops
nowadays, these points need to be projected differently. Products therefore need to be
branded with an unique brand name and the products features and quality will be
projected with advertisement. The price of branded goods are usually higher, since
customers are more confident to buy them. Here are things that are involved with branding:
 Unique name.
 Unique packaging.
 Needs advertising to enforce the brand's qualities.
 Higher price than unbranded products.
 Higher quality than unbranded products.

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  Creates a brand image (unique image associated with using the product)
 Creates brand loyalty.
 Consistent quality.

Packaging
Getting the packaging right is very important. Packaging performs several tasks:

 Protecting the product (also includes preserving foods.

 Making it easy to transport.
 Allow the product to be used easily. Container must be able to be opened easily.
(e.g. juice in a can)
 Suitable for the product to fit in.

Packaging also helps promote the product:

 Make it eye-catching.
 Carries information about the product.
 Promotes the brand image.

The product life cycle

Product life cycles show the stages that a product goes through from its introduction, to its
growth, and then to its decline. Here is a graph to show the product life cycle:

 Development: The product is under development.

 Introduction: The product is introduced. Sales grow slowly and informative
advertising start to attract customers. Price skimming could be used if the product is
new to the market. The main aim of sales is to breakeven.
 Growth: Prices rise rapidly. Persuasive advertising is used to encourage brand
loyalty. Prices may be reduced a little. Sales start to generate profits since costs have
been covered.
 Maturity: Sales rise more slowly. Competition forces prices to be lowered and the
firm uses competitive pricing. Advertising is used to maintain sales. Profits are at
their highest.
 Saturation: Sales reach their limit. There are no new competitors. Sales and
advertising becomes stable but profits fall because of lowered prices to be
competitive.
 Decline: Product go out of fashion and sales and profits decline. Advertising
eventually stops. It is no longer profitable to produce the product.

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The length of each stage varies with products. The business needs to identify which stage
their products are in so that they can use a suitable marketing strategy for it.

Extending the product life cycle

When a product has reached its maturity or saturation stage a business may adopt extension
strategies to stop sales from falling which extends the product life cycle. Sales are given a
boost by these strategies.

 Introducing new variations of the product.

Sell into new markets.
 Make small changes to the products design and packaging.
 Sell through additional, different retail outlets.
 Update the product (make it better)
 Use a new advertising campaign.

Extension strategies aim to prolong the maturity stage of a product. Successful extension
strategies may result in something like this:

Nevertheless, it must be noted that businesses manufacture more than one product. They
should have a product in growth stage to counteract an older one which is declining.

3.2 The Marketing Mix: Price

The role of price in the marketing mix

When pricing a product, a business needs to choose one that fits with the rest of the
elements in the marketing mix. E.g. high price so that consumers thinks they are buying
high quality goods, low price for low quality goods, or competitive prices in a market with a
lot of competition.

Price determination in a free market

People think that prices are determined by the seller of the product, but that is not quite so.
Prices are driven by market forces called demand and supply.

Demand
Demand is not only that people want to buy a product, but that they want it can are willing
to pay for it. Prices can affect how much demand there is for a product. Normally, if the
price goes up, demand goes down, and vice versa. This can be shown on the graph below:

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Supply
Supply also varies with price. However, it is different. If the price goes up, then the owners
would want to be supplied with more products to take advantage of the high price, thus the
supply goes up (and vice versa). This can be demonstrated on the graph below:

The market price

For the market price to be determined, demand and supply must all be put onto the same
graph. The place where the two lines (called curves) cross is called the equilibrium, where
the same number of goods are demanded and in supply resulting in no leftovers. All the
products are demanded and all of them are sold.

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Factors that affect demand and supply
The graphs above assume that the demand and supply of goods are fixed. But these things
can change, which shifts the demand or supply curve to the left or the right in the graph.
Changes in the price affects where you are on the curves. But changes in other factors affect
the position of the curve on the graph.

Factors affecting demand

 The popularity of substitute products. (products that can be used instead of the
product)
 The popularity of complementary products. (products that require each other or are
used together)
 Changes in income.
 Changes in taste and fashion.
 Changes in advertising.

The result is: if demand falls, the market price and sales will fall, and the demand curve will
shift to the left. If demand rises, the market price and sales will rise, and the demand curve
will shift to the right. It is illustrated on the graphs below.

Elasticity of demand
Elasticity of demand is how easily demand can change when prices change. A product with
an elastic demand curve would have a higher change in demand than a change in price
(uses percentages). A product with an inelastic demand curve would have a lower change in
demand than a change in price. The elasticity of demand of a product is mainly affected by
how many substitute products that it has.

Factors affecting supply

Costs in supplying goods to the market:
 Price of raw materials.
 Wage rates.
 Improvements in technology:
 Makes it cheaper to produce goods.
 Taxes and subsidies:
 Higher taxes mean higher costs.

Climate (for agricultural products):

 Supply of crops depend on weather.
The result is: if supply falls, the market price will rise, sales will fall and the supply curve
will shift to the left. If supply rises, the market price will fall, sales will rise and the supply

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curve will shift to the right. It is illustrated on the graphs below.

Elasticity of supply
Elasticity of supply is how easily and quickly supply can change when prices change. How
quickly means how quickly products can be produced and supplied, which is not very quick
for products made by agriculture. A product with an elastic supply curve would have a
higher % change in supply than a change in price. A product with an inelastic supply curve
would have a lower change in supply than a change in price.

Pricing strategies
If a product is easily recognizable from other products, it would probably have a brand
name. And if it has one, it would need a suitable pricing strategy to complement the brand
name that should improve its brand image. Here are the strategies that are used:
 Cost-plus pricing
Cost-plus pricing involves covering all costs and adding a percentage mark-up for
profit.
+ Easy to apply.
- You lose sales if your price is higher than your competitors price.
 Penetration pricing
Penetration pricing is used to enter a new market. It should be lower than
competitors' prices.
+ Ensures that sales are made when a product enters a market.
- Prices will be low. Sales revenue will be low.
 Pricing skimming
High prices are used when a new product is introduced into a market, partly because
it has a novelty factor, and because of the high development costs. High prices could
be charged because a product is high quality. One last use of it is to improve the
brand image of a product, since people usually associate high price with good
products.
+ Skimming can help establish a product as being good quality.
- It may lose potential customers because of high price.
 Competitive pricing
Competitive pricing means setting your price to a similar or lower level than your
competitors prices.
+ Sales will be high because your price is at a realistic level (not under/over-priced).
- You have to research on your competitors prices which costs time and money.
 Promotional pricing
Promotional pricing means that you lower the prices of goods for a short time.
+ Help get rid of unwanted stock.
+ Can renew interest in a product.

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 - Sales revenue will be lower.
 Psychological pricing
Psychological pricing involves setting the price that changes consumers perception
of a product. This may be by:

Using high price to make using the product give the user a status symbol.
Pricing a product at just below a whole number (e.g. $99) which gives it an impression that it
is cheaper.

Supermarkets charge low prices for products that are bought on a daily basis to give
consumers an impression that they are being given good value for money.

3.3 The marketing mix: promotion

The role of promotion in the marketing mix
Promotion informs consumers about the rest of the marketing mix. Without it, consumers
do not know about the product, the price, or the place. Promotion is more than just
advertising, and it includes several activities. It is crucial when you are selling in a mass
market or you have a brand name. Promotion includes:
 Advertisements: They can take different forms, e.g. on TV, in newspapers.
 Promotion: e.g. Money off coupons.
 Personal selling: Sending out sales representatives to talk directly to the consumers.
 Public relations: Involves making the public aware of the company, e.g. creating
publicity in the media.

The aims of promotion

 To inform people about particular issues.
 To introduce new products to the market.
 To compete with competitors products.
 To improve the company/brand image.
 To increase sales.

Advertising
The advertising process
Set objectives: A business needs to determine the purpose of advertising.
Decide the advertising budget: Set a limit on how much the business can spend on
advertising. It can be decided based on:
 A percentage of predicted sales revenue.
 How much competitors are spending.
 How much the business can afford.
Create an advertising campaign: Decide on what advertising campaign to run. Can be
determined based on:
 Target audience.
 Objectives.
Select the media: Using the suitable media for advertising that is the most cost effective.
E.g. TV, newspaper.
Evaluate the effectiveness of the campaign: Has the advertising met objectives?

Different types of advertising

Informative advertising: Involves giving as much information about the product as
possible. (e.g. computer)

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Persuasive advertising: Involves persuading consumers that they need the product and
should buy it. (e.g. perfume)
Different media of advertising

Media Advantages Disadvantages Examples

Television Millions of Expensive Food
people will see it. Cars
The product Household
can be presented in a tools
very attractive way.
Easy to reach
target audiences.
Radio Cheaper than Cannot use Local
TV. visual message. services
Uses song or Expensive Shops
tune which makes ads compared to others.
memorable. The advert has
to be remembered.
Not as wide
audience as TV
Newspaper Can reach Not eye- Local
many people. catching if they are in products
Cheap for local black and white. Cars
newspapers. Does not grab Banks
A lot of info can reader’s attention.
be put into the ad.
Adverts are
permanent*.
Magazines Can use They are only Perfume
specialist magazines published once per Golf
to reach only target month/week. equipment
audience. More expensive Fashion
Magazine ads then newspapers. clothes
are in colour and are
more attractive.
Posters/billboards Permanent* Can easily be Events
Cheap missed. Products
Potentially seen No detailed bought by a large
by anyone who passes info can be included. section of the
by them. population
Cinemas Visual image Only seen by Toys for a
shows product in a people who go to children’s film.
positive way. watch films.
Fairly cheap.
Effective if
target audience goes
to see particular films.
Leaflets Cheap May not be Local

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 Given to a wide read. events.
range of people. Retail
Delivered to stores like Seven-
people’s houses. Eleven
May contain
vouchers to encourage
readers to keep the
advert.
Permanent*
Internet Can be seen by Internet Virtual
anybody around the searches may not goods.
world. highlight the website Services
Can store lots and it could be such as banking
of info. missed. or insurance.
Orders can Internet access Virtually
instantly be made. is limited in some anything that is
countries. not too small.
Competition
from other websites.
Security issues
may discourage
people from buying
online.
Others (delivery Cheap May not be Shops put
vehicles or sides of seen by everyone. their names on
bags) plastic bags.
Coca cola
use neon signs.
*Permanent: adverts can be kept for future references.

Design of adverts
Businesses usually use the AIDA model:
 Attention: Informs consumers that the product exists.
 Interest: Consumers need to become interested in the product.
 Desire: Makes consumers want the product.
 Action: Prompts consumers into buying the product.

The AIDA model is most effective on products that are not used regularly. It is less effective
on products that are bought on a daily basis because people will know how good the quality
really is.

Promotion
Different types of promotion
Promotion is usually used to support advertising and to encourage new or existing
customers to buy the product. Its main function is to boost sales in the short-term, but not in
the long term. It is used to attract new customers so that they can try out items with the
hope that they will like it and continue to buy it after the promotion has ended. Here are
some ways in which promotion is used:
 Price reductions: Involves sales or price reduction coupons.

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  Gifts: Gifts are placed in the packaging of the product to encourage consumers to
buy it. (e.g. toys in McDonald's happy meal).
 Competitions: A card may be put in the packaging allowing the consumer to enter
contests such as the lottery.
 Point-of sale displays and demonstrations: Can be put near the window and
displayed attractively. It could also encourage people to buy it if they can see how it
works (demonstrated by sales staff)
 After sales service: e.g. warranty services. It reassures the customers that if the
product has a problem then they can go and fix it for free. This make the product
more attractive than others without warranty.
 Free samples: Encourages people to try the product. It can be included in other
products as well. E.g. washing machine comes with free washing powder.

The advantages of promotion

 Can boost sales during the year when sales are traditionally low (encourage off-
season purchases)
 Encourages people to try a product.
 Encourages people to buy a product or the product in greater quantities.
 Encourages people to buy a product instead of competitors' products.

Which type of promotion should be used?

When deciding on what type of promotion should be used, these points should be
considered:
 The stage of the product life cycle: e.g. use informative advertisement in the
introduction stage of the life cycle.
 The nature of the product itself: e.g. consumer goods use coupons but producer
goods use discounts on bulk buying.
 The advertising budget: obviously the type of promotion depends on how much
you can spend.
 The cultural issues involved in international marketing: businesses need to
consider whether their type of advertising might offend the local people. They
should also take into account things such as how many people own TV, literacy
level, etc…
 The nature of the target market: Different markets require different media for
advertising.

Personal selling
Used when the nature of the product varies. e.g. housing.
 Price varies.
 Quality varies.
 Customer requirements vary.
 When customers need advice on what type of product is the most appropriate for
their situation.
 When selling expensive products such as cars.
 When negotiation about price or products is needed. This is common for businesses
that sell to other businesses. (e.g. discounts on bulk buying)
 When a business has a stand at a trade fair.
Public relations
Good for improving the brand/company's image.
These activities raise public awareness of the company.

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Includes:
 Sponsoring events such as football matches.
 Giving products to charity.
 Employees take part in an activity for a good cause.

Customer service
It is far more expensive to attract customers than to keep old customers, so one key objective
for any business is to retain their old ones. In the international business environment, there
are many competitors, so businesses need to raise the value of their products with customer
service.

Good customer service is not only producing a good product but also means:
 Giving advice about the product: It is always good to give as much information
about a product as possible so that the customers can be sure that they have
purchased the product that meets their requirements.
 Delivering goods for customers: It becomes convenient for the customer which
encourages the customer to buy products from the business since they do not have to
go anywhere.
 Providing credit facilities: This means letting customers pay later or in monthly
instalments. This make products look cheaper and more affordable encouraging
customers to buy them. Credit facilities are usually offered when people buy
expensive products. You usually get interest as a result, but you could charge no
interest for promotional purposes.
 Providing product information: This means giving information on how to use the
product and offering help on customer service help-lines.
 After-sales service: The aim is to show that you care about customers' satisfaction.
Examples of after-sales service include:
o Warranties.
o Regular product checks.
o Giving refunds for faulty products.
o Exchanging unsatisfactory goods.

3.4 Marketing Mix: Place

The fourth ‘P’ of the marketing mix is ‘place’ or channels of distribution. A distribution
channel is a way of getting the product to the customer. This process usually involves a
number of intermediaries or ‘go betweens’, such as the wholesaler or retailer. Apart from the
retailer, the other intermediaries are often invisible; that is, the customer knows little about
their role and operation. There are three main types of distribution channels:

1. Producer to customer. This is the simplest channel and involves no intermediaries.

Virtually all services, from tax advice to car repairs, use this method.
2. Producer to retailer to customer. A retailer is an intermediary who buys from the
producer and resells to customers. This channel is often used for bulky or perishable
products such as furniture or fruit.
3. Producer to wholesaler to retailer to customer. This is the most common method
used for the distribution of consumer goods. A wholesaler is an intermediary who
buys in bulk from a producer, then sells in smaller quantities to retailers. Producers
will use the services of a wholesaler when a large number of retailers sell the product
and the producer finds it difficult to deal with them all.

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The Place element of the marketing mix is about where the product is made, where the
product is stored and how the product is transported to the customer. The place for each of
these things should ensure that the product gets to the right place at the right time without
damage or loss. The ideal place will be
 Convenient for the customer and the business
 Accessible for the customer if it is the place where the product is sold
 Low cost or free for the customer if it is the place where the product is sold
 Reasonable cost to the business

4. CHANNELS OF DISTRIBUTION
The route or the path through which product is transferred from the place of the production
the final consumers is known as distribution channels. You may transfer goods through
both direct and indirect ways. A distribution channels may be called direct, when the
manufacturer supplies the goods directly to the ultimate consumer and uses no
intermediaries. Here the marketing functions are carried out by the manufacturer of product
by him. If a manufacturer sells the goods to the consumers through one or more than one
middlemen, the channel is called indirect channel of distribution. In indirect channel of
distribution, the functions of buying, selling, transporting, storing, are undertaken by the
middlemen.

4.1 Types of Distribution Channels

There are four major distribution channels for marketing of consumer products.
 Direct Channel.
 Indirect Channel.
 Selective Distributive Channel.
 Intensive Distributive Channel.

4.1.1 Direct Channel -- When the manufacturer or the producer supplies goods directly to the
consumers is called direct channel. The manufacturer in this stage of distribution channel
performs all the marketing functions himself. No middleman is involved. In the direct
channels of distribution, the manufacturer attempts to reach the consumers through his
 Own retail stores,
 House to house selling,
 By mail and
 By sales from the factory door.

The manufacturer to consumer link no doubt appears to be simple and low cost method of
distribution channels, but it is not practicable for marketing of the large amount of consumer
goods. Imagine for a moment, the difficulties which a producer of soap, hairpins, toothpaste,
shoe polish, cigarettes, beverages etc will face in selling the goods directly to the consumers.

4.1.2 Indirect Channel -- Indirect channel are also called exclusive distribution channels. It can
be defined as marketing of goods first to retailer who in turn sell it to consumers is known as
Indirect Channel of distribution. It is a most effective method of products distributions, and
effectively used for promoting clothes, machines, automobiles, furniture’s etc. The reasons
for selecting indirect channels of distribution are:
 Better control on the supply of goods.
 Speedy disposal of products.
 Lesser expenses on selling.

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  Better training of sales people and
 Rapid feedback.

4.1.3 Selective Distributive Channel -- The marketing through Wholesaler is one of the widely
used ways of distribution in all over the world. These distribution Channels enables the
manufacturer to sell goods in lot to a few selected wholesalers, who sell it to retailers, who
further in turn to sell products to the consumers. The wholesaler acting as middleman, take
little to the goods, assume risks, appoint dependable retailers, provide goods on cash as well
as a credit and thus spreads sale on a wide market. These types of distribution channels are
effective for the promotion of drugs, hardware, tobacco, toys, food products etc.

4.1.4 Intensive Distributive Channel -- In intensive distribution channels, the producer uses
many wholesalers and retail middlemen for the promotion of the product. The producer
uses this route of marketing for saturating the market with the product.

4.2 Distribution Channels for Industrial Goods

The distribution channels through which the industrial goods travel from the place of the
production to the final consumers is known as industrial distribution channels. In the
distribution of industrial goods, there are fewer middlemen and shorter channel of
distribution, which should be in your mind:-

1 Technical Information
The industrial goods are mostly purchased by the industrial users in large quantities. They
are therefore, purchases directly from the manufacturer of the source of supply.

2 Purchase in bulk
The industrial user buys products mostly of technical nature. The technical information
regarding the performance, standard of the product, the installation of machinery, the
maintenance services etc cannot be reliably furnished through the middlemen. The
industrial user thus wants direct dealing with the manufacturer to get full technical
information of products. The middleman is thus eliminated from the distribution channels.

3 Direct Contact
Another reason for short channel of distribution for industrial goods is that most of the
industrial markets are generally concentrated in a small geographical area. The purchasers
of industrial goods directly contact the sellers and thus there does not arise the need of the
agent.

4 Contact on Telephone & Fax

The industrial users generally purchase good in bulk. The cost of direct correspondence is
probably through contacts on telephones, mobile number, Fax, or in person etc. The buyers
therefore, eliminate middleman and contact the manufacturer directly for the purchase of
industrial goods.

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