How it works
Whether a company sells goods
or services, customers must be
able to find and buy those products
as easily as possible. Businesses
have to decide on the best sales
outlet and sales channel to get
their products to customers in a
way that benefits both parties.
Place
A sales outlet is the place
where a product is sold, suchas
stores, catalogs, or e-commerce
sites. Sales channels are the
merchants, agents, and distributors
who take a product from the seller
and bring it to the consumer.
70.5%
of device sales by
2017 are forecast
to be smartphones
Main distribution channels
A product reaches the marketplace through one of four main types of
distribution channels. The most suitable distribution channel is usually
dictated by where customers prefer to buy the product.
Selling through retailers
Goods are delivered by producer
directly to retail outlets; retailer
adds a markup onto the price they
pay to producer.
Selling through
wholesalers and retailers
Products are distributed in two
stages: by producer to wholesaler
and then wholesaler to retailer.
Selling direct to consumers
Product is sold directly by the
producer, online, or through a
mail-order catalog, and delivered to
customer without intermediary.
Selling through an agent
Products are distributed in three
stages: from producer to agent,
from agent to wholesaler, and then
on to retailer.
Producer
A producer chooses the distribution channel, or a combination
of channels, that will maximize the number of customers it can
reach while keeping costs as low as possible.
Knowing where customers shop, where a product is sold, and how
efficiently goods can be delivered to the consumer—called “place”
in marketing terms—is essential to sales success.
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188 189
How sales and marketing works
Marketing mix
Example
E-commerce site selling
vitamins; they are sent
to customer by mail
or delivery service.
Example
Farmer sells apples to
wholesaler, who sells
them on to supermarkets.
Example
Electronics company
distributes its television
sets to a chain of
retail stores.
Example
Chocolatier in France
uses import agent in
Japan to sell its products
to wholesalers and on
to retailers.
Consumer
Consumer
Consumer
Consumer
Retailer
Retailer
Retailer
Wholesaler
WholesalerAgent
Channel margin The cost
intermediary adds to producer’s
selling price, which is added to
price paid by customer
Push strategy Method in which
producer promotes products
to wholesalers, wholesalers to
retailers, and retailers to customer
Pull strategy Use of advertising
and promotion to sell to customer
pros and cons of using intermediaries
Pros
Allows wider market coverage so
producer can reach more customers,
especially those in distant areas.
Minimizes distribution cost for
producer as intermediaries are
responsible for this service.
Provides producer with specialized
knowledge of customer buying
habits, as well as delivery logistics.
Cons
Raises difficulty of making direct
communication with customers
to learn about their preferences.
Increases the risk of slow, inefficient
delivery, especially if several
intermediaries are involved.
Takes away control over how
products are handled and displayed
at point of sale.
need to know
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188 189
How sales and marketing works
Marketing mix
Example
E-commerce site selling
vitamins; they are sent
to customer by mail
or delivery service.
Example
Farmer sells apples to
wholesaler, who sells
them on to supermarkets.
Example
Electronics company
distributes its television
sets to a chain of
retail stores.
Example
Chocolatier in France
uses import agent in
Japan to sell its products
to wholesalers and on
to retailers.
Consumer
Consumer
Consumer
Consumer
Retailer
Retailer
Retailer
Wholesaler
WholesalerAgent
Channel margin The cost
intermediary adds to producer’s
selling price, which is added to
price paid by customer
Push strategy Method in which
producer promotes products
to wholesalers, wholesalers to
retailers, and retailers to customer
Pull strategy Use of advertising
and promotion to sell to customer
pros and cons of using intermediaries
Pros
Allows wider market coverage so
producer can reach more customers,
especially those in distant areas.
Minimizes distribution cost for
producer as intermediaries are
responsible for this service.
Provides producer with specialized
knowledge of customer buying
habits, as well as delivery logistics.
Cons
Raises difficulty of making direct
communication with customers
to learn about their preferences.
Increases the risk of slow, inefficient
delivery, especially if several
intermediaries are involved.
Takes away control over how
products are handled and displayed
at point of sale.
need to know
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How it works
The primary purpose of promotion
is to boost sales by attracting new
customers, while enticing existing
ones to try out something new.
Most companies use a number of
communication activities to inform
and remind their target audience of
a product’s benefits (see pp.196–231).
One of the long-term benefits of
communicating with customers is
that it helps to build brand loyalty.
Promotion
Personal
selling
Interact with customers
face to face and tailor
sales messages to
their needs.
Customer
service
Provides customers with
information about the
product; offers updates
and special deals.
Promotion is necessary for generating interest in and sales of a product
or service. A complex and expensive part of the marketing mix, it involves
communicating to customers and influencers such as peer groups.
Integrated Marketing
Communication (IMC)
Promotion of the same brand
message across all media channels
MarCom (Marketing
Communication) Full range
of promotional activities used
to reach out to the market
NEED TO KNOW
Below the line (BTL)
Describes promotional
activities a business carries
out in-house, such as direct
mail or telemarketing, to
reach customers directly.
25%
the percentage of
digital promotion
budgets spent on
mobile advertising
in 2013
C
o
n
s
u
m
e
r
b
e
e
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190 191
how sales and marketing works
Marketing mix
Advertising
Run ad campaigns
through media channels
most likely to reach target
market, and stick to
budget appropriate
for the product.
Direct
marketing
Send product offers and
information directly to
the potential consumer,
via mail or email.
Interactive
marketing
Build long-term
relationships with
customers using two-
way communication,
especially online.
Public
relations
Generate positive interest
in the company by
sponsoring events and
charities, or pitching
news content
to media.
Sales
promotion
Entice customer with
offers, free samples, gifts,
competitions, packaging,
and point-of-sale
displays.
Above the line (ATL)
Refers to online and
offline advertising
a business pays for
to target customers.
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190 191
how sales and marketing works
Marketing mix
Advertising
Run ad campaigns
through media channels
most likely to reach target
market, and stick to
budget appropriate
for the product.
Direct
marketing
Send product offers and
information directly to
the potential consumer,
via mail or email.
Interactive
marketing
Build long-term
relationships with
customers using two-
way communication,
especially online.
Public
relations
Generate positive interest
in the company by
sponsoring events and
charities, or pitching
news content
to media.
Sales
promotion
Entice customer with
offers, free samples, gifts,
competitions, packaging,
and point-of-sale
displays.
Above the line (ATL)
Refers to online and
offline advertising
a business pays for
to target customers.
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Market research
How it works
Market research is used during product development
and then to monitor customer satisfaction and
competitor activity. Researchers draw on existing
data, observations, and their own research. New
research is broken down into quantitative (number-
based) research—closed (multiple choice) questions
asked of a large group of people—and qualitative
(in-depth) research—into how a consumer uses and
feels about a potential new product. The marketing
department’s research budget is usually split between
the two types of surveys. Quantitative research is often
used when developing a new product, followed by
qualitative research to help refine the product.
Asking customers what they think about a product is a vital part of the
decision-making process for marketers. Research offers insights into how
a product
might perform and lowers the risk of marketing campaigns.
“Research + Intuition
= Decision”
Quantitative surveys
Researchers question many
people for a broad view
(numerical data).
They carry out online surveys to
obtain a quick result from a
large sample.
Observations
Researchers may watch from
a distance as customer
interacts with product, or
identify themselves and talk
to customer.
They observe customer using
equipment such as eye tracking
analysis and checkout scanners.
They study credit card records
or computer history to observe
past consumer behavior.
Primary data
collection
New research to answer
specific question
Qualitative surveys
Researchers probe small
groups or individuals for
in-depth view.
They conduct focus group
discussions.
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HOW SALES AND MARKETING WORKS
Marketing mix
?
CASE STUDY
Marketer
has a
question
Marketer
reaches a
decision
Agency
Carries out original
research and organizes
research data into
meaningful results
DATA RETURNED
DATA REQUESTED
Internal sources
Web usage data (for example
browser logs and online
sales records)
Customer profiles with buying
history and demographic data
Accounting records, such as
financial statements
Original data from past
market research reports
External sources
Industry reports by trade
bodies, institutions, and private
research companies
Reports by broadcast, print,
and internet media
Academic papers, university
think tank reports, and
research library holdings
Government surveys, reports,
and statistics
32%
the projected
increase in the
hiring of market
research analysts
in the US by 2022
Coca-Cola launch
In 1985, Coca-Cola launched a new kind of cola.
The launch followed two years of taste tests, costing
$4million, to refine the product. However, the drink
failed and had to be withdrawn in the face of
overwhelming disapproval from the public. In the
marketing postmortem, analysts concluded that the
company’s researchers had failed to ask customers
a very important question: “Do you want a new Coke?”
Secondary data
collection
Published material
on a subject
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