1.3.4 Distribution Channels

• What is the main difference between price skimming and penetration pricing?

  Price skimming sets a high initial price
• Name two factors that influence the choice of a pricing strategy.

  Price elasticity of demand and competition level
• How does a strong brand reduce price elasticity of demand?

  It creates customer loyalty and perceived value
• Give an example of how branding has adapted to social trends.

  Using social media and viral marketing
• What does the design mix consist of?

  Function, aesthetics, and cost
• Why is the design mix important?

  It ensures the product meets customer needs
• What are the steps involved in getting the product from the producer to the consumer?

  • Distribution channels are paths for goods flow
  • Direct distribution: Producer to Consumer
  • Indirect distribution: Involves intermediaries
• What is direct distribution?

  Businesses sell directly to the customer
• What are the advantages of direct distribution?

  Lower costs, greater control, closer relationships
• What are the disadvantages of direct distribution?

  High investment in logistics and workload
• What is indirect distribution?

  Involves one or more intermediaries
• What are the advantages of indirect distribution?

  Wider market coverage and reduced burden
• What are the disadvantages of indirect distribution?

  Reduces control and lower profit margins
• What is an example of a direct distribution channel?

  Producer → Consumer
• What is one disadvantage of using indirect distribution channels?

  Lower profit margins due to intermediary costs
• Why might a business choose an indirect channel with retailers?

  To reach a larger number of customers efficiently
• What factors influence the choice of distribution channels?

  • Product characteristics: Perishable goods need shorter channels
  • Target market: Niche markets may prefer direct sales
  • Costs and margins: Direct channels reduce costs but need investment
• How does Coca-Cola manage its distribution channels?

  Uses indirect channels for global market reach
• What is Gamer's Gear's mission?

  • Become the go-to brand for teenage gamers
  • Offer stylish, durable, performance-enhancing gear
  • Maintain affordable prices
• What are the advantages and challenges of direct and indirect channel options for Gamer's Gear?

  Advantages of Direct:

  • Online engagement and loyal community
  • Profits remain within the company

  
  

  Advantages of Indirect:

  • Visibility through trusted retailers
  • Increased sales quickly with physical presence

  
  

  Challenges of Direct:

  • High competition online
  • Need for effective marketing strategies

  
  

  Challenges of Indirect:

  • Lower control over customer experience
  • Dependence on retailer performance
• What is the main difference between direct and indirect distribution channels?

  Direct involves no intermediaries, indirect does