There are very few social costs, but there are also few benefits. The major benefit of me placing shop in my chosen place is that this would bring people into the local area to shop. This would help other local shops. Channels of distribution A channel of distribution is the way that company gets its product to its customers. If the product costs a lot and few are sold then the manufacture will sell direct to the consumer. If the product is cheap and large amounts are sold, it is easier to sell the product to a whole sales in thousands, and they then sell it on.
This type of distribution needs to be efficient and cheap to run. There are four different channel of disruption: Channel 1 of distribution This is the most simple method of distribution, as it involves the manufacture selling direct to its customer. This is usually impractical if you don't live near the manufacture, but that is why they ship them out. Examples of goods that are sold direct are: Computers Furniture Spare parts Books Software The reasons for this is that if the product is quite expensive then to lower the price they can cut out the middle man.
Channel 2 of distribution This is a very common method of selling, as the manufacture sells the product to a re-seller and they then sell it to the public. This is very widely used by supermarkets, or clothes. Channel 3 of distribution This form uses a wholesaler who buys the products in bulk from the manufacture, then sells to the re-seller. This is to break up the bulk as a small shop can not buy in very large amounts, so it buys in small amounts from a wholesaler. Channel 4 of distribution This is when the product is sold through agents some times in different countries.
The manufacture will export the product to the country, the agent will know how best to sell in the local conditions. My distribution method- I will use channel 3 of distribution, buying from a wholesaler, primarily ads they break up the bulk, so it means I have a wide range of items, buy having selective numbers in stock. This means that if I see that one product is selling very well then I can buy more form the wholesaler, and if a product is not selling then I can stock less. What dose the wholesaler do for the manufacture: The wholesaler buys the product in very large quantities so it saves the manufacture time.
This is because they are only dealing with only a few retailers, instead of lots. This cuts down on paper work, and transport. They save storage space for the manufacture, as the large quantities of goods are stored by the wholesaler not the manufacture, saving them space. The wholesaler may normally carry out the promotion, saving the manufacture money on advertising. How will the wholesaler help me- The wholesaler will be very important in my business, as it will help to breaks up the bulk. The wholesaler being able to deliver will save me time and money, as will not have to invest in special equipment.
The wholesaler also may give me credit that will help free up cash for my business. How will I price This must be right, as people will have to buy large numbers for you to make a profit. The price that you charge can depend on what you are trying to do. If you want to attract a lot of customers then a low price is better, but if know that your product is better then you may charge higher price. There are three types of price: Low price- To attract lots of customers, you will have a price lower then your competition. Average price- Your price will be same as the other companies, so you will try to get customers other ways.
Higher price- If you know that your product is better then your rivals, and your customers know that then you can charge a higher price My price: My price will be as low is possible, so that I can attract the largest number of customers. I will also have goods that are of a high price, that are specialist and only I sell them. Even though am I aiming at social group C, they may be looking for cheap computer games which I should be able to sell to them as well as the more expensive models. How to price? This is very important as you must decide how to price your products.
There are six main ways of pricing your products: Cost plus pricing- This is where the company will figure out how much a job costs, and then add on a certain percentage, this is sometimes called a mark up. An example is a garage, a repair may cost ? 100, but when they add on there mark of 40% it comes to ? 140 Hour based pricing- This is where the work that is done is charged for by the hour. Penetration price- This is a company will bring out a new product and sell it very cheap, so that it gets in to market very quickly. When they have established the product in the market they will raise the price.
Skimming- When you first realise a product in to the market at a higher price then lower the price later. This is because sometimes customers will like the prestige of having your product first, before anyone else. This is called skimming as you skim your customers first selling to the richest. Destroyer- This is where you price your goods or service at very low price so that you put the other companies with that service or goods out of business. Crucial price ponit.
This means the pricing difference between 9. 99 - 10. 00. A customer will feel that the 9.99 is a lot cheaper then the 10. 00, even though it is only a penny. This also applies to 1. 89 - 1. 90, this works on a number of prices. My pricing structure: I plan to use the crucial pricing point, and to sell my goods at a penetrating price on a permanent basis. This is because using the "crucial pricing point" makes my goods seem cheaper, so I will sell more. The reason that I will use penetration pricing is that this should attract customers, destroyer pricing is impractical as I would find it hard to compete with the large companies like Dixons, or Currys.
To get my promotional price I would add on a certain amount to the price, around 15%. Evaluation The method of pricing that I have chosen does have some disadvantages. The main disadvantage is that I will have to sell a lot of my product in order for me to break even and then to make a profit. Also if I ma going to try and have a price that is lower or the same as my competition then I will have to do research in to other prices. To do this it will require to spend time, into researching the local prices. Conclusions from action plan 1
Some of the information that was gathered will be used in other action plans, as this will save me time. Change prices- This can make the product more popular if the price is lowered. Promotional campaigns- You can revamp a product by adverts, that say but on get one free, or free trails. Products, brands, and packaging If your product does not have the benefits that a customer wants the there is no point in spending money on adverts. The benefits that I am offering are ones that are already offered by the local competition. This is because not one store offers all of them and my survey showed which ones where the most important.
The reason that I will not be offering interest free credit is that this would loose me a lot of money. Instead I will let the credit be taken of by a third party, but hopefully the opportunity of credit would bring in extra sales. My packaging: My packaging will be what the goods are supplied in by the manufacture. This is because they will have spent lots of time and effort on designing the best packaging. For accessories I will supply bags that carry my logo and shop names along with other information. This would be: opening times, services available, and special offers.