Quite often the producer will sell the product to a wholesaler, who will then sell it to a retailer, who will in turn sell it to the customer. This is called a full chain of distribution. This method of distribution makes the product more expensive to the customer as both the wholesaler and the retailer will incur their own costs and will have to charge more than they paid for the product in order to make a profit. As a result the product will become more expensive as it passes along the chain.
Sometimes the wholesaler and the retailer are cut out, and the producer will sell directly to the customer- this is known as direct selling, and examples are Avon, Tupperware, and mail order clothes catalogues such as Next.
Sometimes only the wholesaler is cut out and the retailer buys directly from the producer, eg. Iceland frozen foods, fruit stall owners picking their own fruit from farms.
Sometimes the retailers are cut out and the customer goes direct the wholesaler, eg Argos.
The advantage of selling the product to a wholesaler is that the producer can sell large amounts of the product at once and therefore obtain payment more quickly and save on storage space and administrations costs.
Product orientation v customer orientation
If a business is product-oriented it will make the best product it can as efficiently as possible. It will assume that demand for the product is already there.
A customer-oriented business will find out what the customer wants and make the product to match the customers needs/wants.
This is the service offered to the consumer after the goods have been sold ie the company does not forget about the consumer as soon as the product has been sold. Examples of after-sales service include repairs, money back guarantees, servicing, spare parts, training and advice, installation. Obviously different products will need different types and different amounts of after-sales service.
Monitoring customer satisfaction
Marketing is an on-going process, and it is essential for companies to find out what their customers think about them and about their product. This helps them to plan for the future.
Companies monitor customer satisfaction in various ways:
By analyzing sales figures – if these fall or increase companies need to find out why. It could be because the standard of the product has declined, or the standard of customer care has fallen.
By monitoring the number of customer complaints – obviously the fewer the better. Complaints can also be categorized, for example into complaints about the product itself, complaints about the after-sales service, the price etc.
By conducting market research by requesting customers to complete questionnaires about the product and the company, for example a hotel may have a questionnaire in each room for the guests to complete before departure, asking for their opinion on the room, the service, meals etc.
By collecting this sort of information companies can improve their product or service, thus keeping their existing customers, and hopefully attracting new ones too.