THE MARKETING MIX:

PL ACE

C HAPTER 14
 THIS CHAPTER WILL
EXPLAIN

- the role of place decisions in the marketing

mix
- advantages and disadvantages of different
channels, for example, use of wholesalers,
retailers or direct to consumers
- how to recommend and justify an appropriate
distribution channel in given circumstances.
THE ROLE OF PL ACE DECISIONS IN THE
MARKETING MIX

- After deciding on the product, its price and the best ways to promote it,
the business has to actually sell the product to the consumer. The product
or service must be available where and when customers want to buy it.
- Place will influence the selling of the product.
- If the product is not available to customers in convenient locations and
they have to go searching in different shops, then they may give up and
buy a competitor's product.
 DISTRIBUTION CHANNELS

Businesses have to decide where to sell their products ( sell directly to consumers or use
other businesses to do this). This means deciding on the best distribution channel.
Distribution Channel is the means by which a product is passed from the place of
production to the customer.
There are 4 main distribution channels.
 DISTRIBUTION CHANNEL 1:
DIRECT TO CONSUMERS

Consume
Producer
r
It involves manufacturers selling their products directly to the consumer. This
channel is also common when selling directly from one manufacturer to another
manufacturer. For example, car components are sold directly to the car producer.
tire to Toyota
Advantages:
- Suitable for certain types of food products (sometimes sold straight from the
farm), organic products,, online bakery shop, tailored clothing, etc.
- Lower price if sold direct to customers as it eliminates wholesaler/retailer.
- Products can be sold by mail order catalogue or via the internet.
 DISTRIBUTION CHANNEL 1:
DIRECT TO CONSUMERS

Consume
Producer
r
Disadvantages:
- This is usually impractical for most products because the consumers probably do
not live near to the factory and could not go there to buy the products.
- This method may not be suitable for products which cannot easily be sent by
post.
- Not cost effective as it can be very expensive to send products by post or
courier.
 DISTRIBUTION CHANNEL 2: USING A
R E TA I L E R A S T H E O N LY I N T E R M E D I A RY

Consume
Producer Retailer
r
The producer sells directly to retail outlets and then they sell the product to the
consumer. This is most common where the retailer is large (large supermarket), or
when the products are expensive (cars, furniture or jewellery sold through shops).

Advantages: Disadvantages:
-Producer sells large quantities to -No direct contact with customers.
retailers. -The price is often higher than 'direct
-Reduced distribution costs compared to selling' as the retailer has to cover its
DT 1. costs and make a profit.
 DISTRIBUTION CHANNEL 3: USING A
W H O L E S A L E R A N D R E TA I L E R A S I N T E R M E D I A R I E S

Wholesale
Producer Retailer Consumer
r

This distribution channel involves using a wholesaler, who performs the function of
breaking bulk. Without a wholesaler, a manufacturer has to process many orders
from retailers.
Breaking bulk is where wholesalers buy products from manufacturers in large
quantities and then divide up the inventory into much smaller quantities for
retailers to buy.
Advantages:
- Wholesaler saves storage space for small retailer and reduces storage costs.
- Small retailers can purchase fresh products in small quantities from wholesale
because they have a relatively short 'shelf life' before they deteriorate.
- Wholesaler may give credit to retail customers.
 DISTRIBUTION CHANNEL 3: USING A
W H O L E S A L E R A N D R E TA I L E R A S I N T E R M E D I A R I E S

Wholesale
Producer Retailer Consumer
r

Advantages (Continued):
- Wholesaler may give deliver service to the small retailer thus saving on
transport costs.
- Wholesaler can give advice to small retailers about current demand, market
trend, price variations, etc. They may also give advice to the manufacturers
about what is selling well.
Disadvantages:
- May be more expensive for the small shop to buy from a wholesaler than if it
bought straight from the manufacturer as cost of buying goods will be less.
- Wholesaler may not have the full range of products to sell.
 DISTRIBUTION CHANNEL 3: USING A
W H O L E S A L E R A N D R E TA I L E R A S I N T E R M E D I A R I E S

Wholesale
Producer Retailer Consumer
r

Disadvantages (Continued):
- Takes longer for fresh produce to reach the shops, so may not be as good quality.
- Wholesaler may be situated far away from the small shops.
- The consumer price is often higher than 'direct selling' as both the wholesaler
and retailer have to cover costs and make a profit.
 DISTRIBUTION CHANNEL 4: USING AN
A D D I T I O N A L I N T E R M E D I A RY S U C H A S A N A G E N T

Wholesale
Producer Agent Retailer Consumer
r

The manufacturer sometimes uses an agent when they export products. Agent
sells the products on behalf of the manufacturer. This can allow the manufacturer
to have some control over the way the product is sold to consumers.
The agent will either put an additional amount on the price to cover their expenses
or will receive a commission on sales. The agent may also act as the wholesaler.
Advantages: Disadvantage:
- Manufacturer may not know about other - The producer has less control over the way
markets. the product is sold to customers.
- Agents will be aware of local conditions and
will be in the best position to select the most
effective places in which to sell.
 METHODS OF DISTRIBUTION

Methods of Description
Distribution
Department stores Large stores, usually in the centre of towns or cities, which sell a
wide variety of products from a wide range of suppliers.
Chain stores Two or more stores which have the same name and the same
characteristics.
Discount stores Retail stores offering a wide range of products, many branded
products, at discount prices. Often the product ranges are of similar
types of products, for example, electrical goods.
Superstores Very large out-of-town stores which sell a wide range of food and
non-food products.
Supermarkets Retail grocery stores with dairy produce, fresh meat, packaged food
and non-food departments.
Independent retailers Single shops, often small, that offer a local, personalised service.
Prices are often high.
 METHODS OF DISTRIBUTION

Methods of Description
Distribution
Direct sales Products are sold directly from the manufacturer to the customer-
who may be a consumer or another business [DT1]
Mail order Customers look through a catalogue or magazine and order by post.
Orders can also often be placed by telephone or internet.
Internet/e-commerce Instead of looking at a catalogue, consumers view the goods on the
business's website and then order on the internet or possibly by
telephone or mail. Business can sell through other specialist
websites such as eBay and Alibaba.com.
 S P E A K I N G I M PA C T

Your ability to communicate effectively will leave a

lasting impact on your audience
Effectively communicating involves not only
delivering a message but also resonating with the
experiences, values, and emotions of those listening
T H A N K YO U