The Marketing Mix: Place

• After deciding on the product, price and promoting the product, the business has to actually sell the product to the consumer. The business must ensure that the product or service must be available where and when the customers want to buy it. Businesses should consider how and where consumers can buy the product and how will it affect how well it will sell.

Distribution channels

• A distribution channel is the means by which a product is passed from the place of production to the customer.
• These are the main distribution channels used:
  • producer -> consumer
  • producer -> retailer -> consumer
  • producer -> wholesaler -> retailer -> consumer
  • producer -> agent -> wholesaler -> retailer -> consumer

Direct to consumers

• Advantages:
  • Very simple. Manufacturers selling directly to consumer.
  • Suitable for certain products (e.g. specific types of food) which are sometimes sold straight from the farm.
  • Lower price if sold directly to customers (cuts out wholesaler/retailer).
  • Products can be sold by mail order catalogue or via the internet.
• Disadvantages:
  • 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.
  • May not be suitable for products that can’t be easily sent by post.
  • Can be very expensive to send products by post or courier, ∴ may not be cost effective.

Using retailer as only intermediary

• Advantages:
  • Producer sells large quantities to retailers.
  • Reduced distribution costs compared to selling directly to consumers.
• Disadvantages:
  • No direct contact with customers.
  • Price is often higher than direct selling as the retailer has to cover its costs and make a profit.

Using a wholesaler and retailer as intermediaries

• The wholesaler performs the function of breaking bulk, 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 wholesaler because they have a relatively short shelf life before they deteriorate.
  • Wholesaler may give credit to retail customers so they can take the goods straightaway and pay at a later date.
  • Wholesaler can give advice to small retailers about what is selling well. They can also tell the manufacturer 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.
  • Wholesaler may not have full range of products to sell.
  • Takes longer for fresh produce to reach the shops, so may not be as good quality.
  • Wholesaler may be a long way from the small retailers.
  • The consumer price is often higher than direct selling as both the wholesaler and retailer have to cover costs and make a profit.
• Without a wholesaler, a manufacturer has to process many orders from retailers.
• With a wholesaler, a manufacturer has less paperwork.

Using an additional intermediary such as an agent

• An agent is an independent person or business that is appointed to deal with the sales and distribution of a product or range of products.
• Advantages:
  • Manufacturer may not know the best way to sell the product in other markets.
  • Agents will be aware of local conditions and will be in the best position to select the most effective places in which to sell.
• Disadvantages:
  • Producer has less control over the way the product is sold to customers.