Chapter 14: The Marketing Mix – Place
Place is about making products available to customers in the right location, at the right time and in a convenient way. This chapter explains distribution channels, intermediaries and how businesses choose the most suitable route to customers.
Topic 1: Place and Distribution Channels
Place decisions decide where and how the product reaches customers.
1. Place in the Marketing Mix
A product should be available:
- in the right location
- at the right time
- in a way that is convenient for customers.
2. Distribution Channel
Four main channels
3. Channel 1: Producer Direct to Consumer
The manufacturer sells directly to the final customer.
Examples
- products sold directly from a farm
- products sold through the manufacturer's website
- business products sold directly to another business.
- No intermediary, so the producer keeps more of the selling price.
- The producer has direct contact with customers.
- Online selling can allow the business to reach customers directly.
- Distribution to many individual customers can be expensive.
- It may be unsuitable for products that are difficult or expensive to deliver.
4. Channel 2: Producer → Retailer → Consumer
The producer sells products directly to retailers, which then sell them to consumers.
This is common when
- retailers are large, such as supermarkets
- products are expensive, such as furniture or jewellery.
- Producers can sell large quantities to retailers.
- Distribution costs may be lower than selling separately to many consumers.
- The producer has less direct contact with customers.
- The retailer adds its own profit margin, increasing the final price.
5. Channel 3: Producer → Wholesaler → Retailer → Consumer
This channel includes both a wholesaler and retailer.
It is particularly useful when manufacturers need to supply a large number of small retailers.
6. Wholesaler
- Small retailers can buy the small quantities they need.
- Wholesalers can store goods, reducing retailers' storage needs.
- Wholesalers may deliver goods to retailers, reducing transport problems.
- Using a wholesaler adds another profit margin, which can increase the final price.
- Products may take longer to reach consumers, which can be a problem for fresh products.
7. Channel 4: Using an Agent
Agents are particularly useful when businesses sell products in foreign countries.
An agent understands:
- the local market
- local customers
- suitable places to sell the product.
This can help a business enter a foreign market.
The producer has less control over how its products are sold.
8. Retailers
Examples
- supermarkets
- department stores
- chain stores
- independent shops
- discount stores.
Retailers are important because they make products available in locations that are convenient for consumers.
9. E-commerce / Internet Selling
Businesses can sell products through:
- their own websites
- specialist online marketplaces.
Customers view and order products online.
- Products can be sold directly to customers.
- Customers can buy from many locations.
- The business may avoid some costs of operating physical shops.
- Delivery costs may be high.
- Some products are unsuitable for online selling.
- Customers cannot always examine the physical product before buying.
Topic 2: Choosing the Right Distribution Channel
The appropriate channel depends on the product, customers and market conditions.
10. Choosing the Right Distribution Channel
There is no one best distribution channel.
The appropriate channel depends on the product and market.
Important factors include the following.
11. Type of Product and Customer
The business should consider whether the product is sold:
- to consumers (B2C)
- to other businesses (B2B).
Large specialised business products are often sold directly from producer to business.
12. Technical Nature of the Product
Technical products may require:
- demonstrations
- specialist knowledge
- detailed explanations.
Therefore, direct selling may be more appropriate.
13. How Often the Product Is Purchased
Products purchased frequently need to be available in many convenient locations.
14. Price and Brand Image
Expensive luxury products are usually sold through selected outlets that support their brand image.
15. Perishability
Examples
- fresh fruit
- bread.
They need to reach customers quickly, so a short distribution channel may be more suitable.
16. Location of Customers
Businesses need to consider where their target customers live.
Customers spread across a country
Many retail outlets or online selling may be useful.
Customers overseas
Agents or other international distribution channels may be suitable.
17. Competitors
Businesses should consider where competitors sell their products.
Selling through similar outlets may allow the business to compete directly for customers.
18. Quick Guide to Choosing a Distribution Channel
| Situation | Likely Suitable Channel |
|---|---|
| Expensive technical machinery | Producer → Customer |
| Large supermarket purchasing in bulk | Producer → Retailer → Consumer |
| Many small shops | Producer → Wholesaler → Retailer → Consumer |
| Selling in an unfamiliar foreign country | Use an agent |
| Perishable goods | Short distribution channel |
| Everyday consumer goods | Many retail outlets |
| Online product suitable for delivery | Direct e-commerce |
Topic 3: Key Definitions and Exam Focus
Learn these terms and practise recommending a suitable channel for a product.
Key Definitions
| Term | Meaning |
|---|---|
| Place | Where and how a product is made available to customers |
| Distribution channel | Route through which a product passes from producer to customer |
| Retailer | Business that sells products to final consumers |
| Wholesaler | Business that buys large quantities from producers and sells smaller quantities to retailers |
| Breaking bulk | Dividing large quantities into smaller quantities for retailers |
| Agent | Independent person or business appointed to sell and distribute products |
| E-commerce | Buying and selling products using the internet |
What Students Must Know for the Examination
Students should be able to:
- explain why place is important in the marketing mix
- define a distribution channel
- identify the four main distribution channels
- explain important advantages and disadvantages of direct selling, retailers, wholesalers and agents
- explain the role of breaking bulk
- understand the importance of e-commerce as a distribution method
- explain the main factors affecting the choice of distribution channel
- recommend and justify an appropriate distribution channel for a particular product.