Overview
This lecture explains "Place" in the 7 Ps of the marketing mix, focusing on the importance, types, and considerations of different distribution channels.
Defining Place in the Marketing Mix
- Place refers to how a product gets from the manufacturer to the final consumer.
- It is about the method of distribution, not a physical location.
- Distribution channel is the journey or chain of intermediaries the product follows.
Types of Distribution Channels
- There are three main types: direct, via retailer, and via wholesaler and retailer.
Direct Selling (Zero Level)
- Direct selling is when the producer sells straight to the consumer with no intermediaries.
- Examples include Amazon's own products, plane tickets from airline websites, door-to-door sales, farmers markets.
- Advantages: higher profit margins, control over pricing and promotion, direct customer contact.
- Disadvantages: less product exposure, need to handle storage and distribution, lack of selling expertise.
Retailer (Single Intermediary/One Level)
- Involves one intermediary, usually a retailer, between producer and consumer.
- Retailers include supermarkets, bookstores, or agents (e.g., real estate).
- Advantages: wider customer reach, customers can experience the product, storage/distribution handled by retailer.
- Disadvantages: lower profit margin, less control over marketing mix, product displayed with competitors.
Wholesaler and Retailer (Two Intermediaries/Two Level)
- Manufacturer sells to a wholesaler, who sells to retailers, then to consumers.
- Wholesalers buy in bulk and distribute to retailers, aiding in widespread distribution.
- Advantages: easier and wider distribution, reduced storage and shipping responsibilities.
- Disadvantages: even lower profit margin, further loss of marketing control.
General Points about Distribution Channels
- More intermediaries mean lower profit margins due to shared profits.
- Direct selling offers most profit but can limit market reach.
- Retailers and wholesalers help with product exposure and logistics but reduce marketing control.
- Some manufacturers vertically integrate to control the full distribution chain.
Factors Influencing Distribution Channel Choice
- Cost: High intermediary costs may not suit low-margin products.
- Control: Desire for brand and marketing control affects channel choice.
- Customer Location: Widely spread customers may require wholesalers.
- Market Type: Mass market products often need intermediaries; niche markets may suit direct selling.
- Product Nature: Channel suitability depends on the specific product.
Key Terms & Definitions
- Place — the distribution process from manufacturer to consumer in the marketing mix.
- Distribution Channel — the chain of intermediaries a product passes through from producer to consumer.
- Intermediary — a business (retailer or wholesaler) that helps move products from producer to consumers.
- Direct Selling — selling directly from producer to consumer without intermediaries.
- Retailer — an intermediary selling products to consumers.
- Wholesaler — an intermediary buying in bulk from producers and selling to retailers.
Action Items / Next Steps
- Review the distribution channels and their pros and cons.
- Consider how distribution choices might affect your business or product strategy.