Business Studies

Chapter 15 – The Marketing Mix: Place

The role of place decisions in the marketing mix

After deciding on the product and right price, the business has to get the product to the consumer. The product or
service has to be available where and when customers want to buy. Where consumers can buy the product will affect
how well it will sell.

It is very easy for a business to get the place wrong and therefore lose sales, or even fail altogether.

How consumers get to know about the product through promotion is important, but they must also be able to buy
products easily

Distribution Channels
1 Producer Consumer
2 Producer Retailer Consumer
3 Producer Wholesaler Retailer Consumer
4 Producer Agent Wholesaler Retailer Consumer

Distribution Channel 1
This distribution is very simple. It involves manufactures selling directly consumers. It is suitable for products, such as
certain types of agricultural products, which are sometimes sold directly from the farm
This channel is also common when selling directly from one manufacturer to another manufacturer. E.g. car
components are sold directly to car producer

Advantages

 There is lower price if sold directly – cuts out wholesaler/retailer

 Products can be sold by through mail order catalogue or via the internet
Disadvantages

 This is usually impractical for most products as consumers do not live closer to factory or cannot reach there
to buy products
 Not suitable for products which cannot be sent by post
 Might be very expensive to send by post – might not be cost effective

Distribution Channel 2
It is where producer sells directly to retail outlets and then sell the product to the consumer.

This is most common where the retailer is large, such as large supermarket, or when the products are expensive, such
as furniture or jewellery
Advantages

 Producer sells large quantities to retailers

 Reduced distribution costs compared to distribution channel 1
Disadvantages

 No direct contact with customers

Distribution Channel 3
This distribution involves using a wholesaler, who performs the function of breaking bulk1
Advantages

 Wholesaler saves storage space for small retailer and reduces storage costs
 Small retailers can purchase products in small quantities from wholesaler because they have a relatively short
‘shelf-life’ before they deteriorate
 May give credit to customers so they can take the goods straight away and pay at later date
 Wholesaler may deliver to small retailer – saving on transportation costs
 Wholesaler can give advice to small retailers and manufactures about what is selling well
Disadvantages

 May be more expensive for the small shop to buy from a wholesaler than if they bought straight from the
manufacturer
 Wholesaler might not have full range of products to sell
 Takes longer for fresh products to reach the shops – might not be in good quality
 Wholesaler may be far away from small shops

Distribution Channel 4
When products are exported, the sometimes uses an agent2 in the other country. The agent sells the products on
behalf of the manufacturer. This can allow the manufacturer to have some control over thee 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
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 good position to select effective places to sell
Disadvantages

 Less control over they way the product is sold to customers

Methods of Distribution
Method of Distribution Description
A large store, often in city centres, that sells a wide variety of products from multiple
Department stores
suppliers
Chain stores Two or more stores with same names and characteristics
Retail stores offering a wide range of products at discount prices. Often the product
Discount stores
ranges are of similar types e.g. electrical goods
Superstores Very large out-of-town stores which sell a wide range of products
Supermarkets Retail grocery stores with dairy produce, fresh meat, sealed food and non-food departs.
Direct sales Products are sold directly from the manufacturers to the consumer (dist. Channel 1)
Mail order Customers look through catalogue/magazine and order via post/telephone/internet
Internet/e-commerce3 Customers view goods on business’s website and then order on internet or by phone/mail

1
Breaking bulk is where wholesalers buy products from manufacturers in large quantities and then divide up the stock into much
smaller quantities for retailers to buy
2
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
3
E-commerce is the buying and selling of goods and services using computer systems linked to the internet
E-Commerce
low-cost able to access shops might not be needed B2B (Business- to-
global coverage
promotion many consumers Business) easier

Opportunities to Business

E-Commerce
Threats to Business

setting up/updating no direct consumer competition from

website costs contact other websites transport costs

Selecting the distribution channel to use

Each manufacturer will Sold to other producers or to

probably sell products in ordinary customersw If yes,technical person with detailed
same outlets as their knowledge of product should sell it
competitors so that they can
compete directly for
customers

Where do Type of Is product

competitors Product very
sell their technical?
product?

if most of customers are in

FACTORS bought everyday (e.g)
Where are the How often is
cities then it should'nt be sold AFFECTING it
newspapers - many retailers
in rural areass . If in other customers as people won't buy
countries - different retail located? DISTRIBUTION purchased? outdated
routes or online trading might CHANNELS
be appropriate

How
How expensive is
perishable is the
the product? product?

if it gets quickly rotten i.e. fruits or bread

if expensive and quality - limited
then they should be widely avaliable to be
able to sell quickly retailers and expensive areas