Chapter 14 — The Marketing Mix [Place].

1. The Role of Place Decisions in the Marketing Mix.

- product or service must be available where and when customers want to buy it
- convenient locations should be considered, price should match the level of income of the
people in the area, shouldn’t be too far from competitors so the company can directly
compete against them

2. Distribution Channels.
[= the means by which a product is passed from the place of production to the customer]

(A) Distribution channel 1 — Direct to consumers.

- producer —> consumer

- directly selling the product to the consumers
• advantages:
i) very simple distribution channel
ii) suitable for certain types of food, e.g vegetables can be directly sold from the farm
iii) lower price than retailers and wholesalers
iv) products can be sold online via the internet/mail catalogue
• disadvantages:
i) impractical for most products as consumers don’t live near the factory
ii) unsuitable for products which can’t be sent by post easily
iii) can be very expensive to send products by post, making it cost-ineffective

(B) Distribution channel 2 — Using a Retailer as the only intermediary.

- producer —> retailer —> consumer

- common for large retailers like supermarkets or expensive products like jewellery
• advantages:
i) large quantities are sold
ii) reduced distribution costs compared to directly selling to consumers
• disadvantages:
i) no direct contact with customers
ii) price is often higher than direct selling as the retailer needs a profit

(C) Distribution channel 3 — Using a Wholesaler and a Retailer as intermediaries.

- producer —> wholesaler —> retailer —> consumers

- where wholesalers buy products from manufacturers in large quantities then break down
the bulk into much smaller quantities for retailers to buy
• advantages:
i) wholesaler saves storage space for small retailers and reduces storage costs
ii) small retailers buy fresh produce in small quantities as they have a short shelf life
iii) wholesaler gives credit to retail customers who can take the goods and pay later
iv) wholesaler delivers to small retailers which saves up on transport costs
v) wholesaler gives advice to small retailers about what is selling well
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• disadvantages:
i) more expensive for small retailers compared to buying from the manufacturer directly
ii) wholesalers may not have the full range of products to sell
iii) takes longer for fresh produce to reach the shops, can deteriorate
iv) wholesaler may be far away from small retail shops
v) consumer price often higher than direct selling since both retailers and manufacturers
need a profit
vi) time-consuming

(D)Distribution channel 4 — Using an additional intermediary such as an Agent.

- agent = independent person or business that is appointed to deal with the sales and
distribution of a product or range of products
- agent either puts an additional amount on the price or receives a commission on sales
• advantages:
i) manufacturer may not know the best way to sell
ii) agents will be aware of local conditions, good to sell abroad
iii) less risk of loss since the agent has expertise
iv) better for people with a heavy schedule/manufacturers don’t have to do anything
• disadvantages:
i) the producer has less control
ii) no customer feedback

5. Methods of Distribution.

a) department stores = large stores in the centre of cities selling a variety of items
b) chain stores = 2+ stores which have the same name and characteristics
c) discount stores = retail stores selling branded items at low prices (electronics…)
d) superstores = very large out-of-town stores selling a variety of items
e) supermarkets = retail grocery stores (fresh dairy and meat, packaged food and others)
f) independent retailers = small single shops offering personalised service; high prices
g) direct sales = products sold directly from the manufacturer to the consumer
h) mail rider = customers look at a catalogue/magazine and order by post; also through
calls and the internet
i) internet/e-commerce = consumers look at a business’ website and order on the
internet/by mail/by telephone; specialist websites as well like Amazon, eBay…

6. Selecting the Distribution channel to use.

- what type of product? = consumer or producer goods?

- is it technical? = need to be sold to a professional?
- how often is it purchased? = if bought every day, needed in many retail outlets
- how expensive is it? = very expensive products should be in limited outlets
- how perishable is it? = if it rots quickly, it should be in many shops to be sold fast
- where are the customers located? = urban or rural areas? abroad? retail routes?
- where do the competitors sell their products? = selling in the same outlets would mean
that the business can directly compete against competitors for customers

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