Place, or distribution, is the fourth traditional element of 4Ps of Marketing Mix.
The other three are Product, Price and Promotion.Place is referred to as one of the 4Ps for simplicity and creating a memorable shorthand for the Marketing Mix. However, this basic marketing concept of place in a business organization can be more accurately described as distribution of product.
It is that any business organization, no matter whether it is selling tangible goods or intangible services, must establish a distribution strategy. Specifically, how it is going to move products from the place of production to the place of consumption in a fast and low-cost manner so that it is convenient for people to make a purchase.
In the real life, the path that the product travels from a producer to a final consumer normally involves more than one organization.
What does a place (distribution) involve?
Place (distribution) as one of the four elements of Marketing Mix involves marketing managers in deciding about the process of getting products to customers at the right time and in the most cost-effective way.
1. DISTRIBUTION. How to deliver the product from a producer to a customer?
A business makes a product that consumers want, creates a demand and promotes it effectively. The product must then be delivered from the producer to the final consumer through the channel of distribution. Distribution of products is an active process about how products get from the producers to the consumers. The products are then typically placed in outlets where customers wish to buy them.
Distribution is so important that without it the product will never be delivered to the consumer.
2. PLACE. Where can a customer buy the product?
The place is usually an outlet where the product is sold. A physical outlet where a consumer is able and willing to buy the good or service from the business, e.g. a convenience store, a school, a train station, a supermarket, etc. Place also addresses the geographical distribution of products including local places, national places and international places.
The place must be well chosen otherwise the consumer will never buy the product.
TIP: Place is not about deciding of a specific geographic location, this about who will be involved in delivering the product.
Definition of a place (distribution)
The definition of a place (or distribution) revolves around getting the right product to the right customer at the right time in the right location at the right price. Place also refers to the methods of distributing products from producers to customers.
Whatever products a firm is producing, these products must reach those who want to buy them today and will want to buy them in the future. Goods and services should always be available to customers as and when they decide to purchase them, not at the convenience of the producer.
Realistically, the method(s) of distribution must be the most convenient for the customer and the most cost-efficient for the business. This involves clear and detailed understanding of the target customers’ purchasing behavior and the distribution potential of the company.
Example 1: Large hypermarkets (superstores) such as Walmart stores in the U.S. have many products available for purchase.
Example 2: Retail outlets such as 7-Eleven sell daily products in convenient locations.
Example 3: Insurance companies often use agents (brokers) instead of selling directly to individual consumers.
Example 4: Customers can use banking services at a bank branch located in multiple locations around the city or via the smart phone app.
Example 5: People can buy clothes at a retail outlet or via mail order from the Internet.
Example 6: The Coca-Cola Company uses a range of methods to get its soft drinks to the customers, e.g. wholesalers, retailers and vending machines. The company does not sell its mass-produced products directly to the final consumers in general public. Wholesalers are Coca-Cola’s main customers who buy from the manufacturer and then split the bulk to sell to retailers in much smaller units. Individual consumers like you and me would never purchase enough cans or bottles of Coke directly from the manufacturer to make it worthwhile.
Example 7: Cinemas and theaters have a limited number of screens to display moves and stages on which actors can perform, so they only purchase and show movies and performance that will generate the high sales of tickets.
Example 8: Window displays in department stores have very scarce space, so the advertisements the shops choose to show need to generate large sales quickly.
The importance of place (distribution)
For a business manager, getting the place right is extremely crucial to the success of the entire production and sales process. Strong distribution is inevitable for generating sales. Failure to deliver products on time and in the right quantity can hinder a business greatly as it will negatively impact sales revenue.
Distribution also enables each part of the supply chain to take a profit margin when products pass through the distribution channel. The distribution process breaks bulk through the use of intermediaries. Specifically, producers are able to mass produce and sell in bulk, wholesalers break bulk while consumers can purchase small amounts in single units.
Modifying distribution strategies can give businesses the competitive edge over rival firms. Differentiation of place in Marketing Mix can be achieved through cost efficiencies by reducing costs through shortening distribution chains. This can be done by one intermediary taking over the function of other intermediaries. For example, retailers owning their own warehouses, or wholesalers producing their own products.
Consequently, cutting out parts of the distribution process saves time and money leading to increased profit margins. With price competition in markets being so fierce these days, businesses can make a good use of managing distribution resources effectively.
While intermediaries can be eliminated, their functions cannot be. Intermediaries survive because they perform some of the marketing functions better than the producer. While intermediaries add cost to the product, they also add value to the product that off-sets the cost increase.
Physical Distribution Management (PDM)
The process of physical distribution is known as Physical Distribution Management (PDM). It is concerned with physically moving goods between places to ensure that the product is in the right place at the right time. Physical Distribution Management (PDM) is often carried out by specialist logistics companies which use computer controlled distribution to maximize channel efficiency and cost-effectiveness.
Why is physical distribution important?
- Cost of distribution. Cost of distributing the product must be seriously taken in to account in the distribution strategy as it can impact profitability. However, customer service with customer satisfaction must always remain the key objective of distribution rather than the cost.
- Size of holding stock. The amount of stock to be kept on hand is another important aspect. To ensure the level of inventory is at a point that is optimal for both maximizing sales revenue and where stock is neither too high nor too low.
- Transportation. The way of transporting the products between factories and shops must also be decided. Business must choose the best method of logistics to use such as trucks, trains, airplanes, etc. Or, whether to outsource the transportation process to the third party.
Several focus questions to consider for physical distribution might include:
- How and where do customers prefer to buy the product?
- How important are factors such as stock availability, price, speed?
- How can a business ensure that its products reach existing and potential customers using current transportation available?
In summary, the place, or distribution, or placement, of the product is crucial for any business organization. There are often many paths (channels) which a product can take in going from your factory to the final customer.
