What does Place mean in the Marketing Mix?

Philip Kotler, the American marketing academic, developed the concept of the 4P marketing mix.  In this blog, I have regularly discussed three of the four elements of Kotler’s marketing mix; Product, Promotion and Price.  I haven’t really discussed the fourth element of the mix, Place. (I am aware that there is now an extension to Kotler’s model with three additional elements, People, Process and Physical Evidence).

So, what does Place mean in relation to the marketing mix?

Place means how you get your products to the ultimate consumer of them.  It is the strategic planning of distribution channels.  It is considering the need of the ultimate consumer AND your channel intermediaries.  It is ensuring that your products are available in adequate quantities; in convenient locations; and at the right time.

Let’s take the example of a small jam manufacturer.  Are you going to supply your product direct to the public, say through a market stall or a small shop?  Are you going to sell your jam over the internet? Are you looking to sell your jam to local hotels? Are you interested in having a supermarket chain stock your products?  Do you want to operate via direct mail? Are you looking to export your products into foreign markets?  If you are going to export, are you going to use local agents or are you going to set up your own distribution network?

Each of these options leads to different marketing considerations.  Take the latter option, getting your products into a supermarket such as Tesco.  National supermarket chains have systems in place so that regional and local products appear in their stores.  To be accepted for these systems, you have to meet the requirements laid down by the supermarket, the channel intermediary between you as a manufacturer and your ultimate consumer, the general public.  The supermarket chain will ask you to complete a quality assurance audit, usually the British Retail Consortium MIDAS scheme.  They will ask for a retail price that gives them a sufficient margin.  This was the basis of the recent disagreement between Unilever and Tesco.  Unilever wanted to put up their prices but the margin Tesco received for selling those products was to fall.  The supermarket will need assurances that you can provide sufficient stocks of products on a regular basis.  They will not be interested in a product which is only available for a short period or where supply quantities fluctuate.  You will have to persuade the supermarket to stock your products over those of your competitors.

Place marketing strategy is the reconciling of the needs of both producers and consumers.  It is about improving efficiency, improving accessibility and in providing specialist services.  Channel intermediaries also help manufacturers ‘break bulk’.

Manufacturers tend to make a small number of products in large quantities.  Consumers want to buy a limited number of goods from a large selection.  A channel intermediary, such as a wholesaler or supermarket helps producers break down the bulk of their output into smaller parts.  For example, a supermarket will buy thousands of tins of beans but split that quantity sending smaller amounts to individual stores.  This helps provide the consumer with the choice of goods they want and allows manufacturers to limited production options.

Channel intermediaries improve producers efficiency by reducing the number of transactions they enter into.  They also allow for bulk transportation of goods.

Channel intermediaries close a location gap.  A producer may be located in one place, remote from many of their consumers.  An intermediary such as a wholesaler allows for a producer’s goods to be located closer to the location of potential customers.  For example, Nissan’s car factory is in Sunderland but it has independent dealerships in most towns and cities.

A producer may only want to operate during standard working hours (Mon – Fri, 9 am to 5 pm).  Consumers may want to buy at the weekend.  Channel intermediaries may be able to satisfy both the requirements of producers and consumers.

Using channel intermediaries can allow producers to concentrate on manufacturing.  Intermediaries can take care of specialist services such as selling, customer care, installation, etc.

So how do you go about choosing an appropriate distribution channel?  The following factors must be taken into account:

  1.  Market Factors – What is the consumer buying behaviour of your market, what are your customers expectations.  What are their needs.  These factors may affect the decision of a channel intermediary to stock your goods.
  2. Producer Factors – Do you have adequate resources to meet the needs of your chosen distribution channel? Can you meet the requirements of your chosen channel intermediary? For example, do you have the capacity to supply sufficient quantities of product in the required timescale? can you produce goods of sufficient consistency? Does your intermediary demand that you spend significantly to meet their demands?
  3. Product Factors – Large complex products are often supplied directly to the final customer.  For example, the UK’s two new aircraft carriers are being delivered directly to the government from BAe Systems.  There is no aircraft carrier supermarket.  Perishable products often need short supply chains.  Fast Moving Consumer Goods are often distributed through self-employed agents and wholesalers.

Marketing strategy has a significant role to play in a business selecting the most appropriate and most efficient distribution channels for your business.  These matters should not be left to only your logistics team.