Chapter 20 - The Marketing Mix, Promotion and Place
Learning Objective: To understand the Place decisions within the Marketing Mix
The Place decision refers to how products will go all the way from manufacturers to consumers.
Place is connected to distribution, which can be defined as getting the right product, to the right consumer, in the most convenient way possible. Every business, therefore, needs to establish a distribution strategy.
These are the 3 most common channels of distribution for businesses:
Let's start by discussing Direct Selling (3), also called Zero Intermediary Channel:
No intermediaries;
No markup (keeps all the profits);
Complete control over the Marketing Mix:
- Produce, Price, Promotion, and Place.
Quicker - important for perishable goods;
Direct contact with customers (opportunity for Market Research);
Limited reach (may not be convenient);
Promotion, delivery and after-sales costs all bared by the company.
The growth of internet has made the use of this channel easier for many businesses.
One Intermediary Channel (2) (a.k.a. Single Intermediary) e.g. a retailer holding inventory or a travel agent selling tickets:
Cost of storage is transferred to the retailer and no longer belongs to manufacturer;
Cost of selling, promotion, and after-sales are transferred;
Retailers are usually convenient (location, options);
Ability to focus on manufacturing only;
Markups decrease profit margins and/or make the product more expensive;
Loss of control over an element of the marketing mix;
Product is sold alongside competitors' products.
Two Intermediaries Channel (3) when a wholesaler buys from manufactures and distributes to retailers:
Adopted in geographically dispersed countries;
Wholesalers buy in bulk and keep inventories;
Transportation costs also bared by wholesalers;
Effective way of entering foreign markets as wholesalers are well-connected and can push new products to retailers;
It can be more expensive as two intermediaries add their own markups - can make the product less competitive;
Further loss of control over marketing mix elements;
Slower distribution (multiple steps).
Nowadays, one of the fastest-growing distribution channels is online marketing (ecommerce):
- It is inexpensive and wide reach;
- It's easy to collect market research data;
- It's convenient to consumers;
- Possible to accurately measure results (clicks, views);
- Lower fixed costs;
- Possible for dynamic pricing (increased profit margin);
However...
- Slow internet and low access to computers in some places are limitations;
- Customers cannot touch, smell, or try products which can limit willingness to buy certain products;
- Returns can be high increasing costs;
- Postal services can be unreliable and costly;
- Good websites (and safe) are expensive;
- Customers are concerned about safety and privacy on the internet nowadays.
What to consider when planning a distribution strategy:
Should the product be sold directly to customers or through intermediaries?
How many intermediaries to have?
Where should the product be sold?
Should ecommerce (online) be an option?
Cost of retailers and warehouses;
The other elements of the marketing mix and their relationship with distribution.
Place is an important Marketing Mix decision for its own reasons:
Convenience can drive sales up or down - it is a factor of value;
It is related to access and wide geographical availability;
It impacts costs (specially fixed) and prices (by adding intermediaries).
Digital Distribution (Digitalization) of goods and services have also become a trend recently:
Products that once were in physical form are now digitalized bypassing physical distribution.
Such services benefit content creators by:
Having their content globally distributed quickly;
Avoiding high cost of traditional distribution (e.g. transport and inventories);
Achieve low carbon distribution - which is nowadays cared for;
Keep 100% of the revenues for themselves.
To finalized the 4Ps, remember: an INTEGRATED MARKETING MIX is key for business success:
Would you buy a luxury, expensive cologne in a open market stall?
Would you like paying expensive for a product and have it wrapped in old newspaper?
Would advertising a cheap children's clothing brand on a luxury car magazine be effective?
The Marketing Mix elements should be consistently aligned (synergy) for a successful marketing campaign:
Messages should be clear to avoid confusion;
High-price low-quality goods can bring a 'rip-off' feeling;
Expensive looking products at a cheap price makes customers doubt its quality and legitimacy.
Consumers will avoid buying products with confusing and inconsistent Marketing Mix.
To-Do-List:
Chapter 20 - Marketing Mix, Promotion and Place
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