Marketing Mix

PLACE
Place is also known as channel,
distribution, or intermediary. It is the
mechanism through which goods and/or
services are moved from the
manufacturer/ service provider to the user
or consumer.
 OBJECTIVE OF DISTRIBUTION

 A crucial decision is to correctly identify the

distribution channels. The question " how to
reach the customer" must always be in your
mind.
Distribution
A channel of distribution comprises a set of
institutions which perform all of the activities
utilised to move a product and its title from
production to consumption.
 Types of Channel Intermediaries.
There are many types of intermediaries such as wholesalers,
agents, retailers, the Internet, overseas distributors, direct
marketing and many others. The main modes of distribution
will be looked at in more detail.
1. Channel Intermediaries - Wholesalers
 They break down 'bulk' into smaller packages for resale by a
retailer.
 They buy from producers and resell to retailers. They take
ownership or 'title' to goods whereas agents do not.
 They provide storage facilities. For example, cheese
manufacturers seldom wait for their product to mature. They
sell on to a wholesaler that will store it and eventually resell to
a retailer.
There are may be four or five sport articles wholesalers in Arizona.
You sell your fun boards to these big men. On turn the wholesalers
sell the fun boards to the retailers which finally sell to their
customers.

A wholesaler will often take on the some of the marketing

responsibilities. Many produce their own brochures and use their
own telesales operations.
 2. Channel Intermediaries - Agents
 Agents are mainly used in international markets.
 An agent will typically secure an order for a producer
and will take a commission. They do not tend to take
title to the goods. This approach is used where goods
need to get into a market soon after the order is
placed e.g. foodstuffs).
 Agents can be very expensive to train. They are
difficult to keep control of due to the physical
distances involved. They are difficult to motivate.
 3. Channel Intermediaries - Retailers
 Retailers will have a much stronger personal relationship with
the consumer. like you manufacture the fun boards and you
sell them to the Arizona retailers.
 The retailer will hold several other brands and products. A
consumer will expect to be exposed to many products.
Retailers will often offer credit to the customer e.g. electrical
wholesalers, or travel agents.
 The retailer will give the final selling price to the product.
 Retailers often have a strong 'brand' themselves e.g. Ross and
Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in
Portugal.
 4. Channel Intermediaries - Internet
 The Internet has a geographically disperse market.
 The main benefit of the Internet is that niche products
reach a wider audience.
 There are low barriers to entry as set up costs are low.
 Use e-commerce technology (for payment, shopping
software, etc)
 There is a paradigm shift in commerce and
consumption which benefits distribution via the
Internet
Market Exposure
All marketing managers want their products to have maximum
exposure to potential customers. But in the foregoing list of
place objectives, it was indicated that some products need
widespread distribution whereas others need only limited
distribution. Since a definite policy must be set on the degree
of market exposure, a deeper understanding of this concept is
imperative.

We will discuss three degrees of market exposure:

■       Intensive distribution,
■       Selective distribution,
■       Exclusive distribution.
 Intensive Distribution

 Intensive distribution refers to the desire to sell

through all responsible and suitable outlets. Intensive
distribution is directly related to customer habits and
preferences.
 Intensive distribution is commonly need for
convenience goods and for industrial supplies
(pencils, paper clips, typing paper, etc.), which are
used by all or most all plants or offices. Some
industrial raw materials and component materials
which are used regularly but in small quantities by
many small plants may require intensive distribution.
Exclusive Distribution

Exclusive distribution may be satisfactory for some shopping

goods and more expensive specialty goods. It may also be
practical for many industrial products, including installations,
larger accessory equipment, some raw materials and
component materials, which have limited markets and require
special selling effort. When a middleman is given a monopoly
in an area, he is more likely to provide aggressive selling effort
when he knows all the fruits of his efforts will come to him.

Exclusive distribution method may also be useful when

extensive installation or repair services are necessary, such as
for automobiles, heating equipment, some industrial equipment
and electric household appliances.
 Selective Distribution
Selective distribution is the broad band between intensive and exclusive
distribution and may be suitable for all categories of products. Here
only better distributors are used. The usual purpose is to gain some
advantages of exclusive distribution without tightly restricting and
number of outlets and to get adequate coverage at lower sales cost.
A selective policy might be used to avoid selling to wholesalers or
retails ;
♦   Who have a poor credit rating,
♦   Who have a reputation for making too many returns or requesting
too much service,   
♦ Whose orders are too small to justify making calls or providing
services,  
♦ Who for any other reason are not in position to do a satis­factory
marketing job.
 Location of the stores- must be nearby
consumers and it also involves decisions about
warehousing

Transportation
 Choosing the mode of transportation requires an
understanding of each possible method: rail, truck, water,
pipeline, and air.

 Rail transportation is typically used to ship farm products,

minerals, sand, chemicals, and auto mobiles.

 Truck transportation is most suitable for transporting

clothing, food, books, computers, and paper goods.
 Water transportation is good for oil, grain, sand, gravel,
metallic ores, coal, and other heavy items.
 Pipeline transportation is best when shipping products such as
oil or chemicals.
 Air transport works best when moving technical instruments,
perishable products, and important documents.
 Recruiting middlemen

 Nevertheless, inside a type of channel, you keep the possibility

to choose between the different wholesalers and retailers. You
have to choose the best. It means that your choice must focus
on two major facts: the margin and the image.
 The margin
 Price should fit to the customer profile. Let's suppose
this price is $100. It is the retail price: the price paid
by the final customer.
 The retailer takes his margin (or the mark-up). This
margin is calculated on the retail price. Suppose, he
takes $30. It means that he buy $70 to the wholesaler.
 As the wholesaler trades big quantities, his margin is
usually lower than those of the retailer: Maybe 15%
of the selling price to the retailer. So, he will take
$10.5. It means that he has bought $59.5 to you.
 Consider now that you support the cost of the shipping from
your manufacture to the wholesaler store: For example $9.5.
Finally, your factory price is $50 for a product sold $100 to
the final customer. In many case, when taxes and new
packaging occur at the different levels, the factory price can
easily be only one fifth of the final price!
 Do not imagine that you have too much choice. Each
intermediary fills up a real function and it's not easy to ignore
him. For example, you can't sell your fun board straight to the
consumer: you should need a massive sales force.
 You could also ignore the wholesaler in selling directly to the
big retail supermarket. You will save in this case $10,5 but
you can expect that the supermarket which usually practices
low prices will tell you the following speech " $100 as
consumer price is too much. I want to sell that $80. Of course
I keep 30% as margin. So I buy it $56 to you "
 It could look fair but the number of the supermarkets is higher
than those of the wholesalers. It means more shipping and
consequently a rise in costs. Instead of paying $9,5 for
shipping, you will pay $12. Now what is the result?
 Consumer price-------------80
 Supermarket selling price----56
 Shipping to supermarket-----12
 Factory price---------------44
 It does not look a good business: $44 instead of 50! You can
object that the sales will rise because of the lower price to the
consumer but it does not fit with your hypothesis about the
customer profile. Anyway, could you afford $44 as your
factory price? Is it good to sell your fun board through the
supermarket? Is your customer buying in a supermarket or in a
fashionable specialized sport shop?
 The image

 The place of sale influences the perception of your product.

Consequently, you must pay attention to the choice of your
outlets: wholesalers and retailers. If you sell products for every
one, a mass distribution through the supermarket will be
probably the best issue.
 On the contrary, if you sell fine products, you have to choice
fine shops and beautiful people to sell them. In the fun board
case, you should have better to emphasize on the image and to
look for fashionable shops and people.
 You have also to take notice of the share of power inside the
distribution channel. As you will be a beginner, do not
expect to get too much power!
 For example, you can ask the retailers to store your product on
the first line or in the best situation in the shop. They will
probably answer " OK! but I'm going to charge 35% margin
instead of 30%". May be it's a fair bargain but is the rise of the
consumer price compatible with your previous positioning?

 It's quite difficult to list all the occurrences in this matter. Give
a chance to your intuition but keep in mind that all these daily
decisions must always remain in line with your customer
profile.
Monitoring and managing channels

 In much the same way that the organization's own sales and
distribution activities need to be monitored and managed, so
will those of the distribution chain.