4.5d. The Four Ps – Place | Business Made Easy

Place
- How a product reaches its end user/customer from the manufacturer
Distribution channels
- The different ways the product reaches the customers
- Has different levels depending on how many steps are required before the product reaches the customer
- Zero level distribution
  - Manufacturer sells directly to consumers
  - E-commerce makes this more simple, feasible, cost effective and have a wider market coverage
  - e.g. restaurants, Apple, car manufacturers
  - Types of direct marketing
    - Telesales and marketing
      - More expensive
      - Direct to consumer, pitch and add more products
    - E-commerce
      - Cheaper, less cost
      - Wide market coverage
    - Direct mail or email
      - Cheapest (no specialized skill involved)
      - Usually ignored, low success rate
    - Vending machines
      - Physical product can be seen, attracts more customers
      - Cost of machinery
      - Prone to theft and vandalism
  - Advantage: business has control over price, how product is sold, etc.
  - Disadvantage: more costly
- One level distribution
  - Manufacturer to retailer to consumer
  - Advantage: product can reach more markets because of many retailers
  - Disadvantage: less control
- Two level distribution
  - Manufacturer to warehouse/wholesaler to retailer to consumer
  - Can be one level if consumers purchase directly from warehouse
Intermediaries
- Wholesalers – buy products in bulk, sell to retailers
- Direct agents – independent businesses w/ exclusive right to trade a product in a territory; agents may act on behalf of buyer or seller
- Retailers – outlets that sell directly to customers
Distribution Strategy
- Most businesses will use multichannel distribution strategies
- This is affected by:
  - Cost and benefits of each level of distribution
  - Nature of products
    - Perishables are best at zero or one level
    - FMCG’s are best at bulk wholesalers
  - Type or size of market
  - Urgency of use of the product
- Firms must decide on the type of distribution that is most suitable
  - Intensive (mass produced products)
  - Selective (positioning or branding)
  - Exclusive (for large investment or premium products)
- Vertical integration is possible, but not usually feasible/cost-effective
- Branding will give products leverage against power of distribution channels

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4.5d. The Four Ps – Place

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