Place (Distribution)

 

Here is a detailed overview of the place or distribution segment within the marketing mix.  The perspective from a customer-centric point of view is in parenthesis:

 

Place/Distribution (Convenience).  There are many “Places” you can decide upon to distribute and sell your product.  These places are known as distribution channels.  After you have determined what markets you are going to reach, a distribution strategy is needed to determine what your are selling, who are the prospects, where are they, how to reach them, knowing how the distribution channel works, the costs through each channel, and how many channels you should use.  Examples of different distribution channels are:

 

• Directly to consumers.  This would be considered a zero-level channel since it is going from your company direct to the individual with nothing in-between.
• Directly to retailers (stores that sell direct to individuals).  This would be considered a one-level channel as it goes to a store first, and then to the individual.
• Directly to resellers (outside company that sells your product).  This is also considered a one-level channel.
• To wholesalers (the middleman) who in turn sell to resellers or retailers.  This would be considered a two-level channel.

 

It will need to be determined how many and what types of intermediaries or third party channels you want to have. 

 

You’ll also need to decide on the terms on how and who is going to stock your product.  It can be through an intensive distribution method in which you stock your product in as many places as possible, an exclusive distribution method in which limited dealers will be granted the rights to distribute your product, or selective distribution in which you choose only some of the available outlets in an area to distribute your product.  These channels will need to be motivated to sell your product if it or your company is unknown.  If your product or company is well known, the channel members will most likely be knocking on your company’s door…

 

There are channel regulations your company should be aware of such as the Sherman Antitrust Act and the Federal Trade Commissions Act.  These laws are put in place to protect free trade and competition.

 

Manufacturers need to constantly evaluate its channel members through sales quotas, inventory levels, RMA’s, and ongoing training.

 

Here are some other ways to get your product out to the marketplace: 

 

• Through the company’s internal and external sales force.
• Telemarketing by means of selling over the telephone.
• Purchasing online.  Selling over the Internet has had a tremendous impact on traditional marketing techniques.  Things to consider are web site design, Search Engine Optimization (SEO), newsgroups, getting linked up, and many other ideas that are a course in itself.
• Delivery and manufacture-on-demand.
• Directly selling through mail or magazines in which customers either mail in or call to place their order.
• Agents who do not work for the company, but make commissions when they sell the product.
• Internationally by means of exporting.
• Joint marketing agreements in which your company supplies your product to a larger company to sell. 

 

 

Once you have your distribution channels set up, you need to carefully plan, implement, and control the actual physical flow to get your products into that channel.  You will need to determine logistical costs, planning, and methods of transportation, inventory management, warehousing, sturdy packaging for shipment, material handling, and order processing.  See lesson 9 for more information regarding inventory management and supply chain. 

 

The basic objective for your physical distribution operations is to:

 

• Get the right products, to the right place, at the right time, in good condition, for the least cost.

 

• Have a streamlined order processing method from the time the order is placed, to the time it is ready to ship.

 

• Have your warehouse in the most logical, yet least expensive, location to deliver and receive the products on time and without having to constantly maneuver goods due to lack of space.

 

We’ve discussed how to get the product out to the market, but we also need to consider how a customer can return the product back to your company.  This is known as Return Merchandise Authorization (RMA).  You should have a well-known and clear-cut return policy indicating time limits and any other conditions well in advance.  If a customer returns a product with little to no hassle, they are more likely to come back for more.