Welcome to my fourth post on marketing. If you have not read the first three posts, I encourage you to read the introduction post and the articles on products, people, and promotion before reading this article.
Now, let’s get started with “place”. Offering your product at the right place means designing the right shopping experience for customers, which itself requires offering the product through the right distribution channel (aka. Supply channel, marketing channel). A distribution channel is an interdependent collection of intermediaries (merchants, agents, and facilitators) that serves the operational function of getting your product from manufacturer to customer as well as the marketing function of spreading your promotional messages throughout your distribution chain and to your end consumer. The purpose of establishing right distribution channels is providing a marketplace for customers to get the product with the convenience they want, and for businesses to sell products at a profit. Distribution channels are important because they expand your sphere of influence without the commitment of financial resources. They allow you to focus on your core competencies when your product is too small in value for a retail operation, they make it easier to sell more goods by selling in places where customers want to buy, and they make it easier to market to customers.
As a business, you must figure “where is the best place for selling our product? Where, when, and how do customers most want to buy our product or service?” In answering these questions, you should consider customers…
- Shopping culture: where are these types of products typically sold in this marketplace, industry, and country?
- Value perception: where is the product best presented?
- Convenience: where is it more convenient for customers to shop, and hence you can charge a premium price?
Sample shopping locations include online e-commerce shops (suitable if your customers bother to go online for your product), in-store shops (suitable if your customers enjoy shopping this item at shopping malls), and direct mail delivery to customers (suitable if the customer can wait to receive the product). Selling online involves fewer intermediaries while in-store sales may directly promote your product, but a combination of online and in-store sales may create conflicts between your distribution channels.
Regardless of where you want to sell your products, you will invariably need to decide on the best distribution channel for selling the product at your desired location. A good choice of distribution channel allows you to specialize on the product as opposed to high-cost sales efforts, generates the maximum amount of information you gather about customers, and has minimal costs for establishment and maintenance. After you select a distribution channel, you should design a streamlined (shortest possible) channel structure based on your overall business plan. You should consider how willing you are to commit to various stakeholders in that distribution channel, and whether your partners are willing to commit to the distribution network. Think about the role of each member in the channel and leave out intermediaries that are not necessary for the channel to function. Shorter channels are not only logistically beneficial (especially for products that are specialized, bulky, or perishable), they allow for closer relationships with customers and hence more control over pricing and promotional efforts, and make sales more efficient with less inventory and fewer costs.
In the execution phase of product distribution, you should coordinate the efficient flow of information and merchandise (i.e. just-in-time processing) within the channel. Simultaneously, you should evaluate how your distribution channel influences the price, both in terms of the costs carried by the business and in terms of the utility earned by the customer.