Posted by
Anjali Kaur
on
Sep 07, 2020
Place Mix in Marketing
The third element of the marketing mix is place. Place mix in marketing is concerned with making the goods and services available at the right place, at the right time, so that people can buy the same. In this post, we will be understanding the following topics:
- Place Mix
- Channels of distribution
- Functions of the distribution channel
- Types of channels
- Factors affecting the choice of channels
- Physical distribution
- Components of physical distribution
Place Mix
Place mix is a process by which the goods are transferred from the place of production to the place of consumption.
There are 2 important decisions related to place mix:
- Channels of distribution
- Physical distribution
1. Channels of Distribution
Channels of distribution refer to the people or middlemen who help in distributing the goods.
Since goods are produced in one place and customers are scattered all over the country. So, it is very difficult for the producer to distribute goods.
Channels of distributions are the firms or individuals who help in transferring goods from the place of the manufacturer or the producer to the place of the consumer. The following are the channels of distributions:
Distribution channels make shopping easy for consumers and distribution becomes simple for a producer. For example, a consumer can get various products at the retailer outlet. Otherwise, he would have to visit different producers which involves a lot of effort.
With channels of distribution, consumers can get everything that he wants to buy in one place. As shown below:
Without channels of distribution, the consumer has to visit different manufacturers to get various products. As shown below:
Functions of distribution channels
1. Sorting / Grading / Arranging
Intermediary get the commodities from various manufacturers, and then they do sorting, that is, they repack them according to the quality, size, or price.
For example, arranging apples of different size.
2. Accumulate
Intermediary maintain a large stock of commodities, so that, there is a smooth supply of commodities without any delay.
3. Assortment
Intermediary maintain the variety of commodities that they procure from various manufacturers and assemble them in one place so that consumers can fulfill his requirement by visiting one place only.
For example, Decathlon, where we can get all the sports items.
4. Packaging
Intermediary buy the goods in bulk and then they repack them in small lots.
For example, the wholesaler buys bags of 100 kg wheat and then repacks it in convenient packs of 5kg or 10 kg.
5. Promotion
Intermediary also offer some sales promotional tools to attract customers.
For example, discounts or offers or deals of the day.
6. Negotiation
Intermediary negotiates with the manufacturer as well as with the customer on price, quality, and the guarantee.
Types of Channels
1. Zero Level Channel
The most simple and the shortest mode of distribution is direct distribution, wherein the goods are directly available by the manufacturer to the customer, without involving any intermediary. This is a 0 level channel.
For example, Mcdonald
2. Indirect Channel
When a manufacturer employs 1 or more intermediaries to move goods from the point of production to the point of consumption, it is called an indirect channel. The indirect channel includes:
1 level Channel
In this form, one intermediary that is, the retailer is used between the manufacturer and the customer.
For example, Cars are sold through dealers.
2 level channel
This is the most commonly adopted distribution network for consumer goods like soap, sugar, clothes, etc.
3 level Channel
In this case, manufacture used there own selling agents or brokers, who connect them with the wholesaler and then with the retailer.
This is used when the manufacturer carries a limited product line and has to cover a wide market.
For example, North India Distributors.
Have a look at all the channels:
Factors determining Choice of Channels
1. Product related factors
It includes whether the product is industrial or a consumer product, whether it is perishable or non-perishable.
Industrial products are usually technical, they are made according to order as they are very expensive and are purchased by few buyers. These types of product require a short channel, that is a direct channel.
For example, HP laptop.
Consumer products are usually less expensive. These can be distributed with a long network of channels involving many middlemen.
For example, Lux, Sunsilk.
2. Company Characteristics
A company with no financial problems should prefer indirect or direct sales with financially weak firms. They can have more middlemen.
For example, Cadbury.
Companies which have tight control over their distribution, they prefer direct sale.
3. Competitive factors
The type of channel selected by the competitor also affects the selection of the channel.
For example, if Revlon cosmetic producers have chosen big retail stores for the sale of their products, its competitors may adopt door to door selling policy.
4. Market factors
In the industrial market, direct selling is preferred whereas in the consumer market different distribution channels are adopted.
If customers are large or are scattered, then more Intermediaries are used for distribution.
5. Environmental factors
Channels of distribution are also affected by the economic conditions and legal restrictions. In a depressed economy, marketers used shorter channels to distribute their goods in an economical way.
Now, the second important decision regarding place mix.
2. Physical Distribution
Physical distribution means delivery of the goods.
Components of Physical Distribution
1. Order Processing
It involves order placement, order transmission by a salesman to the company, delivery of goods, etc.
Fast order processing gives more satisfaction to the customer, but it involves maintaining sufficient stock.
2. Transportation
Transportation is the means of carrying goods and raw materials from the point of production to the point of sale.
It is one of the major elements of physical distribution because if goods are not made physically available, the sale can not be completed.
3. Warehousing
The commodities produced are not sold immediately. Therefore, every company needs to store finished goods until they are sold in the market.
Some goods are produced throughout the year but are demanded in a particular season only.
These are stored during the off-season.
For example, Air conditioners, woolen clothes, heaters, etc.
4. Inventory
Inventory refers to the maintenance of a stock of the goods. The inventory needs to be maintained so that goods can be supplied whenever demanded.
Inventory involves costs, so accordingly optimum level of inventory should be maintained.
The major factors determining inventory levels are:
- Firms’ policy on customer satisfaction: The greater the customer satisfaction, the higher will be the stock. For example, amazon.
- Degree of the accuracy of sales forecast: More accurate estimates, the stock can be minimized. For example, Milk Booth seller knows that on a daily basis they require X quantity of yogurt. So, they keep their stocks accordingly.
- Responsiveness of distribution system: If to meet additional demand, producer requires more time then a high level of inventory should be maintained.
- The cost of inventory includes holding costs. If the cost of storage or holding increases, then the producer will maintain a lower inventory and vice-versa.
Thank You!
You can read more topics related to business studies:
Feel free to join our Facebook group and subscribe to this website to get daily educational content in your mailbox.
Happy Learning!
Disclosure: Some of the links on the website are adds, meaning at no additional cost to you, I will earn a commission if you click through or make a purchase.
Photo by Alissa De Leva on Unsplash
