MKT 205 (Part 4)
TEXT ON SCREEN:
Marketing 205: Applied Marketing Strategies. Overview: Part IV.
NARRATOR:
In a previous video, we focused on the second P of marketing: price. In this video, we will be looking at the third P: place. Place is essentially what it sounds like. It’s where your offering is made available to consumers for purchase. Keep in mind that some purchases are impulse buys, like candy bars or magazines in checkout lines, while others may be planned in advance, like a new car or house. Traditionally, place is the physical location where a company sells their offering. With the rapid expansion of digital marketplaces though, place has been expanded to a company’s online presence as well as its physical presence. The place or places where a company’s offerings are sold is dependent on where the target market prefers or expects to look for it.
Think about a new product or service you recently purchased. Where did you learn about it? Did you see an advertisement in your social media feed and click through to the company website to buy it, or see it as a “people also bought” option on your favorite online store? Wherever you discovered it, marketers took the time to research where you as a target market consumer would most likely come across it and made sure that they put their offering directly in your path so that you would have an easy, convenient way to purchase it. Whether their offering is sold in a physical location, like a grocery or department store, or online or a hybrid of both, there has to be a way of getting it from the company to the consumer. These paths are known as distribution channels. But distribution channels aren’t just for conveying offerings to the consumer. They also serve as a roadmap for profits. Especially when there are multiple stops an offering must make before reaching the consumer. There are five primary distribution channels companies use to get their offerings to the consumer: direct to consumer, retail, wholesale, distributor, and agent/broker. Direct to consumer is the only distribution channel where companies deliver the offering directly to the consumer. All the other distribution channels involve at least one intermediary or other person or company outside of the one selling the offering to help bring the offering to the consumer.
Let’s consider the purchase of sugar. If you were to buy it directly from a sugar company such as through their website, that would be considered a direct consumer channel. If you were to buy it from a grocery store that is not owned by the company, that’s an example of a retail distribution channel. If you wanted to buy sugar in bulk, say if you owned a bakery, you’d likely buy it from a wholesaler who would purchase the sugar in large amounts from the sugar company and sell it to you at a lower price. If you owned a grocery store and wanted to resell the sugar with your store name on the package, you would likely buy the sugar from a distributor. Distributors buy in bulk from manufacturers but do not resell directly to consumers. Finally, if you were to buy sugar from an individual agent who represents the entire line of different types of sugars available from the company, that would be an example of an agent/broker distribution channel.
Companies might prefer using a direct to consumer distribution channel because it allows them to retain all of the potential profit from those sales. However, it can be tough to be responsible for promotion, shipping, and distributing all of those offerings. [3:21] And having your offerings sold in just one place can potentially limit your ability to reach your target demographic. This is where intermediaries, like retail stores and wholesalers come in. Their job is to get your offering in front of as many people in your target market as possible so that you can sell more units and make more of a profit. The downside is that because they’re doing the distribution for you, they need to be paid for their services, which means a reduction in the potential profit for your company. However, if these companies can reach more in your target market who will buy the product, the higher sales volumes can potentially increase your company’s revenues much more than if you were only selling the product directly to consumers.
Knowing where your target market will be looking determines where you’ll position your offering. Especially if it can be located in a convenient place for them to find quickly and easily. If consumers are aware of your offering, how much you’re asking for them to pay for it, and where they can go to buy it, the next major decision to make is what your company will be selling. In other words, your product. We’ll be looking more closely at product in a later video. [4:33]
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