Place (Leaving Cert Business): Revision Notes
Place
Place is one of the five key elements of the marketing mix. It refers to where and how customers can access and purchase a firm's goods and services. Understanding place is crucial because even the best product at the right price won't succeed if customers can't easily find and buy it.
What is place in marketing?
Place in marketing focuses on distribution - the various pathways that get products from producers to consumers. Businesses must carefully choose the most appropriate distribution channel to ensure their products reach their target market efficiently and cost-effectively.
The distribution process describes the journey that goods take from the producer to the final consumer, and there are several different routes this journey can take.
Channels of distribution
There are four main types of distribution channels that businesses can use to get their products to market:
Channel 1: Producer → Wholesaler → Retailer → Consumer
This is the traditional three-tier distribution system. Here's how it works:
- The producer manufactures goods and sells large quantities to wholesalers
- Wholesalers (like Musgrave) purchase in bulk, then "break bulk" by splitting these large quantities into smaller amounts
- Retailers (such as newsagents, Dunnes Stores, or ASOS) buy these smaller quantities from wholesalers
- Consumers purchase individual items from retailers
Distribution Example: Fast-Moving Consumer Goods
Chocolate bars use this traditional channel:
- Cadbury produces chocolate bars in large batches
- Musgrave (wholesaler) buys thousands of bars and breaks them into smaller quantities
- Local newsagents and shops buy manageable quantities from Musgrave
- Individual customers buy single bars from these retailers
This system ensures widespread availability across many small retail outlets.
Channel 2: Producer → Retailer → Consumer
In this system, large retailers bypass wholesalers and purchase directly from producers:
- Large retailers can purchase massive quantities directly from producers
- This allows them to negotiate better discounts due to their buying power
- Many retailers have own-brand products manufactured specifically for them
- Examples include major supermarket chains like Dunnes Stores, Tesco, Aldi, Lidl, and SuperValu
Direct Partnership Example: Comerford Brothers & Lidl
Comerford Brothers produces cakes exclusively for Lidl stores:
- Lidl orders large quantities directly from the producer
- This eliminates the wholesaler stage, reducing costs
- Benefits: Retailer gets competitive pricing, producer secures large regular orders
- Result: Win-win partnership with better margins for both parties
Channel 3: Producer → Agent → Consumer
This channel is particularly useful for international markets:
- Agents act as intermediaries representing the producer in specific geographic markets
- The agent contacts local retailers in their territory to stock the products
- This is especially valuable when producers want to enter foreign markets where they lack local knowledge
International Distribution Example: Dairygold in the US
Dairygold launching Galtee pork sausages and bacon in America:
- Irish producer lacks knowledge of US retail landscape
- Local US agent understands American market preferences
- Agent builds relationships with US retailers
- Result: Successful market entry without direct investment in foreign operations
Channel 4: Producer → Consumer
This is direct selling where producers sell straight to end consumers:
- Can be done through producer-owned stores, markets, trade fairs, or online sales
- Often used for custom-made or bespoke products
- Examples include made-to-order clothing where a dressmaker works directly with individual customers
- Also common for premium or specialised products where personal service adds value
Factors affecting choice of distribution channel
Businesses must consider several key factors when deciding which distribution channel to use. The wrong choice can significantly impact costs, customer satisfaction, and overall business success.
Cost considerations
Distribution costs significantly impact the final price to consumers:
- Each additional stage in the distribution chain adds costs
- More intermediaries mean higher final prices for consumers
- Many businesses sell directly to consumers to minimise costs and offer competitive pricing
- However, direct selling requires the business to handle storage, delivery, and customer service themselves
Type of product
The nature of the product heavily influences distribution choices:
- Perishable goods (like fresh vegetables or flowers) need shorter distribution channels to reach consumers quickly before they spoil
- These products might go directly from producers to retailers or even straight to consumers through farm shops
- Large, bulky products benefit from direct distribution to retailers/consumers to minimise transportation costs and handling
- Breakable goods need careful handling, so shorter channels reduce damage risks
Critical Consideration: Product Characteristics
The physical nature of your product often dictates your distribution options. Ignoring product characteristics when choosing distribution channels can lead to spoiled goods, damaged products, or excessive costs.
Target market
The characteristics of your target customers affect distribution decisions:
- Low-priced items (like sweets or chocolate) need to be available in as many outlets as possible to maximise sales
- Luxury items (like expensive perfume or jewellery) might be sold through exclusive, high-prestige outlets to maintain their premium image and exclusivity
- Mass market products require wide distribution, while niche products might use more selective distribution
Customer location
Where your customers are located is crucial for distribution planning:
- If all customers are in one location, a more direct distribution channel keeps costs low
- If customers are spread across different regions or countries, businesses typically need wholesalers, retailers, and/or agents to reach everyone effectively
- International distribution often requires agents who understand local markets, regulations, and consumer preferences
Geographic Distribution Example
Cadbury distributes its chocolate bars throughout Ireland using wholesalers like Musgraves, who then supply the products to retailers across the country. This ensures nationwide availability without Cadbury having to manage thousands of individual retail relationships.
Remember!
Key Points to Remember:
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Place refers to the distribution channels that get products from producers to consumers - it's about making products accessible to your target market
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Four main distribution channels exist: traditional three-tier (producer→wholesaler→retailer→consumer), direct retail (producer→retailer→consumer), agent-based (producer→agent→consumer), and direct selling (producer→consumer)
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Channel choice depends on four key factors: cost considerations, type of product, target market characteristics, and customer location
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Shorter channels generally mean lower costs but require producers to handle more distribution responsibilities themselves
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Irish examples like Dairygold's US expansion and Comerford Brothers' Lidl partnership show how businesses adapt their distribution strategies to different markets and partnerships