Marketing Mix

4. Place Strategies
 Marketing Mix: Place

Most producers do not sell their goods directly to the final users;
between them stands a set of intermediaries performing
different functions.

These intermediaries constitute a marketing channel, also

called a trade channel or distribution channel - the “Place”
element in the marketing mix.

These distribution channels make a product or service

available for use or consumption
 Marketing Mix: Place

The channels affect all other marketing decisions. For

example:
- The company’s pricing depends on whether it uses online
discounters or high-quality boutiques.

- Its sales force and advertising decisions depend on how

much training and motivation dealers need.

- Channel decisions include long-term commitments with

other firms and sets of policies and procedures.
 Marketing Mix: Place

In managing its distribution channels, the company can follow a push

or / and a pull marketing strategy.

A push strategy uses the manufacturer’s sales force, trade promotion

money, or other means to induce intermediaries to carry, promote, and
sell the product to end users.

A push strategy is particularly appropriate when:

- there is low brand loyalty in a category,
- brand choice is made in the store,
- the product is an impulse item
 Marketing Mix: Place

In a pull strategy the manufacturer uses advertising, promotion, and

other forms of communication to persuade consumers to demand the
product from intermediaries (thus inducing the intermediaries to order
it).

Pull strategy is appropriate when:

- there is high brand loyalty in the category
- when consumers are able to perceive differences between brands
- and when they choose the brand before they go to the store.

Top marketing companies employ both push and pull strategies.

Marketing Mix: Place

Channel Integration and Systems

 Marketing Mix: Place
Channel Integration and Systems

A conventional marketing channel consists of:

- an independent producer,
- wholesaler(s),
- and retailer(s).
Each is a separate business seeking to maximize its own
profits and no channel member has complete control over
other members.

But there are also vertical, horizontal, and multichannel

marketing systems.
 Marketing Mix: Place
Channel Integration and Systems

1. Vertical Marketing Systems (VMS)

A vertical marketing system includes the producer, wholesaler(s), and
retailer(s) acting as a unified system.

Under a conventional system, each piece in the distribution channel

functions as an independent business and tries to increase its own profits.
But vertical marketing systems arose to eliminate duplicated services
and conflict over independent members.

VMSs have become the dominant mode of distribution in the U.S

 Marketing Mix: Place
Channel Integration and Systems
1. Vertical Marketing Systems (VMS)
Three types of vertical marketing systems:

1.1. CORPORATE VMS brings all of the

elements of the distribution channel, from
manufacturing to the stores under single
ownership.
For example: Apple is responsible for doing
everything related with their products: has
place for the designing, making and selling the
products.
 Marketing Mix: Place
Channel Integration and Systems

1. Vertical Marketing Systems (VMS)

1.2. CONTRACTUAL VMS: Independent production and distribution

companies formally agree to integrate their resources to obtain bigger
sales impact than they could achieve alone.

For example, if 15 independently owned restaurants enter into an

agreement with a produce wholesaler, the total costs go down for
everyone thanks to bulk ordering and shipping.
 Marketing Mix: Place
Channel Integration and Systems
1. Vertical Marketing Systems (VMS)

1.3. ADMINISTERED VMS:

One member of the distribution channel wields enough power,
generally though sheer size, to control the activities of the other
members of the distribution channel without a formal agreement or
ownership.

For example: Walmart (a massive retailer), dictate their terms and

conditions to the other members of the distribution channel (usually
producers and wholesalers)
 Marketing Mix: Place
Channel Integration and Systems

2. Horizontal Marketing Systems

In this channel development, two or more unrelated companies put
together resources and programs to exploit a marketing opportunity.

Horizontal Marketing Systems happens when each company lacks the

capital, know-how, production, or marketing resources to venture
alone, or it is afraid of the risk.

The companies might work together on a temporary or permanent

basis.
 Marketing Mix: Place
Channel Integration and Systems

For example: a bank and a supermarket agree to have the bank’s ATMs
located at the supermarket’s locations
 Marketing Mix: Place
Channel Integration and Systems
3. Multichannel Marketing Systems

Most companies today have adopted multichannel marketing.

Disney sells its DVDs through five main channels:

1. Movie rental stores such as Blockbuster
2. Disney Stores (now owned and run by The Children’s Place),
3. Retail stores such as Best Buy
4. Online retailers such as Disney’s own online stores and Amazon
5. and the Disney catalog and other catalog sellers.

This variety affords Disney maximum market coverage

 Marketing Mix: Place
Channel Integration and Systems

3. Multichannel Marketing Systems

Adding more channels gives companies three important benefits.

- The first is increased market coverage. There are more customers
able to shop for the company’s products in more places

- The second benefit is lower channel cost. For example, selling by

phone is cheaper than personal selling to small customers.

- The third is more customized selling. For example, by adding a

technical sales force to sell complex equipment.
 Marketing Mix: Place
Channel Integration and Systems

There is a trade-off, however: new channels can introduce conflict and

problems with control and cooperation.
Two or more channels may end up competing for the same customers.

Companies need to decide:

- how much of their product to offer in each of the channels
- and how to use different sales channels for different sized customers:
• a direct sales force for large customers,
• telemarketing for midsize customers,
• and distributors for small customers
 Marketing Mix: Place
Channel Integration and Systems

Many “brick-and-mortar” companies debated whether to add an

online e-commerce channel.

They thought about the potential channel conflict with their offline
retailers, agents, or their own stores.

Eventually, most companies had added the Internet as a distribution

channel after seeing how much business was generated online.
 Marketing Mix: Place

Procter & Gamble has only used traditional physical channels of

distribution for years; now is selling some big brands such as Tide,
Pampers, and Olay online.
Procter & Gamble is able to examine consumer shopping habits more
closely.

So managing the online and offline channels has become a priority for
many firms.
Marketing Mix: Place

Retailing and wholesaling

 Marketing Mix: Place
Retailing
A retailer or retail store is any business whose sales volume comes
mostly from retailing.

Retailing includes all the activities in selling goods or

services directly to final consumers

Any organization selling to final consumers –whether it is a

manufacturer, wholesaler, or retailer– is doing retailing.
It doesn’t matter how the goods or services are sold (in person, by mail,
telephone, vending machine, or on the Internet) or where (in a store, on
the street, or in the con- sumer’s home)
 Marketing Mix: Place
Retailing

Types of retailers:
- Store retailers
- Nonstore retailers
- Corporate retailers

1. STORE RETAILERS
There are different formats of store retailers. The most important types
of major store retailers are:
 Marketing Mix: Place
Retailing

1. STORE RETAILERS
These different formats of store retailers will have different marketing
strategies.
They have different competitive and price dynamics, and they meet
different consumer preferences for service levels.
For example: Self-service is the cornerstone of all discount operations.
Many customers are willing to carry out their own “locate-compare-
select” process to save money. In other cases (full service) salespeople
are ready to assist in every phase of the “locate-compare-select”
process.
 Marketing Mix: Place
Retailing

2. NONSTORE RETAILING

Although more than 80% of retailed goods and services are sold
through stores, nonstore retailing has been growing much faster than
store retailing.
Nonstore retailing falls into four major categories:
‣ direct selling,
‣ direct marketing (which includes telemarketing and Internet)
‣ automatic vending,
‣ buying services
 Marketing Mix: Place
Retailing

2. NONSTORE RETAILING

a) Direct selling, (also called multilevel selling and network marketing).

Companies sell door-to-door or at home sales parties.
Examples:
Avon, Electrolux (one-to-one selling)
Tupperware and Mary Kay Cosmetics (one-to-many selling): A
salesperson goes to the home of a host who has invited friends; the
salesperson demonstrates the products and takes orders.
 Marketing Mix: Place
Retailing

2. NONSTORE RETAILING

b) Direct marketing has roots in direct-mail and catalog marketing. It

includes: telemarketing, television direct-response marketing and
electronic shopping ([Link], [Link]).

As people become more accustomed to shopping on the Internet, they

are ordering more goods and services from different web sites.
 Marketing Mix: Place
Retailing
2. NONSTORE RETAILING

c) Automatic vending (vending machines) are found in factories,

offices, large retail stores, gasoline stations, hotels, restaurants, and
many other places. It’s a 24-hour selling, self-service, and they offer
different goods such as soft drinks, coffee, candy, newspapers,
magazines, foods, cosmetics, etc.

d) Buying service is a storeless retailer with a specific clientele (usually

employees of large organizations). These consumers can buy from a
list of retailers that have agreed to give discounts in return for
membership.
 Marketing Mix: Place
Retailing

3. CORPORATE RETAILING AND FRANCHISING

Many retail stores are independently owned, but there are also some
corporate retailing organizations.

Franchise organization is a type of types of corporate retailing.

In a franchising system, individual franchisees are enterprises whose
operations are planned, directed, and controlled by the franchisor.
 Marketing Mix: Place
Retailing
3. CORPORATE RETAILING AND FRANCHISING

Franchises are distinguished by three characteristics:

1. The franchisor owns a trade and licenses it to franchisees in
return for royalty payments.

2. The franchisee pays for the right to be part of the system.

Start-up costs include rental and lease equipment, and usually a
regular license fee.

McDonald’s franchisees may invest as much as $1.6 million in

total start-up costs and fees. The franchisee then pays
McDonald’s a certain percentage of sales plus a monthly rent.
 Marketing Mix: Place
Retailing

3. The franchisor provides its franchisees with a system for doing

business.
McDonald’s requires franchisees to attend “Hamburger University” in
Illinois to learn how to manage the business.
Marketing Mix: Place

Retailing

Videos: Retailers place techniques

 Marketing Mix: Place
Wholesaling

Wholesaling includes all the activities in selling goods or services to

those who buy for resale.

Wholesalers (also called distributors) differ from retailers in different

ways:
• Wholesalers pay less attention to promotion, atmosphere, and
location because they are dealing with business customers rather
than final consumers.

• Wholesale transactions are usually larger than retail transactions