Differences between direct and indirect distribution
While a distribution strategy specifies where you sell your products, a distribution channel is how you get them to consumers. There are two different distribution channels:
Direct distribution
A producer selling directly to a consumer is when there is no intermediary wholesaler or retailer involved. Businesses with little inventory, like bakeries or artists selling through social media, frequently use direct distribution. It is also a typical strategy for business to business distribution, such as a supplier producing flour for distribution to bakeries.
Direct distribution businesses engage with their customers directly, so they frequently have a thorough understanding of the market they’re targeting. They can quickly alter their strategies to take into account a shifting market. With only one company profiting from a single sale, the profit margins are frequently higher in this distribution channel, which can also boost revenue.
Indirect distribution
When a producer sells their product to an intermediary business, that business then sells it to the customer, that is known as indirect distribution. This is the type of retail that consumers are most familiar with. Clothing retailers, supermarkets, and general merchandisers are all middlemen who have obtained products from manufacturers at a discount in order to resell them to customers for a profit.
In this distribution channel, the producer makes money by selling the intermediary large quantities of stock. With indirect distribution, producers can connect with more consumers. They may also be able to sell these middlemen larger quantities, who would then be willing to take on the risk of selling to consumers in smaller quantities.
There are two main types of intermediaries in this distribution channel, though a producer may decide to sell to a mix of them:
What is place strategy?
A component of a company’s marketing mix called place strategy focuses on where the company sells its goods so that the target market can easily access them. The four Ps of marketing—product, promotion, place, and price—are the foundation of a marketing mix, which is a marketing strategy.
Companies develop a place strategy by identifying the retail locations of their target market. For instance, a publisher of cookbooks can place their products in a bookstore to attract book buyers, as well as a kitchenware store to attract customers drawn to cooking.
Distribution strategy is another name for place strategy. There are three basic types of place strategy:
How to establish an effective place strategy
A place strategy that complements your product and business model is effective. To create a successful place strategy, you can take the following actions:
1. Identify the target market
Finding out who your target market is is the first step because you want to put your product in a location where they can easily find it. You can use your sales data to compare existing customers because your current customers demonstrate who is interested in your product. Create a customer profile once you have a list of the characteristics of your target markets so you can figure out how to reach them.
2. Find locations
Consider the shopping areas and websites where your target market is most likely to look for products similar to yours. Customers who purchase soap from you might visit boutiques or general merchandise stores. However, if you sell luxury car accessories, customers will search in highly specialized stores like auto dealerships for your product. Your location strategy ought to be consistent with your product and intended market.
Make a list of stores in your area of distribution that your customers might visit for shopping. Start with areas you are confident your current infrastructure will allow you to distribute to. This list can grow as your company grows. In relation to your customers’ demand for your product, you can also take into account their geographic location. If you sell life jackets, for instance, look for retailers in coastal towns.
3. Consult the marketing strategy
Be sure to take the three other Ps of product, promotion, and price into account when choosing a location because place strategy is just one component of your overall marketing strategy. Examine your list of potential locations to see which ones most closely align with the rest of your marketing plan.
For instance, placing your product in a shop with similar-priced items will increase the likelihood that it will sell well. Customers typically browse stores in their price range, so you can use the store’s current merchandise to determine whether it can assist you in reaching your target market.
4. Determine a budget
Once you’ve chosen the location for your product, you can approach merchants and distributors to sell your stock and set up shop where your target market will be. You may need to factor the retailer or wholesaler’s requirements for quantities they must purchase or prices they can meet into your budget. You can estimate your production costs and desired profit margin in order to engage in negotiations for a deal that benefits you, the retailers, and the customers.
Benefits of an effective place strategy
Here are the benefits of an effective place strategy:
Diversifying distribution channels
An efficient location strategy can help you reach more potential customers and boost your revenue. You can reach more people and increase sales the more successful your distribution channels are.
Additionally, having a variety of distribution channels can give you negotiating leverage with your retailers. Having a variety of outlets through which to sell your goods protects your anticipated profits from the possibility of certain retailers going out of business.
Controlling your production
When you have a successful place strategy, you can monitor your sales and change your production rates. The amount of product you produce can be affected by your planning for the intermediaries you want to work with or even whether you want to work with any intermediaries at all. To create a production schedule, purchase materials, and create a budget, you can use your sales goals as a guide.
Calculating the risk
Your place strategy can assist you in estimating the level of risk involved in creating your product. You can evaluate your production plans by looking at market data, knowing your distribution networks, and anticipating the needs for your inventory. Planning ahead also gives you the chance to reduce potential risks before they materialize into threats while still allowing for the expansion of your business.
MiniMod: Marketing Mix – Place Strategy
FAQ
What is an example of place marketing?
Use of wholesale facilities, retail stores, physical locations, or online platforms as the channels for product placement and trade promotions are a few examples of place strategies in marketing.
Why is place strategy important in marketing mix?
First, place strategy assists us in making crucial decisions about where to locate retail. Second, it aids in selecting the retail format, distribution method, and level of exclusivity. Thirdly, it can aid in the integration of the other marketing Ps, such as the Product, Price, and Promotion
What does place mean in 7ps?
The geographical area in which the business sells its products and renders its services is referred to as place in the marketing mix. According to some, one of the most crucial components of a marketing strategy is location.
