Place (Cambridge (CIE) IGCSE Business): Revision Note

Introduction to place

• Place in the marketing mix refers to where customers purchase a business's products and the distribution channels used to move the product from producer to consumer

• In a competitive environment, location and distribution decisions can give a company a competitive advantage

  • Businesses could locate themselves in areas with high foot traffic to achieve high sales volumes

  • They may use online channels to reach customers who prefer to shop from the comfort of their own home

• Changing consumer needs can impact the way businesses distribute their products

  • E-commerce makes it easier for consumers to shop online and have products delivered to their doorstep

    • Many businesses have therefore invested in their online presence, offering convenience and fast delivery to meet customer needs

Distribution channels

• Distribution channels refer to the intermediaries through which products move from the business to the end customer 

1. Direct to customers

• The business sells its products straight to the customer without using any intermediaries

  • For example, a bakery sells bread directly to customers at a local market or in its own store

Through retailers

• The business sells its products to a retailer, who then sells them to final customers.

  • For example, a clothing brand like Levi’s sells its jeans through department stores like Farmers in New Zealand

Through wholesalers

• The business sells large quantities to a wholesaler, who then sells smaller amounts to retailers or customers

  • For example, soft drinks businesses like PepsiCo sell to wholesalers who supply small convenience stores

Through agents

• An agent acts as a specialist middleman who helps sell the product, often in another country or market, earning a commission

• Agents can negotiate with retailers or individual customers

  • For example, a wine producer in South Africa using an export agent to sell wines in Europe

Recommending a suitable distribution channel

• The choice of distribution channel chosen by a business depends on a variety of factors

• The following questions are worth considering when establishing a distribution channel

  • Do consumers want to speak to a salesperson?

  • Will customers want to handle the product before they make a purchase?

  • Would they prefer to purchase it online?

  • Does the product require special handling, such as protective packaging or quick delivery?

Factors affecting the choice of channel

1. Type of product

• If sold to producers of other goods, distribution is likely to be direct or via a specialist wholesaler 

  • For example, JCB sells excavators directly to construction companies

  • Specialist wholesalers such as France's Bricoman sell consumable building supplies such as nuts, bolts and cement to builders

2. Frequency of purchase

• If the product is bought on a daily basis, retail stores provide convenience for consumers

  • For example, Milka chocolate is sold in most EU-based supermarkets

3. The price of the product

• If the products is an expensive luxury good, it would be best sold through a few specialist outlets

  • For example, Rolex watches are sold in high-end jewellery stores

4. The durability of the product

• Perishable product like fruit and vegetables are distributed through retailers, sometimes via wholesalers, to be sold quickly

5. Proximity of customers

• If customers are located over the world, e-commerce is likely to be a suitable distribution channel

6. Competitors distribution channels

• Products need to be sold where competitors are selling so that a business can compete effectively

  • For example, Nestlé cereals are sold alongside Kelloggs cereals in a wide range of retail outlets

7. Technical specifications

• If technical information needs to be passed to the customer, direct selling or a retailer is usually preferred

  • For example, Apple Store staff provide focused advice to customers purchasing its range of phones, computers and entertainment devices