3 Tutorials that teach Place
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Author: James Howard

This lesson explains the Place "P" of the 4 P's.

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Introduction to Psychology

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Hello and welcome to this tutorial on place. Now, as always with these tutorials, please feel free to fast-forward, pause or rewind as many times as you need, in order to get the most out of the time you are going to spend here.

So let me ask you a question. We've talked about place before in the four P's, so what is the right place? Think about how things are marketed to you. Where do they end up? How are they positioned? What makes you want to buy them? How do you know to go there?

Well, during this tutorial, we're going to be looking at "place" in the marketing mix. We're also going to be looking at the distribution of goods, the value-added benefits of intermediaries, and the value-added benefits of big box retailers. The key terms for this lesson are going to be distribution, wholesale, retail, and intermediaries.

So let's begin with place in the marketing mix, place's place, if you will. As we know, place is part of the four P's, place, price, promotion, and product. And place not only refers to where something ends up on the shelf or where something ends up in the store or what store it ends up in, but the distribution, everything it takes to get that product to where you're going to buy it, including where it ends up on the shelf.

So with distribution of goods, we have a couple of levels that we want to look at. Distribution defined is simply, "The system of providing a product or service accessible to consumers and businesses for consumption." How do I get it to the business to sell and the consumer to buy?

Wholesale is, "The distribution of goods on a broad scale to be sold to other parties." So a wholesaler might buy a product from a manufacturer, and then that wholesaler will then distribute those goods on behalf of the manufacturer to retailers around the country, your corner store down the road, or the local discount store, or the grocery store. All these places get their product from wholesalers, who buy it from the manufacturers and then distribute it.

Another level we'll look at is retail. The act of doing retail is, "Selling items to be used and not sold again." Now, this is where the product meets the end user at the store where you and I buy it.

If you think of it this way, a gallon of milk is sourced from the farmer. It's then taken to a processor and perhaps even then sold to a wholesaler, who warehouses it and distributes it, based on need from retail stores. The retail stores or grocery store, it ends up on the shelf. And you buy it. And you don't typically sell it again. You're buying it to use it. And that's what retail really is.

Now, intermediaries is, "A business in the supply chain that bridges the gap between the wholesaler and the retailer," the people between the wholesaler. For instance, the delivery folks-- if they ship it by UPS, or FedEx, or some other freight company, that would be an intermediary between wholesale and retail.

Now typically, with wholesale and intermediaries, what we have is warehousing. Businesses will warehouse something, in order to have product on hand. So when a retail store needs it, they can simply fill the order in shipping.

And then there's something called just-in-time distribution where you try to time the amount and the orders of products that you have. So you have just the bare minimum in the store or the warehouse. You see, this way, I don't need a big, big warehouse. I'm not holding on to something waiting for something to order it, I'm simply buying things in anticipation of orders, based on past experience, so that I have just enough to fill the order when it comes. In other words, filling the order just in time.

In a distribution channel, as far as place is concerned, there are choices that we can do. See, we don't have to use intermediaries or warehousers, wholesalers. A company can go directly to the consumer and ignore the middlemen, the wholesaler, the retailer altogether, such as Avon and other direct sale agencies.

Or there can be retailers, such as Gap, or Joseph A. Bank, or places like that that sell their own company's products only. Or wholesalers and retailers can be used, such as getting goods to a convenience store. They'll source things from a lot of different wholesalers. The supply channel, or the distribution of the product, is more than just wholesale and retail. There's a lot of things that are involved with getting something from production to the consumer.

So what are the benefits of using intermediaries? What's the value-added for going through all these machinations just to get something on the product, when I could just send it directly to the customer? Well, for one, middlemen, believe it or not, as much as we advertise against it, can actually be a really good thing.

You see, think about the farmer. If there were no middlemen, the farmer would have to grow the wheat, mill it, bake it, sell it to the consumer, warehouse it, distribute it, all those things. He wouldn't be able to specialize in simply growing wheat. His operation will be a lot more complicated. So now, I can grow the wheat on the farm. I can send it to the mill where they grind it into flour. That flour is then sold the baker where they bake the bread and then distribute it to the grocer and finally to the consumer.

Now, each level of intermediary in the supply chain will add value. Flour is more valuable than wheat, because it's more specialized. Bread is more valuable than flour, again, because there's effort put into it, and it's more specialized. So this simple two-cent bag of wheat will cost a lot more-- well, it will be more valuable-- when it's bread sold to the consumer.

And each particular level of intermediary in the chain has to make a profit. So we add value, but we also add cost. It costs money to run the mill and run the baker, run the grocer. So each one not only adds value, but necessarily, it's also going to add cost.

So what are the benefits of these big box retailers like Home Depot and Best Buy and Walmart, for instance? Well, for one thing, it's one place where I can bring together multiple products. From the consumer's point of view, I don't have to run all over town to get the things that I need. I can simply go to one place that either specializes in a type of product, like Home Depot with a very, very large selection, or a lot of different products, like Walmart.

So now, instead of running all over town to do something or to get many different items, all I have to do is go to one store. And it makes things a lot easier. And it's a lot more convenient for the customer.

So what did we learn in this lesson? Well, we looked at place in the marketing mix. And we learned that place isn't necessarily just where it ends up. It's also that distribution, how does it get from manufacturer to consumer.

We looked at the distribution of goods, wholesaling or warehousing, just-in-time warehousing where I'm timing my orders against the orders of my customers to make sure I have just enough to fill that. And I'm able to order and fill orders in a, quote, unquote, just in time type of way.

What are the value-added benefits of intermediaries? We looked at how each person in a supply chain adds value to a product. And also, necessarily, because they have to run their business, adds cost to that. And value-added benefits of big box retailers, that one-stop shopping experience where I can simply go into one store and get everything that I need.

Well, I want to thank you for spending some time with me today. And I hope you have a great day.

  • Distribution

    The system of providing a product or service accessible to consumers and businesses for consumption.

  • Intermediaries

    A business in the supply chain that bridges the gap between wholesale and retail.

  • Retail

    Selling items to be used and not sold again.

  • Wholesale

    The distribution of goods on a broad scale to be sold by other parties.