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Section 10.3 Place
Place Strategies
The first and most important strategy related to place is
determining the exact channel of distribution. For example, products
that must get to end users quickly need a direct channel or a short
indirect channel. Milk is an example of a product that must reach the
end user quickly. Durable products with no expiration date can have a
longer channel of distribution.
The strategy for place should provide timely delivery for the
lowest cost. Transportation, storage, and utility costs are factors to
consider when determining the strategy for place.
Transportation Costs
Each type of transportation has different costs, efficiencies, and
time constraints. For example, when shipping large quantities of
durable products, it may be okay to choose a less expensive, slower
mode of transportation. However, when shipping perishable goods, a
more expensive, faster mode of transportation may be necessary.
Storage Costs
Storage is also critical to the strategy for place. Products need
protection from weather, theft, and damage. Retail and manufacturing
businesses need areas to store physical inventory. This may increase
distribution costs, which will affect the final product pricing. If a
business does not have enough storage space in the facility, it will need
to rent, lease, or build space.
Large companies, such as Neiman-Marcus and Ford, have their
own storage facilities. Smaller companies often either lease a storage
facility or use wholesalers to store products until they are needed.
Some warehouse facilities provide delivery to the end user. By using
this type of warehousing service, a business can reduce inventory-
storage costs and losses due to damage or theft. Managing inventory is
discussed in chapter 15.
Utility Costs
Utility is the attribute that makes a product capable of satisfying
a need or want. There are four types of utility that add perceived
value—place, time, possession, and form. All of these utilities are
associated with the distribution of products or services from the
creators to the end users. Based on the specific product or service,
some utility costs will be necessary and directly affect place strategies;
others will not apply.