Introduction to Place in the Marketing Mix
Place is one of the 4Ps in the marketing mix (alongside Product, Price and Promotion). It refers to how and where products are sold to customers. For many businesses, choosing the right physical location is crucial to their success.
Key Definitions:
- Place: The distribution channels and physical locations where products or services are made available to customers.
- Location factors: The various elements that businesses consider when deciding where to establish their premises.
- Distribution channel: The path that a product takes from manufacturer to the end consumer.
★ Why Location Matters
The right location can make or break a business. A well-chosen location brings customers to your door, reduces costs and creates competitive advantage. The wrong location can lead to failure even if your product, price and promotion are perfect!
★ Types of Businesses
Different businesses have different location needs. Retailers need high footfall, manufacturers need good transport links and service businesses might prioritise low costs or proximity to skilled workers.
Key Physical Location Factors
When choosing a location, businesses must consider several physical factors that will impact their operations and success. Let's explore the most important ones:
1. Proximity to Customers
For many businesses, especially retailers and service providers, being close to customers is essential.
✓ Footfall
The number of potential customers passing by a location. High street shops need high footfall to attract passing trade.
✓ Catchment Area
The geographical area from which a business draws its customers. Larger catchment areas typically mean more potential customers.
✓ Convenience
How easy it is for customers to access the business. This includes parking, public transport links and opening hours.
2. Transport Links
Good transport connections are vital for most businesses, affecting both customer access and logistics.
→ For Customers
Easy access by car, public transport, or foot makes it more likely customers will visit. Think about parking availability, bus stops and train stations nearby.
→ For Suppliers and Distribution
Manufacturers and wholesalers need good road, rail, air, or sea connections to receive materials and ship products efficiently. Being near motorways or ports can significantly reduce transport costs.
3. Cost Factors
Location costs can vary dramatically and have a major impact on profitability.
- Rent and rates: Prime locations command premium prices. City centres and shopping malls typically have the highest rents.
- Labour costs: Wages vary by region. London and the South East typically have higher labour costs than other UK regions.
- Utilities: The cost of electricity, water and other services can vary by location.
- Setup costs: Some locations may require significant renovation or adaptation.
4. Competition
The presence of competitors can be both a challenge and an opportunity.
⊕ Clustering
Some businesses benefit from being near competitors. Car dealerships often locate near each other, creating a "destination" for car buyers. This is called clustering or agglomeration.
⊖ Saturation
Too many similar businesses in one area can lead to intense competition and reduced profits. A new coffee shop might struggle in an area already served by several cafés.
5. Infrastructure and Facilities
The surrounding infrastructure can be crucial for business operations.
- Utilities: Reliable electricity, water and internet connections
- Waste disposal: Important for manufacturing and food businesses
- Support services: Proximity to banks, postal services, etc.
- Security: Safe environment for staff and customers
Case Study Focus: Tesco's Location Strategy
Tesco uses a multi-format approach to location, with different store types for different locations:
- Tesco Extra: Large out-of-town hypermarkets with parking and wide product ranges
- Tesco Superstore: Medium-sized stores in suburban areas
- Tesco Metro: Smaller stores in city centres and busy areas
- Tesco Express: Convenience stores on high streets and petrol stations
This strategy allows Tesco to match its store format to the specific location factors of each area, maximising convenience for customers and optimising costs.
Location Decisions for Different Business Types
Retailers
Retail businesses typically prioritise:
- High footfall locations
- Visibility and accessibility
- Proximity to complementary businesses
- Suitable demographics in the catchment area
Manufacturers
Manufacturing businesses typically prioritise:
- Transport links for receiving materials and shipping products
- Lower-cost areas with available space
- Access to suitable workforce
- Proximity to suppliers or resources
Service Businesses
Service businesses have varied needs depending on their type:
- Customer-facing services (like hairdressers): Need convenient locations for customers
- Professional services (like accountants): Often locate in business districts
- Online services: May prioritise low costs and good internet infrastructure
Evaluating Location Decisions
+ Advantages of Prime Locations
- Higher customer footfall
- Greater visibility and brand exposure
- Prestige and status
- Proximity to complementary businesses
− Disadvantages of Prime Locations
- Higher rents and business rates
- More competition
- Restricted opening hours in some areas
- Limited expansion possibilities
Making the Decision: Tools and Techniques
Businesses use various methods to evaluate potential locations:
- Site visits: Observing the area, counting footfall, noting competitors
- Market research: Surveys of potential customers in the area
- Demographic analysis: Studying the local population's age, income and lifestyle
- Cost-benefit analysis: Weighing up the costs against potential revenues
Real-World Example: McDonald's Location Strategy
McDonald's is famous for its strategic location choices. The company considers:
- High visibility sites on busy roads
- Corner plots that maximise visibility from multiple directions
- Areas with high footfall or traffic
- Proximity to schools, shopping centres and entertainment venues
- Drive-thru potential in car-dependent areas
McDonald's even has a dedicated real estate division that specialises in finding and securing the best locations before competitors.
The Changing Nature of Place
Digital technology is transforming how businesses think about place:
- E-commerce: Online retailers like ASOS don't need high street locations, but they do need efficient distribution centres
- Click and collect: Businesses like Argos combine online ordering with physical collection points
- Delivery services: Companies like Deliveroo have created new distribution channels for restaurants
- Virtual services: Some businesses operate entirely online, with no physical customer-facing location
Despite these changes, physical location remains crucial for many businesses. Even online giants like Amazon are opening physical stores and need strategically located warehouses for fast delivery.
Summary: Key Points to Remember
- Place is a critical component of the marketing mix
- Key physical location factors include proximity to customers, transport links, costs, competition and infrastructure
- Different types of businesses have different location needs
- Location decisions involve weighing up advantages and disadvantages
- Digital technology is changing but not eliminating the importance of physical location
When analysing business case studies, always consider how location decisions have contributed to success or failure. A brilliant product at the wrong location is often a recipe for business disaster!