Isn’t it just where my premises are?
Not necessarily! If you are a fish and chip takeaway then a part of it is where you are, but if you are a manufacturer or a service provider it is not necessarily where you are physically based.
So what is it?
But that is not the whole picture. The fish and chip takeaway may do home delivery, either directly or through services such as Just Eat. They may have a website that people can pre-order and then just go and collect, as well as people who just walk in through the door.
What marketers mean by Place is which route you are going to market through the maze of the whole. Which routes are you going to follow?
If you are a manufacturer, then you may sell direct to end consumers, but you may also sell through warehouses (such as Costco), distributors / wholesalers (such as Bookers for FMCG or an industry specific one such as Tech Data for IT), retailers (independents or chains), resellers, you may have an eBay store or a Fulfilled by Amazon offering. OR any combination of the above.
Very often businesses have multiple routes to market. Look at a business such as HP for a laptop: you can buy it from their online store directly, pick-up a laptop at Costco, go into Currys PC World and buy one, visit an independent IT store, look at eBuyers online and so on. Different clients will have their preferred option to purchase.
So, getting your Place right is about ensuring you have covered all the various routes to market effectively. That your various routes are keenly aligned (your chosen resellers / retailers use your chosen distributors for example), so that the supply chain is integrated. Sounds complicated doesn’t it, but having the right analysis at the start can help you enormously.
Many B2B companies look at the Market Access that their routes to market offer them.
What is Market Access?
It is the percentage of the total market that you are accessible to by your chosen routes. It is impossible when entering a new market, maybe an export market, to be 100% accessible as you start off. But by getting to know the resellers / retailers that when combined add up to your required Market Access, then which distributors / wholesalers do they use most frequently you can build up your target accounts.
Not all of them will want to list you, but by knowing the largest players you know where to focus your attention. There is much truth in the adage that 80% of your business comes from your top 20% channel partners. So your time should be spent accordingly. The 80% of channel partners that make up the 20% of your sales are also valuable, but instead of servicing them via key account managers, a partner portal and regular newsletter may be the way to go.
If you are launching a new brand of cycle helmet, then to get the volume then you would of course look at Halfords, Evans (now owned by Sports Direct) and Decathlon with their key account managers; but at the same time the thousand or so independent cycle stores who may be considered by their clients to be trusted advisors would also be valuable. The 20% large chains will insist on larger margins, they give economies of scale in production, but the profit may well come from the 80% of your channel who only sell 20% of your product.
Often in the IT sector, the 80% of the channel members are the ones that have better and deeper relationships with their clients. When it comes to joint marketing, they are more able to help grow the market with you by introducing your products and services to their clients. Many of the larger resellers are about taking the sales from awareness that you have generated.
One IT company we have come across had as their largest reseller Amazon, but Amazon did nothing to promote the products they just swept up the sale revenue. Instead of the normal 80/20 split they had 96% of their revenue from less than 20% of their channel accounts as Amazon was such a large proportion, and it was not by a FBA route either.
You should never be too reliant on a single route to market. Look at it from the other way around too, Debenhams was so reliant on Arcadia franchises in stores to help pay the rent and overheads, that when Arcadia failed then they also failed. If you sell through only one route and that route fails that will have a large, possibly fatal, impact on your business too depending on how quickly you can react.
Place is much misunderstood in the marketing mix, but it is absolutely key to get right for your success.
If you need any help in defining your routes to market then please feel free to reach out to us and we will help you.