[ Music ] >> Hi. Let's continue our discussion of the marketing mix. The third P is placement. This aspect of the marketing mix focuses on making a product conveniently accessible to potential customers. For most products, placement involves the physical movement of a product for manufacturer through a series of marketing channel intermediaries ending typically with an independent retailer. The retailer then provides a number of important functions, such as displaying the product upon the shelves and educating its staff about the product's features so they can help sell it to potential customers. Coke is a great example of a firm that has effectively employed this aspect of the marketing mix. Coke distributes its product, essentially its formula, to a network of over 250 bottling partners around the globe. These distributors mix the coke formula with water, bottle it, then ship these bottles or cans to a collection of warehouses, which in turn distribute this product to over 16 million retailers around the world across more than 180 countries. These retailers include, not only grocery stores, but also convenience stores, restaurants, movie theaters, and even vending machines. Indeed it is almost impossible to walk into a store in most parts of the world and not be able to buy a bottle of Coke. That's good placement. Now let's discuss a few key concepts about the placement part of the marketing mix. Placement has a number of key concepts, including inventory management, logistics, and salesforce management. In this module we'll focus on two fundamental concepts, distribution and retailing. First let's discuss distribution. The distribution channel used by most firms is typically outsourced to a series of independent firms, such as an importer, a wholesaler, and a retailer. For example take a look at the distribution channel for imported flowers. As you can see the distribution process is often lengthy and requires substantial resources in terms of both time and money to properly manage. Each member of this channel is typically independent from the other members, thus each participant is trying to maximum their revenues and minimize their cost. As a result, conflicts and misunderstandings among channel members often arise. So in order to properly manage this channel, a manufacturer needs to carefully select and closely monitor each of his channel partners. This is a difficult and costly endeavor and typically drives up the price of its products. Now let's take a look at retail. The retailer is typically the final step in the distribution chain. Selecting the number and type of retailers is an important decision because it affects the number and type of customers that a firm can acquire for its products. For example, firms that produce luxury goods such as Louie Vuitton, employ intensive strategy by making their products available at only a small, exclusive set of retailers. In contrast, lower priced consumer goods such as toothpaste and shampoo typically employ a more extensive placement strategy by making their products available as many different retailers as possible. Retailers also vary considerably in terms of degree of customer service. Some retailers such as convenience stores are largely self-service operations where customers locate and select products with nearly no assistance from the retailer. In contrast, full-service retailers such as high-end department stores take a more active role in assessing a customer's needs and locating the right product to satisfy those needs. Now let's talk about what's changing. With a few exceptions such as Dell Computers, most physical products are sold for an extensive network of distributors and retailers. These firms play important functions by helping get this product in the hands of customers. However these functions are not free. Typically a manufacturer only receives about 60-70% of a product's final retail price. Thus, traditional product placement is an expensive proposition for both firms and consumers. This traditional approach is starting to break down due to the rise of digital tools. Most firms are supplementing or even bypassing physical retailers by making their products directly available at either an online retailer, such as Amazon.com, or on their own website. This trend has been going on for some time and online sales are growing rapidly. In 2014 there was nearly $300 billion spent on e commerce in the US alone. Even products that we traditionally want to touch or try out at the store, are now being sold online. A great example of this is Casper, which is a very innovative new firm that sells mattresses exclusively online. So the first time that a customer gets to try out this mattress is after it's delivered in their home. If a mattress can be sold online, just about any product can bypass traditional physical stores. This growth of online retailing is probably not surprising to most participants in this course. However, what is probably surprising is the fact that digital tools are not only capable of replacing the retailer, but the entire distribution channel. Today, even large online retailers, such as Amazon.com, have to physically ship products from the manufacturer to the customer. However, newly emerging digital tools, such as 3D printers and scanners, make it possible to eliminate the distributor by allowing firms to ship a digital design rather than a physical product. A nice example of this is Nokia, which recently uploaded the design for a case for its Lumia Smartphone on the digital file sharing website, thingiverse.com. Anyone in the world can easily access this design and print it out for free using affordable 3D desk top printer. Thus, in this new digital marketing environment, we are now moving from long distribution channels that transport physical goods to short distribution channels that transport digital goods. In this module we'll discuss how new digital tools such as 3D printers are starting to change how products are being distributed. I think you'll find the discussion quite fascinating that would alter the way you think about this aspect of the marketing mix.
