10 September 2021
More than distribution strategy, "place" is where customers meet products or services to consider, understand, purchase, take delivery, and get help.
The critical stage in the marketing process is when the customer comes face-to-face with your product or service to consider and purchase.
This “place” can be a physical environment or a virtual one. It might also be a once only visit or an extended process of customer engagement.
Whatever it is, wherever it is – the role of the marketer is to envisage this place and make decisions about the customer experience to maximise the chance and value of purchase.
This is called a Place Strategy
Place strategy is one of FOUR marketing levers that make up the traditional marketing model (the so-called Four P's of Marketing) that comprise Marketing Strategy. See What is Marketing?
Place strategy is more than just distribution because after deciding to go direct-to-market or working through intermediaries there is still a lot of work to do to optimize the value of the channel and to maximize the quality of the customer's purchase experience
The Place Strategy - designing the sales transaction environment and process
Having gone to the trouble of designing a beautiful, carefully crafted product, the marketer doesn't want the customer's first encounter with the product to be marred by a less than satisfactory presentation or experience. Companies go to a lot of trouble to ensure the environment within which the product is showcased and sold supports the consumer experience and enhances the brand.
At the extreme end of the spectrum luxury car marques (think Porsche, Lamborghini, Aston Martin, Bugatti) are displayed in sparkling clean show rooms, the salesperson is dressed in a tailored suit, the furniture is plush, the decor is architectural, the car is carefully lit.
This does not happen by chance. Luxury car manufacturers choose their car dealerships carefully and specify how the product will be presented and the sales process.
Conversely, concrete blocks possibly don't need a nice showroom, but it would be handy to have a forklift to lift the pallets onto a truck.
The development of a place strategy is about making the sales experience for the customer easier.
The Distribution Strategy is the main element of the Place Strategy
How the product gets into the hands of the customer is defined by a distribution strategy.
Distribution options are things like...
- Selling direct to the customer (common in B2B markets and service providers)
- Company owned retail outlets (for example Apple Stores)
- Selling via intermediaries (Indirect distribution: agents, wholesale distributors, and retailers)
- Selling online (a web store)
- Through a dealership network
- Network marketing
Distribution of services
Distribution isn't just a reality of physical product businesses. For example, travel operators integrate accommodation, travel and tours into travel packages that are distributed by travel industry wholesalers who the on-sell the travel packages to travel agents. The airline industry and hotel industry relies on selling a certain number of seats and room nights to travel agents. Accommodation sites like Wotif.com and Trivago are simply sales portals - these are examples of marketing channels.
Many companies don't just rely on one method of distribution and employ several of these distribution methods which is termed Omni-Channel Distribution. In fact, many companies that previously relied on retail distribution are setting-up online stores to sell direct in competition with their retail distribution partners. This often leads to disputes with their retailers who fear they are undercutting them (if online prices are lower) and/or "going around them." One distribution channel competing with another is termed "channel conflict."
Another common practice is to sell direct to large accounts and appoint distributors to sell to smaller customers. This is commonly used by large technology manufacturing firms (Siemens, ABB, Schneider etc.) who use technical product distributors to more efficiently service small accounts (typically under $1 million annual sales) but service major organizations like mining companies, utilities, large manufacturers, and large engineering firms direct.
Channel conflict is less but there is a grey area where small meets big.
Invariably the distributor's largest customers are tempted to buy direct from the manufacturer and the manufacturer's direct sales people are often tempted to chase the distributor's larger customers. There can be some robust conversations.
The method of distribution is a major component of the Place Strategy.
The customer journey and customer experience
Before designing the Place Strategy understanding the customers' buying process is an essential first step.
At first glance, buying and selling is deceptively simple; you offer a product, and people buy it - does this need a lot of thinking?
However, upon closer inspection the reality is more nuanced.
As the world increases in complexity, marketers have had to invent, define and refine terminologies to more accurately understand the buying and selling process. Two new terms that are becoming increasingly trendy are customer journey and customer experience.
The customer journey is the process by which the customer develops a need (or desire) for the product, how they go about looking to satisfy that need, engaging with the potential offerings, and finally executing a purchase.
However, it doesn't stop there. For many products and services, after sales service and support is part of the total product experience.
Experience is a great word.
With the proliferation of the internet, consumers now communicate with businesses using an increasing number of channels. These touch-points create complex customer journeys, making it more difficult to always ensure a great customer experience.
Customer experience is growing in importance and complexity…
- Customers consider their experience with a company to be as important as its products, and for the marketing of services it IS the product.
- The world has changed. Younger generations tend to care less about physical products and more about buying experiences.
- Consumers want to talk with a company in real-time.
- Customers expect to be able to communicate using digital methods.
Marketing is about keeping-up with the latest consumer trends. That doesn't mean aping what everyone else is doing, or being trendy for the mere sake of it. To create competitive advantage and even having a chance to identify the break through innovation, marketers must closely study consumer behavior and understand primary motivations.
Developing a place strategy is about understanding the customer and understanding customer journey's and using this information to flesh out the product taking it from being a mere physical thing and turning it into a total positive experience.
This experience is what shapes the brand.
The place for customer service
Customer service is arguably part of the Product Strategy but is often a function performed at the end of the distribution chain (a duty performed by distributors. For example car dealerships main business is not just selling the car but they make their biggest profits from servicing.
However, there are two forms of customer service pre-sales and after sales.
There have been many trends in business, not the least of which was the emergence of customer service as a new discipline with a singular focus. Around the late 1980's a new breed of consultant emerged that espoused customer service processes and methods and everyone embraced the term "customer service strategy."
All companies began promoting their outstanding customer service - as if before it wasn't important.
And it possibly wasn't. During the seventies and eighties businesses underwent massive transformation driven by the proliferation of electronic data processing made ubiquitous by the invention of the microprocessor which enabled affordable desktop computing.
Employee intensive service businesses like banks, insurance companies, accounting firms, telcos and government departments which employed vast numbers of clerical staff to shuffle paper were replaced by machines. A side effect was that customer service declined.
I am guessing that not all the clerical staff were just shuffling paper.
Another factor was the rise of business ruthlessness. The eighties was a decade where finance professionals got control and milked great brands by slashing costs. Customer service costs money - get rid of it. It was an era that was also characterized by mergers and acquisitions. Great companies with strong brands were traded like cattle.
During this era, employees left behind after the slash-and-burn were understandably less interested in the customer and more concerned about surviving the next restructure. Similarly, business barons made fortunes through trading businesses and were less interested in running them.
Repairing this damage was a key contributor to the rise of the customer service trend.
Customer service is a component of the Place Strategy.
Developing strategy means making choices, the main choice in the customer service strategy is deciding...
- What things will be part of customer service (as opposed to leaving it to the customer to find a solution?)
- What level of customer service greatness will you aspire to?
- How will you deliver customer service?
- What cost are you able to bear in the quest for delivering customer service?
The last point is a crucial one. Delivering great customer service is expensive.
Many products and services simply cannot support the cost without going out of business, or resulting in a price point well above what the customer is prepared to pay.
Deciding to provide poor customer service is a deliberate and legitimate strategy. Not saying great customer service isn't a legitimate business strategy either, but it is a strategic choice.
Some businesses have resigned themselves to the fact a certain proportion of the population are beyond help, this is particularly true of technical consumer products like internet services, and computer equipment. Sadly, no amount of technical support will be enough for this part of the population, and attempting to deliver it will have two unintended consequences...
- More people will contact technical support rather than figuring it out for themselves. Offering great technical support, simply increases the demand for it.
- All customers will need to be charged a higher price to cover the cost.
To solve this dilemma there are several strategies...
- Make technical support either non-existent or ensure customers wait on telephone queues for long periods.
- Charge for anything other than basic technical support.
- Set-up technical question forums where consumers talk to each other asking technical support questions.
The technical support forum (or community) also provides a self-organizing source of usability research. Trawling the tech-support forums the technical product vendor can identify the most annoying technical glitches or misunderstandings and use this information to guide product development.
So, rather than assuming customer service should always be maximized whenever possible, part of strategy is weighing-up the benefits and considering other options.
This decision talks to the positioning strategy. There is room in the market for both the premium product/service and the stripped down, no frills, low cost producer.
Places in B2B marketing - your place or mine?
Most B2B marketing isn't conducted in a sales showroom but is increasingly taking place in virtual environments. The typical customer journey is depicted by these diagrams...
Customer journey in a low touch B2B sale
The B2B Low Touch sale is typically the selection by the customer of a technical component, building materials, or similar where the sales information, sales conversation, and buying process is done without meeting face-to-face. Typically conversations are by telephone or email. Many service products are transacted this way; for example airline travel and accommodation. In this case "The Place" is a website backed-up by internal sales.
Typically the Place Strategy would include...
- The decision to adopt an online direct selling model backed-up by internal technical sales.
- Specifying the website to showcase products, provide technical data and encourage either online sales or sales enquiry.
- Designing the scope and nature of the internal sales team, procedures, support systems and sales quotation processes.
- Specifying the order fulfillment process
- Providing order tracking
- After sales support - helping the customer to use the product, which for technical products can be important.
Customer journey in a high touch B2B sale
Many B2B products and services are not off-the-shelf and require custom design. Examples include bespoke machinery, roads, bridges, buildings and other construction. Software solutions, or consulting projects.
The process required to design and deliver such products or services is called "solution selling." These products or services are rarely sold from a show-room, although firms offering such solutions may invest in impressive office space to project a credible brand image (think law firms, accountants, and architects).
However, it is not unusual for B2B selling firms to prefer to meet with the customer at the client's office as a show of deference and customer service. There are some firms that are completely virtual with all employees working from home. And, since this article has been written in the age of COVID, increasingly solution selling is being conducted completely on-line.
Developing a place strategy to suit solution selling would include...
- The decision about how you will engage with the customer: your place or mine?
- Many firms recognize the switch from the office as the shop-front to the importance of having an impressive online presence and invest in a professionally developed website. Such websites now include video presentations, project case studies, white papers and e-commerce processes.
- Specifying and tightly controlling the customer engagement process to maximise the projection of a competent image and ensuring the collection of information (the customer's brief), and other information is well documented.
- Orchestrating the entire process from online delivery of information before enquiry, right through to final delivery to ensure the customer journey is as painless as possible.
The key elements of the place strategy
It is important to remember that the Place Strategy is one part of the overall Marketing Strategy, with Place being one of the 4 P's of the marketing mix. The overall marketing strategy is arrived at through setting each of Product, Price, Place, and Promotion. These settings are guided by Positioning, Brand and Market Segmentation.
At its core, place strategy should be based on your ideal customer — how does the average client buy goods?
Customer journeys: The first step is to map out the customer journey. There may be more than one. Understanding how the customer seeks the product or service and tailoring your place strategy to better match their process is the essential first step. For example, consumers expect milk to be available within a few minutes drive; this pretty much dictates an intensive distribution strategy. However, as in all things, don't discount the possibility of disruptive innovation. What if milk went back to being delivered door-to-door like in the good 'ole days?
What are the competitors doing: Since the place strategy is a source of competitive advantage it is essential to understand how competitors are solving the same consumer problem. Clearly, you need to either match what they are doing, develop something superior, or conversely decide to strip the cost of the place strategy in favor of achieving a price, product, or promotion advantage.
Distribution strategy: A critical part of the place strategy is deciding on distribution. It drives the decision making for all other elements in the place strategy. Again, plenty of opportunity for innovation exists through changing the distribution strategy. Many companies are setting-up web shops and shipping via 3PL's (Third Party Logistics) providers to escape the tyranny of the retail chains or closing down their company owned bricks-and-mortar retail outlets. However, going online means providing a content rich showcase experience - is it enough to just provide one picture and a paragraph description?
Product showcase: At the heart of the place-strategy is deciding how you will present your product or service to the customer. This can be through retail or wholesale show rooms, pop-up exhibitions at trade shows, online through a well developed website, carried door-to-door by a sales team, through printed catalogues, or using a well trained sales team skilled in presentation. Of course the distribution strategy is a key consideration. If you are relying on a distributor to showcase your product you may wish to specify how this is to be done and make it part of the distributor agreement. Some companies provide the physical assets - for example a branded display system to be installed in the retail outlet.
Transaction process: Specifying how the sale is closed. This may be as simple as ringing it up on the cash register, an online shopping cart process, or a highly contractual process requiring the signing of documents. In the travel industry (particularly airlines) ticketing systems are hugely complex but essential for an efficient sales process. Reservation systems are used for booking accommodation, travel packages, air travel, car hire and even restaurant bookings. The internet has both simplified (for the consumer) but made more complex (for IT people) the entire reservation system. And the internet has enabled the concept of sales portals. In B2B marketing, increasingly large companies are asking suppliers (particularly of consumable products like tools and safety equipment) to be provisioned by online customer portals.
Delivery process: Specifying how the product is delivered. Is it carried out of the retail store, installed by an installation team, drop-shipped, sent through the post, or is it a purely experiential product like travel, accommodation or even a consulting process. You can leave these items up to chance or gain competitive advantage through thoroughly specifying the process.
After sales support process: Consumer protection laws mandate a minimum product guarantee of 12 months. So, after sales support is mandatory. However, some products need servicing, and having convenient service centres to provide this is part of the place strategy. A classic example is motor vehicle sales. However, in B2B selling many complex products for example IT systems, need ongoing support. Will this be company provided, outsourced to dealers, or outsourced to third-party service providers? Many business models are built around making more money out of the service stage than the sale of the product that needs servicing. This is very true of motor vehicles, where the profits are split: the vehicle manufacturer makes their profit at the factory, the dealer (who actually doesn't make much at all on a new car sale) they make their money, on new car sale options, finance, insurance, in the workshop and on used cars. The new car is mostly a sprat to catch the mackerel.
Customer retention: An important consequence of a well orchestrated place strategy is enuring that customers continue to buy. Repeat business is less expensive to obtain than finding new customers. Having had a satisfactory first experience purchasing your product or service goes a long way to keep them coming back. One thing to remember about channel marketing is that your customer is the distributor not the end user. The downside of using distributors is that they own the customer relationship. There are methods for overcoming this problem, but it becomes a negotiation point with the distributor.
**Apple Shops - a great example of a thoroughly executed Place Strategy.**
They charge for technical support, but they turn it into such a well choreographed experience that customers happily pay. In fact, every step in the customer experience in an Apple store is well thought through and executed. The use of technology is also impressive; Apple use their own iPhone and iPad products as sales terminals to log new customer arrivals, allocate sales-people to customers, communicate with the back-of-store to whistle-up products, and even to ring-up the sale. Brilliant.
Apple also use an omni-channel distribution model selling through dealers, selling online, and through their company owned bricks-and-mortar retail outlets.