NARRATOR: So far, we've covered two of the four Ps, product and pricing. In the next few lessons, we'll turn our attention to the third one, place, or the location where a company's products are being sold. Product distribution is probably the most difficult step to set up among the four Ps.

How come? Well, it takes a lot of time and significant energy to build and optimize a distribution channel, and we have to consider several factors that will influence our decision. The best distribution channel is the one that delivers a product the customers want, delivers a product where customers want it, and allows customers to have the product at the right time. So let's dig deeper and try to understand the implications of the three principles.

On multiple occasions, we emphasize the importance of creating a product that customers want to have. What is probably equally important, however, is the way it is delivered to them, and this is one of the final variables determining whether they will acquire it.

A great looking store, with prepared sales personnel and optimal product placing, can have a huge impact on sales. That's why companies like Apple and Tesla have taken matters into their own hands and built their own stores, which allows them to have direct contact with customers and explain to them the benefits of their products.

A product must be positioned where its target customers are likely to find it. Prada owns shops in luxurious shopping streets, such as the Fifth Avenue in New York and Montenapoleone in Milan. Companies working with distributors must examine their point of sales carefully and try to understand if their target customer group matches the one visiting these places.

The other trait of great distribution channels is they deliver products at the right time. Nobody likes it when an item is out of stock or when there's a long waiting period for its delivery. Companies want to be efficient with the inventory they keep, as it represents a cost. An optimized logistics flow can be beneficial for both customers and producers.

Great distributors can find the best solution and typically apply just-in-time policies. Introduced by car manufacturer Toyota, just-in-time is a method aimed at reducing flow times within a production system and response times from suppliers and customers.

Nowadays, almost all companies try to implement such procedures. They use enterprise resource planning systems, also known as ERP systems, that automatically optimize orders, inventory levels, shipments, and other aspects, which improves the entire distribution flow and reduces the need for human intervention.

OK, let's pause for a second. In the next video, we'll learn about the different types of distribution channels.