Location and the Marketing Mix
Choosing Where to Operate
Location is one of the first and most important decisions a new business owner makes. A poor choice can add costs, cut off customers, or make it impossible to find workers. A good choice can reduce overheads, place the business next to its target market, and give it a head start over rivals. Four main factors shape where a business sets up: proximity to the market, proximity to labour, proximity to materials and proximity to competitors. The internet then changes how much the physical site matters.
Factors Influencing Location
Proximity to the target market matters most for businesses that rely on passing trade or high-frequency customer visits. A children’s nursery benefits from being close to where families live; a tourist souvenir shop must be near attractions. Being far from customers increases delivery costs and reduces footfall, both of which eat into profit.
Access to labour is critical for businesses that need large numbers of workers or specific skills. A call centre locating in a city with several universities can recruit graduates cheaply. A specialist engineering firm may locate near an existing cluster of engineering companies to share a pool of skilled workers. Labour costs also vary by region — land and wages in London are typically higher than in rural areas.
For manufacturing businesses, being close to materials reduces transport costs and ensures reliable supply. Historically, steel towns grew near coalfields and iron ore deposits. Today this matters less in service industries, but food producers and builders’ merchants still benefit from proximity to suppliers.
The four location factors are proximity to: (1) the market — for retail and service businesses; (2) labour — for businesses needing skilled or large workforces; (3) materials — for manufacturers and primary producers; (4) competitors — clustering can attract customers (e.g. car dealerships) but also intensifies rivalry.
The Impact of the Internet on Location
E-commerce has fundamentally changed location decisions. A business selling handmade jewellery no longer needs a shop on a high street — it can sell to customers across the country, or internationally, from a spare room. This reduces overhead costs dramatically: no rent for retail space, no rates, fewer staff. Online pure-play businesses (sometimes called e-tailers) compete entirely on price, delivery speed and website experience rather than physical location.
However, not all businesses can go online. A hairdresser, a dentist, or a children’s activity centre must be physically accessible to customers. For these businesses, location remains a critical competitive advantage. The internet has also created hybrid models — a bakery might sell at a local market but also take orders through an Instagram shop, combining physical presence with an online reach.
Fixed premises give a business visibility, trust and the ability to serve customers face-to-face, but they come with high fixed costs (rent, rates, utilities) that the business must cover even when sales are slow. E-commerce removes these costs but requires investment in a website, fulfilment and returns management, and customers cannot inspect products physically before buying. Many start-ups begin online to keep costs low and then move to premises as they grow.
What is the Marketing Mix?
The marketing mix is the set of tools a business uses to bring a product to market. It is commonly called “the four Ps”: Product (what is being sold), Price (what is charged), Promotion (how it is communicated to customers) and Place (how and where customers access it). Each element must be designed to fit the target market and must work consistently with the others.
Product includes features, quality, design, branding and packaging. A product with a premium design and strong brand identity (think of a Dyson vacuum cleaner) commands a higher price. Price must reflect the value customers perceive and the costs the business must cover. Promotion covers advertising, social media, PR, discounts and events — communicating why customers should choose this product. Place covers where the product is available: a physical shop, a supermarket shelf, an online marketplace or direct delivery.
The four Ps are interdependent — changing one element forces a rethink of the others. If a business raises its price (premium pricing), it must ensure the product quality, packaging and promotion all support the premium image. A business that prices cheaply but places its product only in luxury stores will confuse customers and damage sales.
Balancing the Marketing Mix
The right balance of the four Ps depends on the competitive environment and the target customer. A business selling budget clothing in a competitive high-street market may compete primarily on price and place (wide distribution). A small artisan cheese-maker selling to independent delis balances premium product quality, a higher price, limited-edition promotion (farmers’ markets, Instagram), and exclusive place (specialist retailers). When consumer needs change — for example, when shoppers shifted to buying grocery staples online during lockdowns — businesses that could not adjust their “place” strategy lost sales to more agile rivals.
Digital technology has reshaped all four Ps. Product: software updates mean a product can improve after purchase. Price: dynamic pricing (used by airlines and hotels) adjusts prices in real time based on demand. Promotion: social media advertising allows businesses to target very specific demographics at low cost. Place: e-commerce removes geographical barriers, allowing a start-up in Cornwall to sell internationally from day one. Students who can explain how technology has changed a specific P in the context of the scenario earn strong AO2 marks.