Place utility describes the tendency for a product to be purchased by consumers due to it’s location in the store.
The best locations for a product are usually where they get the most exposure or where customers expect them to be.
For example, it is a well-known marketing tactic to place impulse products near the cashier of a retailer. Some categories of products can see high sell-through by such placement but it would be a waste of valuable retail space to place other categories of products.
Even though placing products in the most prominent locations with the highest exposure is generally seen as good place utility, this is not always the area where a product can see the best sales.
This is because a huge portion of modern consumers enter a store like a supermarket fully knowing what they want to buy and goes straight to specific sections of the store to grab what they want to buy.
In such circumstances, placing what people expect to find in certain sections of a store is the best place utility a store manager can give to particular products.
For example, visitors of a supermarket can fully expect to find cheese at the dairy section of the store. This also gives the store a good opportunity to cross-merchandise products from other related categories.
From a geographical perspective, place utility can sometimes reap great rewards if buyers and merchandisers have sharp business acumen.
Some products can have higher demand in specific geographic locations.
For example, BBQ products would inevitably see higher demand in recreational areas with public BBQ pits such as chalets and the beach.
Thus, retailers tend to carry higher inventory levels of products in this category.
Place utility has also become key marketing feature of online retailing.
Online retailing
It’s no secret that consumer buying behavior online is markedly different from in-store behavior.
One big difference that that unlike a physical store, online visitors only have a limited visual window of what product an online store offers.
A visitor of a real physical store for example, would be exposed to the products that are strategically placed all over the selling floor. A visitor of an online store would only have a computer monitor or phone screen to see products.
Therefore, cross selling can often be a huge challenge for online stores. And place utility is critical for people to find products that they want to buy.
This is not just limited to products on a portal, but different products in different shopping portals too.
For example, a person who want to buy electronics might choose to visit a niche ecommerce retailer that specialize in such products instead of getting them from huge retailers. This is especially when they are looking for products that big retailers don’t carry.
So it is important for online retailers to make it as easy as possible for visitors to find what they are looking for.
This is why the focus of online malls are often on personalisation instead of showing products to someone who has not shown any interest on them.
So if a visitor has searched for earphones for example, an online retailer might then use that information to show more of such products to a particular him with the purpose of place utility.
