Transcript Chapter 8 Target Markets & Channel Design Strategy

Chapter 8
Target Markets &
Channel Design Strategy
Objective 1:
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Market Variables
• Channel manager decisions regarding the
design of the firm’s marketing channel…
– MUST be a function of the firm’s target
markets’ needs and wants
– Remember customer value is the driver of
design.
Objective 2:
Framework for
Market Analysis
• Market Geography
• Market Size
• Market Density
• Market Behavior
The Four
Dimensions
Of All
Markets
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Objective 3:
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Market Geography
• Market Geography
– Refers to the geographical extent of markets
and where they are located.
• Channel Manager’s Task…
– To evaluate market geography relative to
channel structure to ensure that the structure is
able to serve the markets effectively and
efficiently.
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Locating Markets
• Channel managers ascertain the
geographical locations of target markets
through the use of…
– The Bureau of Census
(http://www.census.gov)
• Regions, States, counties, MSAs (x > 50k*),
secondary markets (x < 50k)*, etc.
– Postal Zip Codes
– GIS*
• Computerized systems that combine physical
geography with cultural geography* (Dunne, Lusch, & Carver 2010)
Tracking Changes
in Market Geography
• In the U.S.
– A high degree of mobility means markets
change frequently
• Globally
– Southeast Asian countries & former Eastern
Bloc countries of Europe have become key
locations
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Objective 4:
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Market Size
• Market Size
– Refers to the number of buyers or potential
buyers in a given market
• Can be either end-users or industrial buyers
• Bucklin’s
Model of
Channel
Structure
Cost per
unit
Cd
Cm
Ue
Number of Buyers (U)
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Market Size
• Channel Manager’s Task…
– When using Bucklin’s model for market size
data, it is important to consider the particulars
of certain situations
– For Example:
• Will an increase in buyers increase or decrease
average cost of serving customers?
• If an increase in average cost is likely, can channel
structure be changed to reduce costs before market
reaches its increased size?
Objective 5:
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Market Density
• Market Density
– Refers to the number of buyers or potential
buyers per unit of geographical area.
• Efficient Congestion
– Congested, high-density, markets can promote
efficiency in the performance of several basic
distribution tasks (e.g., transportation, storage,
communication, and negotiation.)
Strategic Implication of
Density
• “Density offers efficiency”
– Opportunity to achieve high levels of customer
contact at lower average costs
• Manufacturers often seek out intermediaries
(wholesalers & retailers) operating in dense
markets
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Objective 6:
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Market Behavior
• “Market Behavior” is characterized by, or
encompasses…
1.
2.
3.
4.
When the market buys
Where the market buys
How the market buys, and
Who buys
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When the Market Buys
Buying Patterns
• Seasonal
• Weekly
• Daily
Implications
• Variance creates peaks
and valleys in
production
• Should seek members
who are in tune with
changes in patterns
• How could a
“Category Killer” help
the manufacturer?*
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Where the Market Buys
A “Function” of:
• The types of
intermediaries from
which buyers make a
purchase
• The location of these
intermediaries
Implications
• Particular types of
products are typically
purchased where?
• What product
categories align well
with one’s product(s)?
• Are these patterns
likely to change?
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How the Market Buys
•
•
•
•
•
•
•
Large vs. Small Quantities?
Self-Serve vs. Assisted Shopping?
One-Stop vs. Multi-Store Shopping?
Impulse vs. Planned Purchases?
Cash vs. Credit?
Shop at home vs. Prefer Traditional Store?
Shopping vs. Non-Shopping Good
– (i.e., search level)
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Who Buys
• Who makes the actual purchase?
– Affects type of retailer chosen
– May alter channel members
for industrial goods
• Who decides whether to purchase?
– Who in “family unit”
– Buying centers for industrial goods
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Buying Centers
• Definition:
– a set of people who
participate in industrial
buying decisions &
who are responsible for
the consequences
resulting from those
decisions.
• Typical Participants
(or Roles Performed):
–
–
–
–
–
–
Users
Influencers
Deciders
Approvers
Buyers
Gatekeepers
Note: Individuals may
perform more than one.
Objective 8:
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Changes in Market Behavior
• Channel Managers must be attune to:
1. Changes likely to occur in the targeted
markets’ shopping behavior
2. Whether these changes are likely to remain
(i.e., permanent) or are more likely fleeting
(i.e., short-term)
Implications of Changes
in Market Behavior
• Increased demand for…
– Knowledgeable & helpful sales assistance:
• Increase in personal selling in department/specialty
stores
– Minimum service with very low prices
• Increase in retailers w/ sparse surroundings &
aesthetics (e.g., warehouse clubs like Sam’s)
– Convenience & no crowds of shoppers
• Increase in firms offering mail order & catalog
services to avoid crowds & shop from home
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Implications of Changes
in Market Behavior
• Increased demand for…
– Efficiency in information gathering &
purchasing
• Increase in Internet shopping, especially for B2B
– Innovation in service, selection, or
effectiveness
• Department stores featuring different layouts (e.g.,
the “loop” vs. “free flow”), kiosks, and specialty
stores adopting “fast turn” (e.g., Zara)*
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