Target Markets and Channel Design Strategy Part 2: Developing the Marketing Channel Target Markets and Channel Design Strategy

Market Variables 1 The target market’s needs and wants should drive the manner in which the channel manager shapes the design of the firm’s marketing channels.

Framework for Market Analysis 2 Market geography – efficiently and effectively reach customers. Can use census data and zip code data to identify. Market behavior – four dimensions: when, where, how, and who. Market size – must consider relative costs of adding additional channel members based on size. Market density – number of buyers in an area. Want efficient congestion. Target Markets

Market Density & Channel Strategy Efficient congestion Congested (high-density) markets can promote efficiency in the performance of several basic distribution tasks, particularly those of transportation, storage, communication, and negotiation. Strategic Implication The opportunity to achieve a high level of customer access at low cost is higher in dense markets than in more dispersed ones.

When the Market Buys Variations occur: Daily Weekly Seasonally Implications for the channel manager: Variations create peaks & valleys in the manufacturer’s production schedule. He or she should attempt to select channel members who are in tune with these changing patterns.

Where the Market Buys Implications for the channel manager: Determined by the types of outlets from which final buyers choose to make their purchases 2. Determined by the location of those outlets Implications for the channel manager: 1. He or she should know where customers generally buy particular types of products He or she should know whether these patterns may be changing.

How the Market Buys Versus Large quantities Self-service One-stop shopping Impulse buying Cash Shopping at home Expending substantial effort 8. Demanding extensive service Small quantities Assistance by salespeople Buying from several stores Extensive decision making prior to purchase Credit Shopping at stores Expending little effort 8. Demanding little service Versus

Who Buys Who makes the physical purchase? Affects the type of retailers chosen in the consumer market. May influence the kinds of channel members used to serve industrial markets. Buying centers are commonly Used in industrial markets.

Buying Centers Collection of people who participate in industrial buying decisions and who are responsible for the consequences resulting from the decision Users – actually use the purchase Influencers – provide input Deciders – have the power to buy Approvers – authorize decision Buyers – negotiate terms Gatekeepers – information flows

Changes in Market Behavior 7 Channel Manager’s Role Must be tuned in to changes that are likely to occur Needs to determine whether changes are temporary or long term

Recent Changes… 6 Improved service at the retail level. Demand for low prices leading to minimum service/warehouse environment. Catalog and online buying for convenience. Less complex buying procedures. Retail level innovations in layout and display.