Chapter 8 Target Markets and Channel Design Strategy

Market Variables 8 The target market’s needs and wants Objective 1: 8 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 Objective 2: 8 Framework for Market Analysis Market geography Market behavior Market size Market density Target Markets

Market Geography Channel manager’s task: 8 Objective 3: Market Geography 8 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. “More distant markets, modifications in channel structure may be needed.”

Locating Markets 8 Channel manager delineates geographical locations of target markets by using a combination of the following: The Bureau of Census data for geographical entities such as states, regions/divisions, counties, metropolitan statistical areas, towns & townships 2. Postal ZIP codes

Tracking Changes in Market Geography 8 In the U.S. Globally A high degree of mobility within the U.S. means that market geography changes frequently. Southeast Asian countries & former Eastern bloc countries of central & eastern Europe have become key locations.

Market Size Channel manager’s task: 8 Objective 4: 8 Market size refers to the number of buyers or potential buyers (consumer or industrial) in a given market. Channel manager’s task: When using Bucklin’s model for market size data, it is important also to consider the peculiarities of particular situations and other relevant variables. “ Increasing market size will decrease the cost of using intermediaries”

Market Density 8 Market density refers to the number of Objective 5: 8 Market density refers to the number of buyers or potential buyers per unit of geographical area. This market dimension’s relationship to channel structure is illustrated in the concept of efficient congestion.

Market Density & Channel Strategy 8 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.

Market Density & Channel Strategy 8 The opportunity to achieve a high level of customer access at low cost is higher in dense markets than in more dispersed ones. Strategic Implication = Manufacturers of a wide array of products seek out distributors and retailers that operate in dense markets.

Market behavior consists of four Objective 6: Market Behavior 8 Market behavior consists of four subdimensions: When the market buys Where the market buys How the market buys Who buys

When the Market Buys 8 Variations occur: Seasonally Weekly Daily 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 and avoid selecting channel members who are out of touch with time demands of the markets they serve (e.g. retailers remain closed on Sundays).

Where the Market Buys Implications for the channel manager: 8 Determined by: The types of outlets from which final buyers choose to make their purchases 2. 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 8 Large quantities Self-service One-stop shopping Impulse buying 5. Cash 6. Shopping at home 7. Expending substantial effort through comparison shopping 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 8 Who makes the physical purchase? May influence the kinds of channel members used to serve industrial markets Affects the type of retailers chosen in the consumer market Who decides to make the purchase? In context of family unit at consumer level (B2C) Buying centers at industrial level (B2B)

Buying Centers 8 Sets of people who participate in industrial buying decisions and who are responsible for the consequences resulting from the decision Users: members of org. who will use the product/service Influencers: people who influence the buying decision Deciders: people who have power to decide on product requirements on suppliers Approvers: people who must authorize the proposed actions of deciders/buyers Buyers: people with formal authority for selecting supplier and arranging term of purchase Gatekeepers: people who have power to prevent sellers/info. from reaching members (users/deciders) of buying center

Changes in Market Behavior Objective 8: 8 Changes in Market Behavior Must be tuned in to changes that are likely to occur Needs to determine whether changes are temporary or long term Channel Manager’s Role

Implications of Changes 8 Good personal selling at the retail level Making a comeback in department and specialty store sectors due to increasing consumer demand for knowledgeable and helpful salespeople

Implications of Change 8 Retail stores with Spartan (simple) surroundings & minimum service but very low prices Consumers demanding membership in warehouse clubs (Sam’s Club: an American chain of membership-only retail warehouse clubs owned and operated by Walmart)

Implications of Change 8 Mail-order buying Shoppers are trying to save time and avoid the inconvenience of shopping at crowded stores and fighting traffic congestion

Implications of Change 8 Online shopping Personal computers (also tablets and smartphones) are a means for consumers to supplement their in-store shopping