Target Markets and Channel Design Strategy

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

2. Importance of market variables • Framework of market analysis • Market geography • Impact of market size • Market density’s effects • Influence of market behavior • Changes in market behavior

3. 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.

4. Framework for Market Analysis 2 Market geography Market behavior Market size Market density Target Markets

5. Market Geography 3 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.

6. Locating Markets 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

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

8. Market Size 4 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.

9. Market Density 5 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.

10. 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.

11. Market Density & Channel Strategy 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. = Manufacturers of a wide array of products seek out distributors and retailers that operate in dense markets.

12. Market Behavior 6 • Market behavior consists of four • Sub-dimensions: • When the market buys • Where the market buys • How the market buys • Who buys

13. 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.

14. Where the Market Buys 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.

15. 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 How the Market Buys • Large quantities • Self-service • One-stop shopping • Impulse buying • Cash • Shopping at home • Expending substantial effort 8. Demanding extensive service Versus

16. 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

17. Who Buys Who decides to make the purchase? In context of family unit at consumer level Buying centers at industrial level

18. Buying Centers Sets of people who participate in industrial buying decisions and who are responsible for the consequences resulting from the decision Users Influencers Deciders Approvers Buyers Gatekeepers

19. 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

20. Implications of Changes 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

21. Implications of Changes Retail stores with Spartan surroundings & minimum service but very low prices Consumers demanding membership in warehouse clubs (Sam’s Club)

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

23. Implications of Changes Online Shopping Personal computers are a means for consumers to supplement their in-store shopping

24. Implications of Changes Auto retailing & foreign auto manufacturers Car buyers demanding fewer hassles & confrontations typically common when buying a car

25. Implications of Changes Internet Shopping Growing in all sectors, especially in industrial or B2B

26. Implications of Changes Innovations undertaken by channel member Kohl’s racetrack layout exposes customers to the maximum amount of merchandise in the shortest time.

27. Discussion Question #3 By the end of the first decade of the twenty-first century, the anti-junk food movement had really begun to take hold in the U.S. Of particular concern was the sale of junk food through vending machines in schools. The easy availability of salty snacks, candy and sodas made easily available from the machines provided a level of temptation that was just too enticing for many students to resist. But could vending machine channels that worked so effectively to sell junk food in schools work just as well for selling healthier foods? This is the question that Stonyfield Farm, a Londonderry, New Hampshire maker of organic yogurt, is seeking the answer to by putting health-food vending machines in a number of New England high schools. Stonyfield is betting that attractive displays of healthy snacks and the convenience provided by vending machines will prove to be just as effective in enticing students to buy healthy foods as they were in getting them to buy junk foods. Do you think the vending machine channel will work for healthy foods as well as this channel worked to sell junk food to students? Why or why not?