Lecture Marketing channel strategy: Chapter 2 - TS. Đinh Tiến Minh

Learning objectives: Understand the central role played by end-users and their demands in the design of marketing channels, define “service outputs” and identify and analyze them, recognize how to divide a market into channel segments for the purposes of marketing channel design or modification, understand how to target channel segments to optimize sales and profits.... and other contents.
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Lecture Marketing channel strategy: Chapter 2 - TS. Đinh Tiến Minh1/12/2018Chapter 2: End-User Analysis:Segmenting and TargetingDINH Tien Minh• LEARNING OBJECTIVES– Understand the central role played by end-users and theirdemands in the design of marketing channels.– Define “service outputs” and identify and analyze them.– Recognize how to divide a market into channel segments for thepurposes of marketing channel design or modification.– Understand how to target channel segments to optimize salesand profits.– Evaluate when and whether to try to meet all expressed serviceoutput demands in the short run in a particular market.– Describe the relationship between service output demands andsolutions to overall channel design problems.END-USER SEGMENTATION CRITERIA:SERVICE OUTPUTS• These service outputs in turn can be classifiedinto six general categories:– Bulk breaking– Spatial convenience– Waiting or delivery time– Product variety– Customer service– Information sharing11/12/2018Bulk Breaking• Bulk breaking refers to the end-user’s abilityto buy a desired (possibly small) number ofunits, even if the product or service originally’was produced in large, batch-production lotsizes.• When the channel system allows end-users tobuy’ in small lots, purchases more easilysupport consumption, reducing the need forend-users to carry unnecessary inventory.Spatial Convenience• Spatial convenience provided by marketdecentralization in wholesale and/or retailoutlets increases consumers’ satisfaction byreducing transportation requirements andsearch costs.• Business buyers value spatial convenience tooWaiting Time• Waiting time is the time that the end-usermust wait between ordering and receiving thegoods or postsales service.• The longer the waiting time, the moreinconvenient it is for the end-user, who mustplan or predict consumption levels far inadvance.21/12/2018Product Variety and Assortment• Variety describes generically different classesof goods that constitute the product offering,namely, the breadth of product lines.• Assortment refers to the depth of productbrands or models offered within each genericproduct category.Customer Service• Customer service refers to all aspects ofeasing the shopping and purchase process forend-users as they interact with commercialsuppliers (for business-to-business purchases)or retailers (for business-to-consumerpurchases).Information Sharing• Information sharing refers to educationprovided to end-users about productattributes or usage capabilities, as well as preand postpurchase services.• For some manufacturers and retailers,information sharing has been classified assolutions retailing.31/12/2018Price• Price has not been listed as a service output.• Price is what the customer pays to consumethe bundle of product + service outputs; it isnot a service that gets consumed itself.SEGMENTING END-USERS BY SERVICEOUTPUTS• Different groups of end-users value serviceoutputs differently.• We must consider how to group end-usersaccording to their service output needs, bysegmenting the market into groups of endusers who differ not in the product(s) theywant to buy, but in how they want to buy.• There are three general steps to segmentingend-users by service outputs.– First, it is essential to generate a comprehensivelist of all the potential service outputs desired byeach end-user for the products being offered.41/12/2018– Second,• The market might be divided into a priori segments (e.g.,those often used in product or advertising decisions), thenanalyzed to see whether those segments share commonpurchasing preferences.• Research might be designed and conducted to definechannel segments that best describe end-users’ serviceoutput needs and purchasing patterns.– Channel segmentation should be designed to produce groups ofbuyers who» (1) are maximally similar within a group» (2) are maximally different between groups» (3) differ on dimensions that matter for building adistribution system.– Third, channel manager should name eachsegment to capture its identifying characteristics.• Naming each segment facilitates internalcommunication and organizational alignment, which ishelpful in executing an effective channel strategyService outputABCDReferences and credentials54625Financial Stability and longevity44516Product demonstrations and trials1110820Proactive advice and consulting109810Responsive assistance duringdecision process149106One-stop solution41183Lowest price32886Installation and training support10151210Responsive problem solving aftersales829103Ongoing relationship with supplier111151Total100100100100% Respondents16%13%61%10%5