Target Markets and

1
Chapter 8

• Target Markets and
• Channel Design

2
Major Topics for Ch. 8
8

• Framework for (Target) Market Analysis
• - Effect of Each Market Variable on
• Channel Structure
• - Positioning and Channel Design
• Channel Competition and
• Channel Structure
• 3. Desired Service Output from Channels

3
Market Variables
8
The target markets needs and wants should drive
the manner in which the channel manager shapes
the design of the firms marketing channels.
4
Framework for Market Analysis
8
1. Market geography
4. Market Behavior
3. Market Density
2. Market size
Target Markets
5
1. Market Geography
8
refers to the geographical extent of markets and
where they are located.


Channel managers task To evaluate market
geography relative to channel structure to
ensure that the structure is able to serve the
markets effectively and efficiently.
? Influence Level and Ownership of Channel
Structure
6
Locating Markets

8
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 (www.census.gov/)
• 2. Postal ZIP codes

7
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.

• Asian countries former Eastern bloc countries
  of central eastern Europe have become key
  locations of emerging markets.

8
Beyond Market Geography
8
Channel managers must also grasp changes
in -Demography -Psychography (Consumer) -Benefit
Sought (Service output!)


9
2. Market Size
8
refers to the number of buyers or potential
buyers (consumer or industrial) in a given market.
Channel managers task Consider the
peculiarities of particular situations and other
relevant variables. gt Influences Intensity,
Ownership, Level Ex) Foreign market (Hindustan
Levers Channel design in India)
10
3. Market Density
8
Market density refers to the number of buyers or
potential buyers per unit of geographical area.
This market dimensions relationship to channel
structure is illustrated in the concept of
efficient congestion.
11
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. ? Influence Intensity,
ownership, and level
12
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
Ex) McDonalds in Asia
Manufacturers of a wide array of products seek
out distributors and retailers that operate in
dense markets.
13
4. Market Behavior
8


consists of five sub-dimensions

• When the market buys
• Where the market buys
• How the market buys
• Who buys
• What the market buys

14
When the Market Buys
8
Variations occur
Seasonally
Daily
Weekly

• Implications for the channel manager
• 1. Variations create peaks valleys in the
  manufacturers production schedule.
• 2. Need to select channel members who are in tune
  with these changing patterns.
• ? Influence Intensity decision

15
Where the Market Buys
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. Need to know where customers generally
• buy particular types of products
• Need to know whether these patterns
• may be changing.
• ? Influence Type of Intermediaries

16
How the Market Buys
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
17
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?
Buying centers at industrial level
In context of family unit at consumer level
18
Concept of Buying Centers B2B Sector
8
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
What the Market Buys
8

• Product Performance?
• Service (before and after) and maintenance?
• Total Solution?
• Implication for Ownership/function and Length of
  Channel Structure
• Ex) Partial Integration in Fashion Apparel
  Industry

20
Changes in Market Behavior
8
Needs to determine whether changes are temporary
or long term
Must be tuned in to changes that are likely to
occur
Channel Managers Role
Ex) Disruptiveness of Innovation ? Demand
Migration
21
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
22
Implications of Change
8
Retail stores with spartan surroundings minimum
service but very low prices

Consumers demanding membership in warehouse clubs
(Sams Club)
23
Implications of Change
8
Mail-order and Internet buying
Shoppers are trying to save time and avoid the
inconvenience of shopping at crowded stores and
fighting traffic congestion
24
Implications of Change
8
Online shopping
Personal computers are a means for consumers to
supplement their in-store shopping
25
2. Different Types of Channel Competition
8
Ex) Selling Cars
Brand
Inter (between)
Intra (within)
Same brand Same-type Store
Different brands Same-type Store
Intra
Store
Same brand Different-type Stores
Different brands Different-type Stores
Inter
Who Gains and Who Loses in Each Cell?
Manufacturer?, Dealer?, Consumer?
26
Channel Competition and Channel Structure
8

• Distribution Intensity ? Intra-brand Competition
• Manufacturer Brand Assortment ? Inter-brand
  Competition
• Retailer Category Assortment ? Intra-store
  Competition
• Ex) Grocery sales in Wal-Mart
• 4. Multiple Channels (both direct and indirect)
  ? Inter-store Competition ex) Dell

27
III. Desired Service Output in Channels
8

1. Lot size
2. Spatial Convenience
3. Waiting and Delivery Time
4. Variety and Assortment
5. Personal Service