Target Markets

1
Chapter 8

• Target Markets
• Channel Design Strategy

2
Market Variables
8
Objective 1

• Channel manager decisions regarding the design
  of the firms marketing channel
• MUST be a function of the firms target markets
  needs and wants
• Remember customer value is the driver of design.

3
Framework for Market Analysis
8
Objective 2

• Market Geography The Four
• Market Size Dimensions
• Of All
• Market Density Markets
• Market Behavior

4
Market Geography
8
Objective 3

• Market Geography
• 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.

5
Locating Markets
8

• Channel managers ascertain the geographical
  locations of target markets through the use of
• The Bureau of Census (http//www.census.gov)
• Regions, States, counties, MSAs (x gt 50k),
  secondary markets (x lt 50k), etc.
• Postal Zip Codes
• GIS
• Computerized systems that combine physical
  geography with cultural geography (Dunne, Lusch,
  Carver 2010)

6
Tracking Changes in Market Geography
8

• In the U.S.
• A high degree of mobility means markets change
  frequently
• Globally
• Southeast Asian countries former Eastern Bloc
  countries of Europe have become key locations

7
Market Size
8
Objective 4

• Market Size
• Refers to the number of buyers or potential
  buyers in a given market
• Can be either end-users or industrial buyers
• Bucklins
• Model of
• Channel
• Structure

Cost per unit
Cd
Cm
Number of Buyers (U)
Ue
8
Market Size
8

• Channel Managers Task
• When using Bucklins model for market size data,
  it is important to consider the particulars of
  certain situations
• For Example
• Will an increase in buyers increase or decrease
  average cost of serving customers?
• If an increase in average cost is likely, can
  channel structure be changed to reduce costs
  before market reaches its increased size?

9
Market Density
8
Objective 5

• Market Density
• Refers to the number of buyers or potential
  buyers per unit of geographical area.
• Efficient Congestion
• Congested, high-density, markets can promote
  efficiency in the performance of several basic
  distribution tasks (e.g., transportation,
  storage, communication, and negotiation.)

10
Strategic Implication of Density
8

• Density offers efficiency
• Opportunity to achieve high levels of customer
  contact at lower average costs
• Manufacturers often seek out intermediaries
  (wholesalers retailers) operating in dense
  markets

11
Market Behavior
8
Objective 6

• Market Behavior is characterized by, or
  encompasses
• When the market buys
• Where the market buys
• How the market buys, and
• Who buys

12
When the Market Buys
8

• Buying Patterns
• Seasonal
• Weekly
• Daily

• Implications
• Variance creates peaks and valleys in production
• Should seek members who are in tune with changes
  in patterns
• How could a Category Killer help the
  manufacturer?

13
Where the Market Buys
8

• A Function of
• The types of intermediaries from which buyers
  make a purchase
• The location of these intermediaries

• Implications
• Particular types of products are typically
  purchased where?
• What product categories align well with ones
  product(s)?
• Are these patterns likely to change?

14
How the Market Buys
8

• Large vs. Small Quantities?
• Self-Serve vs. Assisted Shopping?
• One-Stop vs. Multi-Store Shopping?
• Impulse vs. Planned Purchases?
• Cash vs. Credit?
• Shop at home vs. Prefer Traditional Store?
• Shopping vs. Non-Shopping Good
• (i.e., search level)

15
Who Buys
8

• Who makes the actual purchase?
• Affects type of retailer chosen
• May alter channel members
• for industrial goods
• Who decides whether to purchase?
• Who in family unit
• Buying centers for industrial goods

16
Buying Centers
8

• Definition
• a set of people who participate in industrial
  buying decisions who are responsible for the
  consequences resulting from those decisions.

• Typical Participants (or Roles Performed)
• Users
• Influencers
• Deciders
• Approvers
• Buyers
• Gatekeepers
• Note Individuals may perform more than one.

17
Changes in Market Behavior
8
Objective 8

• Channel Managers must be attune to
• Changes likely to occur in the targeted markets
  shopping behavior
• Whether these changes are likely to remain (i.e.,
  permanent) or are more likely fleeting (i.e.,
  short-term)

18
Implications of Changes in Market Behavior
8

• Increased demand for
• Knowledgeable helpful sales assistance
• Increase in personal selling in
  department/specialty stores
• Minimum service with very low prices
• Increase in retailers w/ sparse surroundings
  aesthetics (e.g., warehouse clubs like Sams)
• Convenience no crowds of shoppers
• Increase in firms offering mail order catalog
  services to avoid crowds shop from home

19
Implications of Changes in Market Behavior
8

• Increased demand for
• Efficiency in information gathering purchasing
• Increase in Internet shopping, especially for B2B
• Innovation in service, selection, or
  effectiveness
• Department stores featuring different layouts
  (e.g., the loop vs. free flow), kiosks, and
  specialty stores adopting fast turn (e.g.,
  Zara)