CHAPTER 8

TARGET MARKETS AND CHANNEL DESIGN STRATEGY

DR STEWART KAUPA

Introduction

• Of all the variables that affect the design of the marketing channel, marketing variables are the most fundamental

• The needs and wants of the market being targeted by the channel manager should shape the design of the firm’s channels.

• Market channel design should be market driven

Market driven channel

• Market channel strategy should be market driven so as to meet as closely as possible the demands of the firm’s target market.

• The channel manager should be familiar with several dimensions of the market as they relate to the design of the market channel.

A framework for market analysis

• Factors to consider when analysing markets • Market geography • Market size • Market density • Market behaviour

1: Market geography and channel design strategy

• Market geography refers to the geographical extent of markets and where they are located.

• The channel manager should ask the questions of:

• What do our markets look like geographically? • How distant are our markets? • The concern is with the market geography

• The channel manager is charged with the task of evaluating market geography relative to channel structure to make sure that the structure is able to serve markets effectively and efficiently.

• Changing locations as a result of expanding geographical boundaries of the existing markets or opening up of new markets should signal the channel manager that modifications in the channel structure may be needed.

• Locating Markets: • Channel manager delineates geographical

locations of target markets by using a combination of the following:

• 1. The data from chamber of commerce for geographical entities such as districts, regions/divisions, towns.

• Changes in Market Geography • A high degree of mobility within Namibia

means that market geography changes frequently.

• Other town initially not so important to the organisation now have become key locations.

2: Market size and channel Design Strategy

• Market size refers to the number of buyers or potential buyers (consumer or industrial) in a given market.

• If market forecast data indicate that a substantial increase in the number of buyers in a particular market is expected, then the channel manager should ask:

• Will the increase in the number of buyers increase or decrease the average cost of serving our buyers?

• If an increase in average costs is likely, can our present channel structure be changed to reduce these costs before the market reaches its forested size?

• Is such structural changes could be made, would this yield a differential advantage to our firm.

3: Market density and Channel Design Strategy

• Market density refers to the number of buyers or potential buyers per unit of geographical area.

• The channel manager should understand the efficient congestion of the market.

• According to the concept of 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 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

4: Market Behaviour and Channel Design Strategy

• Market behaviour consists of four subdimensions:

• 1. When the market buys • 2. Where the market buys • 3. How the market buys • 4. Who buys

• When the Market Buys! Seasonally, Daily, Weekly Variations occur:

• Implications for the channel manager: • 1 Variations create peaks & valleys in the

manufacturers production schedule. • The channel manager should attempt to select

channel members who are in tune with these changing patterns

• Implications for the channel manager: • The manager should know where customers

generally buy particular types of products • The manager should know whether these

patterns may be changing.

• How the Market Buys • 1.Large quantities • 2.Self-service • 3.One-stop shopping • 4.Impulse buying • 5.Cash • 6.Shopping at home • 7.Expending substantial effort through

comparison shopping 8.Demanding extensive service

• 1.Small quantities • 2.Assistance by salespeople • 3.Buying from several stores • 4.Extensive decision making prior to purchase

5.Credit 6.Shopping at stores • 7.Expending little effort • 8.Demanding little service Versus

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

• Buying Centers • Sets of people who participate in industrial

buying decisions and who are responsible for the consequences resulting from the decision

• this is made up of; users, influencers, deciders approvers, buyers, gatekeepers

END OF CHAPTER EIGHT

Group Assignment presentation

• Group One • Y. Hamutenya • Date: 4/10/2016 • Time :17:15 -17:45

Group 2

• Members: • T. Gwisai • Date: 4/10/2016

• Time: 17:50 -18:20

Group 3

• Members: • W. Kandjou • Date: 6/10/2016 • Time: 18.40-19:10

VSM Make-up test

• Date: 12/10/2016 • Time: to be announced • Venue: to be announced