Marketing Channel and Market Testing

#Peny Meliaty Hutabarat #Suci Defina Sari #Kutut Wijanarko

Marketing Channel
Marketing Channels
-Structure & Functions
Segmentation For
Marketing Channel Design
Market Testing
-- Crawford Chapter 18 --
Marketing Channels
Structure & Functions
-- Coughlan Chapter 1 --
Segmentation For
Marketing Channel Design
-- Coughlan Chapter 2 --

Marketing Channel
Marketing channels are the routes to market used to sell every
product and service that consumers and business buyers
purchase everywhere in the world.
Marketing Channel
Important of Studying Marketing Channels
Gatekeeper
Important Asset of Marketing Strategy
# Differentiator #Difficult to replicate
End-User Satisfaction
# Overall brand image
Awareness of channel important is low
# Opportunity for competitive advantage
Difficult to create and maintain channel
#Difficult and costly to change #Right the first time

Marketing Channel
What is a Marketing Channels?

A marketing channel is a
set of interdependent
organizations involved
in the process of making
a product or service
available for use or
consumption.
Set of Interdependent Organizations.
A Process (usually over time)
Process with purpose
- to satisfy end-users
The marketing channel is often viewed as a key strategic asset of a manufacturer
Marketing Channel
Why Do Marketing Channels Exist and Change?
Demand-Side Factors
Facilitation of Search
Intermediary channels arise because buyers and sellers cannot find each
other
Adjustment of Assortment Discrepancy
Manufacturer = large quantity of limited variety
Consumers = large variety in small quantities (customization & choice)
1. Sorting out (packer : orange size and grade)
2. Accumulation (wholesaler : gather together supply)
3. Allocation (wholesale distributor : breaking bulk)
4. Assorting (complementary


Bottom Line : Meeting customer demands, driven by the consumer.
Marketing Channel
Two forces for channel development and and change
Channel Development & Change
Supply-Side Factors
Routinization of transactions
Electronic Data Interchange ; Continuous replenishment program (CRP)
Reduction in number of contacts
Employing more and more intermediaries is subject to diminishing returns simply from the
point of view of number and cost of contacts in the market

Bottom Line : mitigating risk, minimizing management costs, maximizing utility
Manufacturers
Wholesaler
Retailer
Marketing Channel
Manufacturers
Retailer
Marketing Channel
Source : Marketing Channels (a relationship management approach) ;
Pelton, lou E.2002
What is The Work of The Marketing Channel?
Producers Retailers
Consumers:
Industrial
and
Household
Wholesalers
Physical
Ownership
Promotion
Negotiation
Financing
Payment
Ordering
Risking
Physical
Ownership
Promotion
Negotiation
Financing
Payment
Ordering
Risking
Physical
Ownership
Promotion
Negotiation
Financing
Payment
Ordering
Risking
Marketing Channel
Marketing Flows in Channels
Intermediaries participate in the work of marketing channel because they both add value and help reduce cost in the channel.
Marketing Flows
Processes flow through the channel
Done at different points in time by different channel
members
Flow of information
The eight universal marketing channel flows :
1. Physical possession
2. Ownership
3. Promotion
4. Negotiation
5. Financing
6. Risking
7. Ordering
8. Payment
Marketing Channel
Who Belongs To A Marketing Channel?
Manufacturers
Intermediaries (retailers, wholesalers, specialized)
End-users
Channel Members
Channel Captain :
An organization that taks the keenest interest in
the workings of this product or service and that
act as a prime mover in establishing and
maintaining channel links.
Marketing Channel
Channel format as Combination of
Channel Members
The various channel participants can combine in
many ways to create effective marketing
channels.
The range and number of channel members are
affected by the nature of demand by end-users,
and the captaincy of the channel can vary from
situation to situation.

Channel Analysis Framework









Decisions about Efficient Channel Response :
#Channel Structure :
What kind of intermediaries are in my channel? ;
Who are they? ; How many of them?
# Splitting the workload
With what responsibilities?
# Degree of commitment:
Distribution alliance?
Vertical integration / ownership?
# Gap analysis
What do i have to change?

CHANNEL DESIGN PROCESS :
# Segmentation
Recognize and Respond to target customers
service output demands









CHANNEL IMPLEMENTATION
PROCESS :
Channel Power:
Identify sources for
all channel members
Channel Conflict:
Identify actual and
potential source
Manage/ Defuse Conflict :
Use power source strategically, subject to
legal constraints
Goal :
Channel Coordination
Insight for specific channel institutions :
Retailing, Wholesaling and Logistics, Franchising
Segmentation
Splitting market into groups of end-users
Similar within groups
Different between groups
Based on demands for the outputs of the marketing channel
Added value
Service outputs

Example : Segments of book end-users




Marketing Channel
Channel Structure
Splitting the Workload
1. Types of channel members
2. Identities of specific channel members
3. Channel intensity : number of each type




Assign channel flows to channel members
Meet target segments service output demands
Reliable
Minimize total cost, while meeting service level
Marketing Channel
Degree of Commitment
Gap Analysis
Transactional relationships
- Pursue individual goals
- No guarantee of continued business
Alliances
- Enduring connections throughout
companies
- Pursue common goals
The difference between optimal and actual channels
Demand side gaps
- Service output demands are not being met
- Undersupplied
- Oversupplied
Supply side gaps
- At least one flow is costing too much
- Lack of expertise
- Waste
Closing gaps is difficult and costly
Vertical integration
- Own channel members
- Reasons
- Channel members do not exist
- Company can handle flows as efficiently
- Channel member is not sufficiently
committed
Marketing Channel
Channel Power
Channel Conflict
Ability to control other channel members
Necessary to implement channel design
May be used to optimize channel to benefit of all channel members
Actions of channel members prevent channel from
achieving its goals
Goal conflict
Domain conflict
Perceptual conflict

Marketing Channel
Manage/ Difuse Conflict
Channel Coordination

Marketing Channel
Identify sources of conflict
- Poor channel design
- Poor performance
Take action
- Exercise channel power
Result of
- Channel designed to meet service output
demands of target end-user segments
- Application of channel power to ensure smooth
implementation of the channel design
Ongoing process

Marketing Channel
End-User Channel Preferences

Product or service can be bought
in multiple way, ex; corporate
personal PC and online bill payment

Diff. end user have diff. demands

Identify how the end-user wants to
buy as well as what the end-user
wants to buy
Marketing Channel
Service Outputs
Bulk breaking
Spatial convenience
Waiting time
Product variety
Customer service
Information provision
Marketing Channel
Service Outputs
Bulk breaking
Enabling
customers to
buy in their
desired
quantities
Spatial
convenience
Reducing
customers
transportation
requirements
and search
costs
Waiting time
Time period
between
ordering and
receiving
products and
services
Longer waiting
times mean
customers must
be able to
predict needs
and plan further
in advance
Marketing Channel
Service Outputs
Product variety
Variety; diff.
classes of good
making up the
product offering
(the breadth of
product lines)
Assortment;
depth of product
brand/models
offered within
each generic
product
Customer service
Easing the
shopping and
purchase
process
Must be
sensitive to the
target end-user
Information
provision
Education of
customers about
product
attributes,
product usage
capabilities,
solutions
retailing, pre-
purchase
services, and
post-purchase
services
Marketing Channel
TABLE 1-1: SERVICE OUTPUT DEMAND DIFFERENCES
(an example of segmentation in the book-buying market)
Browser buying best-sellers to take on vacation Student buying textbooks for fall semester at college
Descriptor
Service Output
Demand Level Descriptor
Service Output
Demand Level
Bulk-
breaking
Im looking for some good
read paperbacks to enjoy.
Medium
I only need one copy of my
Marketing textbook!
High
Spatial
convenienc
e
I have lots of errands to run
before leaving town, so Ill be
going past several bookstores.
Medium
I dont have a car, so I cant
travel far to buy.
High
Waiting
and
delivery
time
Im not worried about getting
the books now I can even
pick up a few when Im out of
town if need be.
Low
I just got to campus, but
classes are starting tomorrow
and Ill need my books by
then.
High
Assortment
and variety
I want the best choice
available, so that I can pick
what looks good.
High
Im just buying whats on my
course reading list.
Low
Customer
service
I like to stop for a coffee when
book browsing.
High
I can find books myself, and
dont need any special help.
Low
Information
provision
I value the opinions of a well-
read bookstore employee; I
cant always tell a good book
from a bad one before I buy.
High
My professors have already
decided what Ill read this
semester.
Low
Marketing Channel
Service Outputs
Service output demanded by meaningful
segment of end-user

Costly activities of channel members
Marketing Channel
Segmenting the Market
Identify all relevant service outputs
A priori segmentation
Service output segmentation
- Maximally similar within groups
- Maximally different between groups
- On dimensions that matter

Marketing Channel
FIGURE 2-1: IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS SEGMENTS BUYING A NEW
HIGH-TECHNOLOGY PRODUCT
Manufacturer
(New High Technology Product)
Full-Service
Responsive
Support
References/
Credentials
Lowest
Total
Cost
Pre-Sales
Sales
Post-Sales
VARs
Associations,
Events,
Awareness
Efforts
Third-
Party
Supply
Out-
source
Dealers
TeleSales/
TeleMktg
Internal Support
- Install, Training & Service
Group
Segment


Source: Reprinted with permission of Rick Wilson, Chicago Strategy
Associates, 2000.

Marketing Channel
Meeting Service Output Demands
Costprohibitively expensive
- Decide whether or not to provide the service
- Decide whether to cover the cost or explicitly charge the customer

Competitivewhat do the competitors offer?
- Providing extra service may not affect market share

Ease of entry
- New competitors

Other elements of excellence in offering
- Very low price
- Truly superior product

Marketing Channel
The Role of Service Output Demand Analysis
in Marketing Channel Design
Assess segment attractiveness

Select segments to target and not to target

Customize the marketing channel for each
targeted segment
- Create new marketing channels
- Modify existing marketing channels
Marketing Channel
Marketing Channel
Market Testing
The objective

1. to get insight about opportunity in obtaining solid forecast of dollar
and unit sales.
2. As diagnostic information to revise and refine anything about the
launch.

Marketing Channel
The Market Testing Decision
Marketing Channel
Factor to be considered in market test decision
Any special twists on the launch
What Information is needed
Cost
Nature of the marketplace
Marketing Channel
Methods of market Testing
Pseudo Sale : refers to the presentation of the product directly to its
potential consumers in order to record their thoughts about it and
then use it to figure out if the product will have a market or not.
Controlled Sale : the newly developed product is actually displayed
for sale, but the only difference is that it is controlled.

Full Sale : all variables are go, including competition and the trade.
Marketing Channel
Methods of market testing and where are used
Marketing Channel
Pseudo Sale Method
Speculative Sale
the marketing team presents the product to the potential
consumers. Once the presentation is over, the potential
consumers are free to ask any questions about the product to the
marketing team. And of course, here the marketing team must
make sure to reply to them in a convincing manner. The next job
then is figuring out how much the potential customers are willing
to pay for the product. In the end, the marketing team asks them
whether they would be interested in buying it. In the process, all
the reactions and answers of these potential customers are
recorded.




Marketing Channel
Pseudo Sale Method
Simulated Test market
Simulated test market refers to a marketing research technique
where consumers are subjected to engineered advertising and
purchase decisions to examine their response to a new product or
service.

Marketing Channel
Control Sale Method
Informal Selling
In informal selling category, a specific location is picked where a
salesperson trained by the marketing team is stationed with the
new product. This location can be anything ranging from trade
show to hallway of a mall. As people come to see this product the
salesperson is supposed to give them a presentation of the
product. After hearing his explanation if the people buy the
product and then again come back to buy another portion of it
after a week or two then the marketing team sees it as a good
sign.

Marketing Channel
Control Sale Method
Direct Marketing
direct marketing is an "interactive system of marketing which
uses one or more advertising media to effect a measurable
response and/or transaction at any location, using mail,
telephone, TV, Fax, or computer network.
Marketing Channel
Control Sale Method
Minimarket
the marketing team selects a few different stores (limited outlet)
for displaying their newly developed product. These stores
happen to be very specific. They must be close to the potential
customers who are in need of the product and also their sales
people. In majority of the cases, a marketing team picks those
stores which already have old connection with the company of
the newly developed product. However, the goal remains the
same. The marketing team wishes to see if the potential customers
buy the product and makes repeated purchases in later time.
Marketing Channel
Full Sale Method
Test Marketing

Product development stage where the product and the marketing
program are introduced on a small scale into one or more selected
cities or market areas. Test marketing provides the marketer the
opportunity to observe consumer behavior toward the product in
a real market situation, gain experience with the marketing
program, and assess potential problem areas before launching a
full-scale product introduction.


Marketing Channel
Full Sale Method
Test Marketing
Marketing Channel
Full Sale Method
Rollout
Sometime called tired marketing or limited marketing is a term
for the introduction of a new product or service to the market and
often accompanied by a strong marketing campaign to generate a
large amount of consumers interest.
Marketing Channel
Full Sale Method
Pattern of information gained at various stage of rollout
Marketing Channel
Marketing Channel