TARGET MARKETS AND

CHANNEL DESIGN STRATEGY

Week 11
Learning Objective
Determine the role of channel managers in defining
target markets

Select the efficient channel design strategy that would

best fit the determined target market
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 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 the national statistics office for

geographical entities such as districts,
regions/divisions, towns.

Postal Zip codes

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?
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 sub dimensions:

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
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 1.Small quantities
2.Self-service 2.Assistance by salespeople
3.One-stop shopping 3.Buying from several
4.Impulse buying stores
5.Cash 4.Extensive decision
6.Shopping at home making prior to purchase
7.Expending substantial 5.Credit
effort through comparison 6.Shopping at stores
shopping
7.Expending little effort
8.Demanding extensive
service 8.Demanding little service
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
Conclusion:
In order to analyze markets effectively
for channel design purposes, a
framework consisting of market behavior
dimension, which breaks down into four
sub dimensions of when, where and how
the market buys as well as who buys