segmentation for marketing channel design for service output

8/10/2019 Segmentation for Marketing Channel Design for Service Output

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Segmentation for MCD : Service

Outputs Is dependent on the end-users

demands for a product/ service

Demand into notwhat they want to

consume but howend-users want to

buy and use the products/ services


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Survey Resultsof grocery shoppers

11% found grocery shopping fun

83% thought it took too much of time

50% felt saving time is more importantthan money

85% said they were looking at saving

time 93% were looking at making their lives

simpler


3/25

Peapod Shopping Steps

Who performs this step

Shopping process step GS Peapod

Plan what to buy Shopper Shopper

Travel to grocery store Shopper Peapod

Walk aisles of store Shopper Peapod

Pick & choose items Shopper Peapod

Checkout process Shopper Peapod

Bag groceries Shopper Peapod

Transport groceries home Shopper Peapod

Unpack groceries Shopper Shopper


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Peapod Operations Initially orders were taken on-line through a

proprietary software. Peapod employees then shopped the aisles of actual

Jewel-Osco stores to fill each order & delivered at aspecified time

In October98 they started the WWW based accesssystem

The new software made gave an option of speediercheck out, nutrients & ingredients list, & acumulative list of what has been purchased during an

on-line shopping trip. In December 1998 Peapod started their 1st dedicated

distribution center leading to a reduced delivery coststo customers, efficient assortment of grocery, diary &frozen products & to be replenished just in time basisby suppliers


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Peapod Operations

Perishable products are planned to be Cross-

docked implying that they will sit in inventory

for a minimal amount of time They have also introduced a new transportation

routing to lower costs of delivery

Delivery charges varies from $ 9.95 per order with

no monthly fees to $5 per order plus $4.95 flat

charges per month or unlimited deliveries for

$19.95 per month.


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Peapod Operations

In August 98 they started pre selected bundles of

products to fit niche buying occasions like the

holiday season, new baby gifts, Christmas giftsetc., with deliveries across the nation

They also tied up with Greatfoods.com to give

services of packaged foods

This gave them an opportunity to make a brand

name across the country even where they were not

present


7/25

Relevance of peapod operations to

shoppers

Research done by Chicago Strategy

Associates found three main segments of

grocery shoppers

Low priced & comparisons segment - 43%

Efficiency seekers segment - 39%

Branded products delivered segment - 18%


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shoppers Branded products segments placed a very high importance

on availability of specific brands & off these 44% were

high internet users which made them the target customers

for on-line shopping.

Also off these segments the branded products segments

placed high importance on home delivery & said that it

enhanced their shopping experience.

75% of the people in this segment were females & fromdual income families

Also 70% and more of families had an income of $60,000

annually


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shoppers

Anderson consulting has through a study

found that 42% of Americans would like to

have the comfort of shopping from homefor commodities or staple items

Also that by the year 2005, 20% of retail

grocery volume is expected to be from on-line shopping


10/25

Louis P Bucklins frame work for marketing

channels

Other things being equal ( in particular

price, end users will prefer to deal with a

marketing channel that provides a higherlevel of generic service outputs like:

Bulk breaking

Spatial convenience Waiting or delivery time

Product variety


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Bulk Breaking

Ability of the end user to buy in desired smallquantities though the original produced packagingcould be big.

Purchases move directly into consumption ratherthan into inventory

Lesser product handling by the end user

Lesser storage space & costs

Increases the service output of the MC Which could lead to an increased price for the end

user


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Spatial convenience

Is the distance convenience of shopping to the enduser.

It increases customer sat because of the shorter

distances involved. Exs are neighborhood supermarkets, convenience

stores, vending machines, gas stations etc.,

Companies like Grainger in the US offer spatial

convenience to business customers by offeringthem their requirements by having branches atdistances of 20 minutes from most businessestablishments


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Waiting time or delivery time

Is defined as the time period that the end user mustwait between ordering & receiving goods/service.

Quick delivery is highly valued by industrial users The longer the waiting period for a product/

service higher is the compensation (i.e., the lowerthe prices) they receive.

The waiting period for a product/ service isindicative of the value being place by consumersfor that product/service


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Breadth of assortment

Wider the breadth of assortment or the

availability of product variety higher is the

service outputs of the channel The higher the service output of the

channel, higher is the distribution costs

because of the inventory carrying costswhich is passed onto the end user.


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Trends in B2B buyer preferences

Outsourcingrefers spinning off particular

corporate activities or functions to outside

providers. The outside providers are generally specialists

with up-to-date technological know how& lower

costs due to economies of scale.

Some of the activities that are outsourced are

invoicing, shipping, financing, selling itself, etc.,


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Downsizing refers to the reduction in

number of employees in a firm.

Hence the existing employees would haveto indulge in multi tasking & would not

have time to indulge in service output

functions they used to earlier. This could again lead to outsourcing


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Alphabet soup refer to the various initiatives

undertaken in the management of business

channels wherein there are acronyms of alphabetsto describe them like JIT, ECR, etc.,

These methodologies have increased an increase

in business buyers demands for quick delivery,

spatial convenience, bulk breaking & assortment& variety.


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Trends in consumer preferences

Poverty of time is well summarizedinthis

statement We are desperate for a few minutes of

rest. If we did not have help, we would fall down Hence it becomes imperative for channel

managers to design channels to offer one stop

shopping experience.

Design more non store based channels for retailing

like having a catalog , on line shopping etc.,


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Increased knowledge about products &availability Customers are well informed about

product characteristics, availability & pricing

This could be because of an increased mobility ofcustomers today in comparison to the past.

It thus becomes important for organizations to findout the areas of awareness of customers & work

on them. If customers are aware of product alternatives it

becomes imperative for companies to work on thedegree of competitiveness.


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Increased polarity of incomes

Increased number of self employed workers


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Segmenting the markets by SODs

It is important to study understand all the relevantSODs by different end-users by conductingqualitative focus groups or one-on-one exploratory

interviews. These interviews will generate unbiased list of all

the service outputs that apply to the particularproduct & market in question

Research should be designed & conducted fromstart to define channel segments that best describeend-users service output demands & more on their

purchasing patterns.


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Segmenting the markets by SODs

The focus is more on the purchasing pattern isbecause end-users preferred shopping & buyinghabits rarely correlate with their preference forschemes offered by the management.

The channel segmentation process should bedesigned to produce groups of buyers who are : Who are maximally similar

Who are maximally different

Differ on dimensions that matter to building adistribution system.


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Meeting service output demands

One of the basic tenets of marketing is that the seller has toidentify & then meet the needs of its end-users.

Similarly it means in creating & running a marketing

channel systems the seller has to keep in mind the serviceoutputs demanded by targeted end-users, the creation &maintenance of which could be time consuming &expensive.

The question arises whether there are market conditionsunder which a channel manager can profitably serve asegment in the market without fully meeting the SODscharacterized by them. Ex Peapod


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The key factors determining whether & how quickly torespond to knowledge about unmet service output demandsinclude the following

Cost : At times meeting the SODs of end-users could froma supply perspective become so expensive that the end-

user is unwilling to pay that price. Ex shippingtechnologies

Competitiveness : Here the question that arises is whetherany existing competitors can beat the channels currentservice output provision levels. Hence the added cost of

increasing the service outputs of this channel will notincrease the market share of the channel. However ifcompetitors increase their channel output service levels itwould become imperative for the existing channel toincorporate necessary changes


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Ease of entry: Competition is not only from existing firms,channels already existing or entrants to the industry butfrom those channels that fail to deliver the service outputsof the end users. This is because competition can leveragetechnology to meet those service outputs ex Citibank

ATMs. Hence it is important while formulating a channelto block entry of new competitors.

Other elements of excellence in marketing offering: Themarketing channel is one part of the overall marketing mix.A truly superior product or a tremendously low price canlead end users to buy through a channel that does not quitemeet their service output requirements. This just meansthat the existence of an unmet service output demandmeans there is a potential threat to the channel that offerssome but not all the elements of the marketing mix tailoredto the target end users demands.

segmentation for marketing channel design for service output

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