E-Marketing

Channels
Lecture two – Targeting and
Segmenting
Dr. Eng. Majd AbedRabbo
Certified Omnichannel Advisor
Green Belt – Lean Six Sigma
Fellow of the UK Higher Education
 Today’s Learning Objectives
01 Understand the central role played by end users and their demands in
the design of marketing channels. 

02 Recognize how to divide a market into channel segments for the

purposes of marketing channel design or modification. 

03 Evaluate when and whether to try to meet all expressed service

output demands in the short run in a particular market.

04 Describe the relationship between service output demands and

solutions to overall channel design problems. 
 Teaching Schedule

Wk 2 Wk 4 Wk 6-7 Wk 10

Channel Omnichannel
Channel Strategy
Channel Analysis
Relationship
Segmenting
in Different
& Targeting
Formats

Wk 1 Wk 3 Wk 5 Wk 8-9 Wk 11

Your Text Your Text

Introduction Auditing Designing Channel Revision
to marketing Marketing Marketing Power,
channels Channels Channels and Conflicts,
Structures Strategies
 Marketing Channels and End-Users
Developing a marketing channel strategy, similar to
many other marketing activities, must start with
the end user even for a manufacturer that does not
sell directly to end users. 

A channel manager needs to understand the nature

of end users demands before they can design an
effective channel that meets or exceeds such
demands. 

The most useful insights for channel design are not about what end users want to
consume but rather how they want to buy and use the products or services being
purchased.
 Why Should We Segment?
• End users (whether business to business buyers or individual consumers) purchase
products and services of every sort. Yet in most cases, they consider more than just the
product important.
• A particular product or service can be bought in multiple ways. The product stays the
same, but the method of buying and selling the product and the associated services
that accompany the product vary.
• Even when the product can be standardized across global markets, the way the user
wants to buy the product often remains unique to each country.
• Thus, managers need to segment end users needs, even if standardized approaches can
work for advertising or product design.
 Segmentation Criteria – Service Outputs Framework

Bulk
Channel systems remain viable over time Breaking
because they can perform duties that reduce Spatial
Customer
end-user search, waiting-time, storage and Convenienc
Service e
other costs.
Service
These are the service outputs of the channel output
that makes a channel more preferred if else s
being equal (i.e. same product) Information Waiting
Sharing Time
Product
Assortment
 Bulk Breaking
Refers to the end users ability to buy a desired number of units, even if the product or service
originally was produced in large, batch production lot sizes = purchases more easily, support
consumption, reducing the need carry unnecessary inventory.

The more bulk breaking the channel does, the smaller the lot size end users can buy, and
the higher is the channel s service output level = more willing to pay a higher price that
covers the costs to the channel of providing small lot sizes.
 Spatial Convenience & Waiting Time
Wholesaler
Retailers

Channel

Spatial Convenience provided market decentralization in wholesale and/or retail outlets

increases consumers satisfaction by reducing transportation requirements and search costs.

Waiting time is the time that the end user must wait between ordering and receiving the
goods or postsales service. The longer the waiting time, the more inconvenient it is for the
end user, who must plan or predict consumption levels far in advance.
 Product Variety and Assortment
When the breadth of the variety or the depth of the product assortment available to end
users is greater, so are the outputs of the marketing channel system.

Variety describes generically different classes of goods that constitute the product
offering, namely, the breadth of product lines. The term assortment instead refers to the
depth of product brands or models offered within each generic product category.

Higher
Higher Higher distribution
Assortment Variety costs and
inventory
 Customer Service and Information Sharing
• Customer service refers to all aspects of easing the shopping and purchase process for
end users as they interact with commercial suppliers or retailers. Excellent customer
service can translate directly into sales and profit.
• Information sharing refers to education provided to end users about product attributes
or usage capabilities, as well as pre and postpurchase services.
 Segmenting End-users by Service Output
Service outputs clearly differentiate the offerings of various
marketing channels, and the success and persistence of
multiple marketing channels at any one time suggests that
different groups of end users value service outputs differently.

Thus, we must consider how to group end users according to

Low sensitivity
their service output needs, by segmenting the market into
groups of end users who differ not in the product(s) they want
to buy, but in how they want to buy.

For example, there is a segment of buyers who are both very

service sensitive and very price insensitive and who can be
profitably served through a specialized channel.
High sensitivity
 Steps for Segmenting The Market
Generate a comprehensive list of all the potential service outputs
desired by each end user for the products being offered

Divided the attained services into different segments

Naming segments to group them by characteristics

 Step 1: Comprehensive list of Service Outputs

Use market research tools (interviews, focus groups, observations, etc.) to highlight the set
of demands needed by different users.

E.g.: Where would you possibly buy your weekly groceries? , “Can you name the journey you
followed when buying X product?
Step 2: Divide the attained services into different segments
Channel members (like intermediaries) often sort product/services to enable access to companies’
offerings.
E.g.: Manufacturers typically produce large variety of products, which customers might not be
fully interested in.

Alternatively, research might be designed and conducted to define channel segments that best describe
end users service output needs and purchasing patterns.
This paths preferable, because end users preferred shopping and buying habits rarely
correlate with their with that management and advertising agencies usually employ in their
segmentation strategies.

Channel segmentation should be designed to produce groups of buyers who:

(1) Maximally similar within a group;

(2) Maximally different between groups;
(3) Differ on dimensions that matter for building a distribution system.
 Step 3: Naming segments to group them by characteristics

When the overall market has been segmented into

similar groups of end users, according to their
preferred channel service outputs, price sensitivity, or
other product specific factors, the channel manager
should name each segment to capture its identifying
characteristics.

Naming each segment facilitates internal communication and organizational alignment,

which is helpful in executing an effective channel strategy. 
Example: Channel Segments
Template for Channel Segmentation
Example of Service Outputs
 Targeting End-User Segments (1)

After segmenting the market and identifying each end user segment s distinct service
output needs, the channel manager can integrate these insights into an overall marketing
channel design and management plan.

In particular, this information should be used to assess segment attractiveness, target a

subset of the segments identified, and customize the marketing channel system solution
used to sell to each targeted segment.
Targeting a channel segment means choosing to focus on that segment, with the goal
of achieving significant sales and profits from selling to it.
 Targeting End-User Segments (2)

If the channel segmentation process has proceeded appropriately, targeting multiple

channel segments for channel system design purposes implies the need to build different
marketing channels for each segment.

Segmentation can be a costly and hard to manage activity. Hence, channel managers
likely choose an attractive subset of all the identified segments to target. We thus
suggest a corollary to the targeting concept: Targeting means choosing which segments
not to target.
Segmented service output demand information can help the channel manager choose which
segments offer the greatest relative growth and profit opportunities for targeting. Even though other
segments also offer some potential, only the best should be chosen for targeting.

This includes the size and sales potential of the targeted segment, the cost to serve them, the fit with
the selling firm s competencies, and the intensity of competition for their business, among other
factors.
 Targeting End-User Segments (3)

Ideally, the end user analysis performed on service outputs should support segmenting,
targeting, and positioning (channel design).

Pursuing a channel strategy without knowing what the marketplace wants in its
marketing channel is risky!. 

Considering the expense of setting up or modifying a marketing channel, it is prudent to

perform the end user analysis before proceeding to upstream channel decisions, which
are also critical to any successful channel strategy.

Performed correctly, an analysis of target segments service output needs can be the
foundation for higher profits, due to high margin sales with intensely loyal end users. 
 Activity

Using the service output segmentation template, provide examples for each
customer need for a luxury brand bag manufacturer.

Consider the different customers that might shop there and how you intend to
serve them.