Place (Distribution)

and Market Research

Place or Physical Distribution
Some Basics
 What is a marketing channel?
 Why is a marketing channel needed?
 Customers’ desire for product assortment
 Better rate of return on core business
 Improve efficiencies of distribution

M C M C

M C M D C

M C M C
Unique Role of Channel Members
 Collaborators
 Common interest to make the sale and grow
 Share information

(Increase size of the pie)

 Competitors
 Want more share of the margin
 Interested in selling competitor’s products

(Compete over share of the pie)

Channel Functions
Physical Distribution
 Ordering (assortment, lot size,
availability..)
 Transportation and logistics
 Holding inventory
 Risk-taking
Channel Functions
Selling activities
 Promotion & Demand Generation
 Contact with prospective customers
 Negotiation
Channel Functions
Information/market feedback
 On Product, Customer, Competition...
Channel Functions
Service
 Customization of augmented product
 Financing
Channel Member’s Economic Role

Channel
Manufacturer Customer
Member

Transferred Business Costs Transferred Business Costs

Inventory Inventory
Order Handling Freight
Selling Storage
Credit Order Handling
Characteristics of Distribution
Schemes

Distribution Number of Market Product Margin

Intensity Distributors/ Coverage Category
Retailers

Exclusive One Less Specialty High

Important

Selective Limited but Moderate Specialty and Moderate

more than one some Shopping

Intensive All suitable Critical Convenience Low

Channel Management Decisions
 Selecting channel members
 Financial capability
 Stake in your firm and switching costs
 Category experience
 Organizational skills
 Motivating Channel Members
 Promotions
 Training services
 Financing options
 Evaluating Channel Members
 Sales quota attainment
 Customer service levels
 Treatment of lost and damaged goods
Distribution systems
 Conventional marketing channel
 M-W-R-C
 Vertical marketing system
 MWR-C
 Horizontal marketing system
 (M1+M2)-C
 Hybrid marketing system
 M-W-R-C1
 M-C2
 Channel Conflict
 Vertical
 Coca-Cola and bottlers wanting to bottle Dr. Pepper

 Horizontal
 Some Ford dealers complaining about other dealers
being too aggressive in their pricing
Managing Channel Conflict
 Diplomacy
 Focus on common goals
 Exchange of personnel
 Joint membership in trade associations
 Arbitration/mediation
Steps in Channel Design
Information requirements
1.Find out what Logistics (variety, convenience, waiting time, lot size)
your customers What tradeoffs do they make: between information, logistics
and price?
want Use tradeoff information to generate segments
Explore real & hypothetical alternatives
2. Identify Types, Number (Exclusive-Selective-Intensive), Terms
Alternatives, Are options feasible? What kind of support
needed? Costs and their implications in terms of
Determine Costs required market share increase, etc.
Get top mgt. reactions to effects on efficiency,
3. Bound the effectiveness, and flexibility
“ideal”. Impose Develop list of objectives for distribution from top mgt.
Legal restriction, prejudices and biases
Constraints
Other managerially relevant constraints
Benchmark existing channel capabilities and competitors’
4. Evaluate and channels w.r.t. customers’ channel requirements
Compare Compare “ideal” system from Step 2. with Step 3. constraints
Use Economic Criteria (breakeven analysis: when are various
Alternatives structures suitable); Control Criteria; Flexibility Criteria
Marketing Research
Key Points
 Why is Marketing Research
necessary?
 What is the Research Process?
Value of Information
 Decisions involve risk and uncertainty
when information is imperfect
 Information eliminates (or at least
reduces) risk and uncertainty

Purpose of Marketing Research: To collect

useful information.
How can Marketing Research
help?
 It can reduce risk and uncertainty
 It takes out some of the guess
work involved in making marketing
decision
 It can supplement (not replace)
good sense
Why is Marketing Research
Necessary?
 Competitive Pressure
 Expanding Markets
 Increasing Customer
expectations

Mistakes can be costly

What do companies want to know?
• Monitoring performance (sales, margins,
share, satisfaction)
• Idea generation (ad copy testing; new
product concepts)
• Industry evaluation (growth rate;
technological change)
• Customer Analysis (who they are; why they
buy; how to segment them)
• Competitor analysis
• Marketing mix evaluation
What do companies want to know?

What variables affect sales?

Patterns of product use
Response of marketing channels
How best to segment market?
What segments exist?
How will consumers react?
Impact of price change
 Why Study Research Methods?

• Information of higher accuracy

is more valuable
• Study of research method gives
insight into accuracy and reliability

of information being generated

Marketing Research Process
1. Formulate Research Problem

2. Develop Research Plan:

Exploratory, Descriptive, Causal

3. Implement Plan:
a. Identify Data Source: Primary, Secondary
b. Develop Questionnaire Design, Sample size

4. Analysis and Interpretation:

a. Analysis
b. Reporting
Stage 1: Problem Formulation
 Decision Problem: What should
the manager do?

 Research Problem: What

information is needed, and how
to obtain the information?
Stage 1: Problem Formulation
Examples: Examples:
Decision Problem: Research Problem:
 Develop a package
for a new product
 Increase store traffic

 Develop value-added
service for mobile
phone
Stage 1: Problem Formulation
Examples: Examples:
Decision Problem: Research Problem:
 Develop a package Evaluate effectiveness of alternative
for a new product package design
 Increase store traffic Measure store image and current
store choice decisions.
 Develop value-added Study how target segment values
service for mobile alternative value-service.
phone
Stage 2: Develop Plan and Research
Design
Types of Research Designs:
 Exploratory Research: To gain ideas and insights
 Newspaper facing decreasing sales generates possible explanations
 Descriptive Research: To obtain summary measures
 Trends in lifestyle of current users
 Causal Research: For cause-effect connection
 How people react to a newspaper’s topic selection and space allocation

Choice of research design depends upon research objectives

3. Implement Plan: Sources of Data
 Primary: Data gathered for the specific problem
at hand
 Demographics, psychographics, attitudes, intentions,
behavior
 Secondary: Data that have been previously
gathered for some purpose. Relatively
inexpensive and fast, but inaccurate and ill-
fitting the problem
 Internal: Sales data, warranty cards
 Published: Directories, periodicals, statistical sources
 Commercial: Ad exposures, scanner data, store audits
Research Approaches: Ways of
gathering Primary Data
 Observation (and Focus groups)
 Best suited for exploratory research
 e.g., people meters, checkout scanners
 Survey
 Best suited for descriptive research
 Design of survey is critical - wording, ordering,
response format
[Note: all surveys should be pre-tested]
 Experimentation
 Best suited for causal research
3. Implement Plan: Developing the
Questionnaire

 Specify what information is sought

 Determine method of administration
 Determine content, wording, response format
for each question
 Determine question sequence
 Pretest questionnaire and revise if necessary
3. Implement Plan: Sampling

 Simple random sampling: Each element of population

has an equal probability of being selected
 Stratified sampling: Entire population is divided into
strata, and do simple random sampling from each
stratum
 Cluster sampling: Entire population is divided into
clusters –each representing the population, and do
random sampling of clusters
 Key considerations:
 Cost: Sample size, method of data collection
 Information accuracy: Sample representativeness,
respondent error, administrative error
 Contact methods
(for primary data collection)
 Mail
 Telephone
 Internet
 Personal
 individual (one-on-one)
 group (focus groups)
 Sampling Plans (for primary data collection)
 Who to survey? (individuals? families?)
 How many people?
 Sampling procedure?
Q: How reliable and/or valid are the results?
Evaluation of Contact methods
Contact methods
Mail Phone Personal Internet

Poor Good Excellent Excellent

Flexibility
Good Fair Excellent Huge
Quantity
Exc. data Fair Poor Excellent
Fair Excellent Fair Limited
Interviewer Effects
Poor Good Good Very Fast
Sample
Poor Control Good Good Poor
Speed
GoodCollection
Fair Poor Very Low
Response Rate
Costs
 Typical Problems in Wording Questions
PROBLEM SAMPLE QUESTION
Leading question Why do you like Wendy’s fresh
meat hamburgers better than
those of competitors made with
frozen meat?
EXPLANATION
Consumer is led to make
statement favoring Wendy’s
hamburgers

Ambiguous question Do you eat at fast-food What is meant by word

restaurants regularly? regularly-once a day, once a
Yes No month, or what?

Unanswerable What was the occasion for your Who can remember the
question eating your first hamburger? answer? Does it matter?

Two questions Do you eat Wendy’s hamburgers How do you answer if you
in one and chili? eat Wendy’s hamburgers
Yes No but not chili?
Typical Wording Problems (continued)
Problem Sample question Explanation
Non-exhaustive Where do you live? What do you check if you
question At home In dormitory live in an apartment?

Mutually What is your age? What answer does a 40-

non-exclusive Under 20 20-40 40 and year old check?
answers over
4. Analysis and Reporting
 Did the research meet its objectives?
 Was the information helpful in making the
decision? Did the managers use the information?
 Was there an ‘aha’ factor?
 Did the analysis throw open some additional
issues?
In Sum: Marketing Research
1. Formulate Research Problem

2. Develop Research Plan:

Exploratory, Descriptive, Causal

3. Implement Plan:
a. Identify Data Source: Primary, Secondary
b. Develop Questionnaire Design, Sample size

4. Analysis and Interpretation:

a. Analysis
b. Reporting