Channel-Design Decisions

To design a marketing channel system, marketers analyze customer needs and wants, establish channel objectives and constraints, and identify and evaluate major channel alternatives.

Analyzing Customer Needs and Wants

Consumers may choose the channels they prefer based on price, product assortment, and convenience as well as their own shopping goals (economic, social, or experiential).¹⁴ Channel segmentation exists, and marketers must be aware that different consumers have different needs during the purchase process. Even the same consumer, though, may choose different channels for different reasons.¹⁵ “Marketing Insight: Understanding the Showrooming Phenomena” describes some of the new ways customers are using multiple channels as they make their purchases.

Understanding the Showrooming Phenomena

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Consumers have always shopped around to get the best deal or broaden their options, and now selling via mobile phone and tablet offers a new twist. Showrooming lets buyers physically examine a product and collect information in a store but make their actual purchase later, from the retailer online or from a different retailer, typically to secure a lower price. One study showed that more than half of U.S. mobile phone users, especially younger ones, have used their phones to ask for purchase advice from a friend, to look at reviews, or to search for lower prices while shopping.

Mobile has become a top priority for many retailers as a means to combat showrooming. Target has expanded its use of mobile media, incorporating QR codes, text-to-buy features, and new checkout scanners to make mobile coupon redemption easier and faster. Many retailers are also making the

in-store experience more informative and rewarding. Guess, PacSun, and Aeropostale equip in-store staff with iPads or tablets for sharing in-depth product information with shoppers. One study found that 70 percent of a showrooming audience was more likely to buy from retailers with well-designed Web sites and apps, strong multichannel support, and price comparisons via QR codes.

Sources: “Showrooming Threat Hits Major Chains,” www.warc.com, March 1,2013; Lydia Dishman, “Target’s Cartwheel to Bridge the Digital and Brick-and-Mortar Divide,” Forbes, May 9, 2013; “‘Showrooming’ Grows in U.S.,” www.warc.com, February 4, 2013; “Showrooming to Shape U.S. Holiday Sales,” www.warc.com, November 16, 2012; Hadley Malcolm, “Smartphones to Play Bigger Role in Shopping,” USA Today, November 15, 2012; Maribel Lopez, “Can Omni-Channel Retail Combat Showrooming,” Forbes, October 22, 2012; Australian School of Business, “Stop Customers Treating Your Business as a Showroom,” www.smartcompany.com.au, October 8, 2012.

Channels produce five service outputs:

• 1. Desired lot size—The number of units the channel permits a typical customer to purchase on one occasion. In buying cars for its fleet, Hertz prefers a channel from which it can buy a large lot size; a household wants a channel that permits a lot size of one.
• 2. Waiting and delivery time—The average time customers wait for receipt of goods. Customers increasingly prefer faster delivery channels.
• 3. Spatial convenience—The degree to which the marketing channel makes it easy for customers to purchase the product.
• 4. Product variety—The assortment provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, though too many choices can sometimes create a negative effect.¹⁶
• 5. Service backup—Add-on services (credit, delivery, installation, repairs) provided by the channel.

Providing more service outputs also means increasing channel costs and raising prices. The success of discount stores such as Walmart and Target indicates that many consumers are willing to accept less service if they can save money.