• Channel Design, Back Then• Unfettered Customers• Rethinking Channel Design• Building New Channel Strategies• Go-to-Market Systems• Assessing Your Capabilities• Devising Your Channel Strategy• Implementing Your Strategy• Closing Remarks

Contents

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• Based on market segmentation– Demographics– Income level and shopping behavior

• Main assumption– People with common demographic traits will shop & buy in same way

• Customer type– Mainly loyal– Made purchases from retailers, which served them with information and advice– Stuck to the retail channels from beginning to purchase

Channel Design, Back Then

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• Traditional channel design is defunct for such customers

• They can use any channel they want, w/o commitment to a single channel– Use of high-touch channels (i.e. retailers with higher prices and additional services) for

information and product advices– Buying the advised product/service from a cheaper channel

• Causing an increase in companies’ “stranded” assets– Physical and organizational capabilities– Highly trained salesforce– Abundant, empty retail floor space

• Research suggests that many customers may use multiple channels, both for B2B and B2C sectors.

Unfettered Customers

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Loyal and Unfettered Customer

Promotions

•Conventional channel•Loyal customers•Mainly brick-and-mortar

Purchase

Traditional Channel

GatheringInformation

Benefit and CostComparison

Purchase

Channel A Channel B

GatheringProductInformation

•Today’s channels (retailers, e-businesses)•Unfettered customers (channel surfers)•Use of high-touch channels for information

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• Demographics can tell you what people shop for

• But not how they shop – heterogeneity of shopping behaviours

• Customer segmentation needs to be rethought with regard to 4 classifications:– Habitual Shoppers – tendency to shop from same places, in same ways– High-value deal seekers – frequent channel surfers, bargain hunters– Variety-loving shoppers – informed by high-touch services, buy from favorite channel– High-involvement shoppers – informed by all channels, buy from cheapest channel

Rethinking Channel Design

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Buyer Types & Purchasing Stages

Rethinking Channel Design

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• Discover how people shop

• Conduct market research

• Base your strategy on research results

• Define pathways:– Reflecting customer behaviours– Serving their needs– Influencing their choices– Returning highest value to your company

Building New Channel Strategies

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Go-to-Market Systems

Open System

• Fragmenting/unbundling your offerings and delivering the ones your company is expected to be paid for

• Letting the customers choose from your offerings – e.g. service, convenience, customization

• Examples:– Toyota’s website featuring a link to

Edmunds, an impartial car rating service, in order to help customers compare cars

– Toyota’s Boston dealership, adopting a transparency policy that informs customers about cars’ retail prices and dealer’s cost

Captive System

• Keeping your offerings bundled

• Binding activities together in the buying process

• Examples:– Staples – if a product is not available in

the store, customers can order it from in-store kiosks and arrange delivery

– Staples stores also have print catalogues – customers can choose items from catalogue and order from home

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• Level of Product and Service Integration– If there is a high level of customization and servicing requirement, captive systems are

more suitable

• Assortment Requirements– One-stop shopping – If customer needs/desires a wide range of products/services,

relatively open systems are more essential

• Product Availability– Open systems are more desirable if your customers:

• cannot predict the amount/quantity of your product/service they require, or• opt for purchasing your product locally, or• need immediate replacements or spare parts

• Product Quality Assurance– If product quality assurance is essential, captivity can offer direct access to suppliers

Assessing Your Capabilities

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• Specializing in One Phase of Distribution– Concentrating capabilities and resources to a single function– Building links to other function providers for complementary functions

• Coordinating the Information Flows of Specialists– Works well when many undifferentiated competitors are present, thus the channel may

require variety– Having a competitive advantage in customer relationships is important– Examples: yemeksepeti.com, Re/Max

• Combining Several Channel Roles– A captive channel is more suitable, and having an advantageous position in product or

process competence is important– Improvement/development in multiple channels – investing in a channel can also help

improve other channels

Devising Your Channel Strategy

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• Exploiting Customer Relationships– A captive channel is more suitable– A competitive advantage in customer relationships is important– Process efficiency is not a requisite– Focusing on single activities that have tight control over important relationships– Lock-in on loyal customer base and ensuring repeated transactions

Devising Your Channel Strategy

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• Noah Principle: It doesn’t suffice to predict rain, it is much more important to get everybody on the ship

• Companies should have these goals:– Shared Understanding

• Harmony – each go-to-market channel should complement and support other channels• Between-channel competition may harm companies’ relationships with unfettered customers

– Cross-Channel Performance Metrics• Restructuring the company’s measurement criteria with regard to its prior customer profile• Most companies track total cost to serve customers, in case of channel shifts

– New Management Information• Timely info is essential in keeping track of customer behaviour and total cost to serve them• Change in customer behavior is also traceable by data mining

– Targeted Education and Learning• Implementation of comprehensive personal and organizational development initiatives• Trainings are also instrumental in overcoming resistance to change

Implementing Your Strategy

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• Granting autonomy for the customers – don’t interfere directly with customers’ preferred purchasing methods

• Conventional channels try to force customers to follow predesigned paths

• Try to retain the adaptability of your channels to changes – do not rule out a channel altogether if there is a decline of demand in that channel

• Regroup your customers with respect to strategies they employ, when they buy your products/services

Closing Remarks

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THANK YOU

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