Session Ten:
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
M
C
M
M
C
M
C
D
C
C
Marketing Channels
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Customer
Retailer
Retailer
Customer
Customer
What Determines the Channel
 Characteristics of the Product
Product or service
 Price
 Complexity
 Demonstration

 Characteristics of the Customer
Decision maker/decision making process
 Familiarity with product
 Shopping habit/places

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
 Retailer interested in selling competitor’s products
 Retailer selling own (store) brand
 Brand sells to other retailers
(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
Manufacturer
Transferred Business Costs
Inventory
Order Handling
Selling
Credit
Channel
Member
Customer
Transferred Business Costs
Inventory
Freight
Storage
Order Handling
Characteristics of Distribution
Schemes
Distribution
Intensity
Number of
Distributors
/Retailers
Market
Coverage
Product
Category
Margin
Exclusive
One
Less
Important
Specialty
High
Selective
Limited but
more than
one
Moderate
Specialty and
some
Shopping
Moderate
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
1. Find out what
your customers
want
Information requirements
Logistics (variety, convenience, waiting time, lot size)
What tradeoffs do they make: between information, logistics
and price?
Use tradeoff information to generate segments
2. Identify
Alternatives,
Determine Costs
Explore real & hypothetical alternatives
Types, Number (Exclusive-Selective-Intensive), Terms
Are options feasible? What kind of support
needed? Costs and their implications in terms of
required market share increase, etc.
3. Bound the
“ideal”. Impose
Constraints
Get top mgt. reactions to effects on efficiency,
effectiveness, and flexibility
Develop list of objectives for distribution from top mgt.
Legal restriction, prejudices and biases
Other managerially relevant constraints
4. Evaluate and
Compare
Alternatives
Benchmark existing channel capabilities and competitors’
channels w.r.t. customers’ channel requirements
Compare “ideal” system from Step 2. with Step 3. constraints
Use Economic Criteria (breakeven analysis: when are various
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?
Within Customers:
• How best to segment market?
• What segments exist?
• Patterns of product use
• Impact of price change
• Response of marketing channels
• Response to advertising
• How much will they spend?
• How do they rate competitive brands?
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: Research Objectives
Exploratory, Descriptive, Causal
3. Implement Plan:
a. Identify Data Source: Primary, Secondary
b. Develop Questionnaire Design, Sample size
4. Analysis and Interpretation:
a.
b.
Analysis
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:
Decision Problem:

You need to develop
a package for a new
product
Examples:
Research Problem:
Stage 1: Problem Formulation
Examples:
Decision Problem:

You need to develop
a package for a new
product. What kind of
packaging is best?
Examples:
Research Problem:
Evaluate effectiveness of alternative
package design:
in terms of product freshness
in terms of visual appeal
in comparison to other options
in comparison to competition
Stage 2. Develop 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 illfitting the problem
Internal: Sales data, warranty cards
 Published: Directories, periodicals, statistical sources
 Commercial: Ad exposures, scanner data, store audits

Stage 2: Develop Plan and Research
Design
Research Objectives:
 To Define the Problem and Suggest Hypotheses:
Exploratory Research:
To gain ideas and insights
 Newspaper facing decreasing sales generates possible
explanations

 To Describe Market Situation: Descriptive
Research:
To obtain summary measures
 Trends in lifestyle of current users

 To Predict Hypothesis about Cause and Effect:
Causal Research:
For cause-effect connection
 How people react to a newspaper’s topic selection and space
allocation

Different Ways to Operationalize
 Exploratory
No sense of what is going on, why
 Need to find out more even to form a hypothesis
 Provides a starting point

 Observation and Focus groups
Best suited for exploratory research
 Observing consumer behave (in stores) gives
pointers to ‘why’ they behave
 In-depth interviews
 Focus groups

 Qualitative Research

Very special skills to get it right!
Different Ways to Operationalize
 Descriptive
Need to get quantitative estimate of sizes
 Sample size critical

 Survey
Best suited for descriptive research
 You have a sense of what you want to find out –
need to get a sense of population proportions
 Design of survey is critical - wording, ordering,
response format
 Do not want to bias the responses
[Note: all surveys should be pre-tested]

 Quantitative

Requires good quantitative skills to analyze data
Different Ways to Operationalize
 Causal Research

Need to establish causality: ‘x’ causes ‘y’; e.g.,
change in price affects sales
 Experiments
Take comparable situations – just change one
element to test its effect. (e.g., two similar cities
with high vs. low price  effect on sales)
 Test market is another example

 Hypothesis

Specific hypothesis being tested
3. Implement Plan: Developing the
Questionnaire (survey)
 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
Flexibility
Quantity data
Interviewer Effects
Sample Control
Speed Collection
Response Rate
Costs
Mail
Phone
Personal
Internet
Poor
Good
Exc.
Fair
Poor
Poor
Good
Good
Fair
Fair
Excellent
Good
Good
Fair
Excellent
Excellent
Poor
Fair
Good
Good
Poor
Excellent
Huge
Excellent
Limited
Very Fast
Poor
Very Low
Typical Problems in Wording Questions
PROBLEM
SAMPLE QUESTION
EXPLANATION
Leading question
Why do you like Wendy’s fresh
meat hamburgers better than
those of competitors made with
frozen meat?
Consumer is led to make
statement favoring Wendy’s
hamburgers
Ambiguous question Do you eat at fast-food
restaurants regularly?
•Yes
•No
What is meant by word
regularly-once a day, once a
month, or what?
Unanswerable
question
What was the occasion for your
eating your first hamburger?
Who can remember the
answer? Does it matter?
Two questions
in one
Do you eat Wendy’s hamburgers
and chili?
•Yes •No
How do you answer if you
eat Wendy’s hamburgers 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 over
year old check?
answers
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.
b.
Analysis
Reporting