Analyzing Customers Desired Service Output Levels

Because the point of a marketing channel is to make a product available to customers, the marketer must understand what its target customers actually want. Channels produce five service outputs:

1. 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 buying a lot size of one.

2. Waiting time: The average time customers of that channel wait for receipt of the goods. Customers normally prefer fast delivery channels.

3. Spatial convenience: The degree to which the marketing channel makes it easy for customers to purchase the product. Chevrolet, for example, offers greater spatial convenience than Cadillac, because there are more Chevrolet dealers.

4. Product variety: The assortment breadth provided by the channel. Normally, customers prefer a greater assortment, which increases the chance of finding what they need. Relentless expansion of product variety is the special edge that has helped maintain its lead in Internet retailing.

5. Service backup: The add-on services (credit, delivery, installation, repairs) provided by the channel. The greater the service backup, the greater the work provided by the channel.7

Smart marketers recognize that providing greater service outputs means increased channel costs and higher prices for customers, just as a lower level means lower costs and prices. The success of discount stores and Web sites indicates that many consumers will accept lower outputs if they can save money.

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