“We are selling consumer products nationwide for five years now. Our sales volume has not really grown so much. We would like to focus on few but important channels of distribution as our hope for growth. Where do we begin?”   - Alex from Mandaluyong
 
Strategy should not only be focused on the physical attributes of the product or price,  but also in choosing marketing channels that provide the services end-users are looking for.  This entails segmenting the market into groups of end users who differ not only in the products they want to buy but also in how they want to buy them.
 
Your question leads us to the issue of channel segmentation according to service output demands.  Dell used and dominated online channel in selling its personal computers to consumers who are looking for decision support, customization, and ease of set-up.  Consider the phenomenal success of the album ‘Long Road Out of Eden’ by the rock band Eagles.  The album released in 2007 was certified 7x Platinum by the Recording Industry Association of America for shipments of 7 million discs.  For the first year after the album's initial release, the album was available in North America exclusively via the band's website, or through Wal-Mart and Sam's Club retail stores. It was not sold at traditional music store channels.  How did these companies do it so well? Let us briefly discuss the few important steps.
 
Study buying preferences of each consumer segment.  The term ‘consumer’ means the end user of your products.  It should be clear to you by now who your primary target consumers are, and how you position your products to each of these segments.  Buying preference is about HOW consumers buy or their methods of buying, not WHAT they buy.  For instance, how do you buy a newspaper like BusinessWorld? When at work during workdays?  When at home during weekends? When driving on the road on the way to your office? Your answer reveals that the same consumer may have different buying preferences and intensity in different purchase occasions.  This step leads us to the concept of service outputs.
 
Understand their service output demands.   The term service outputs was originally proposed by Prof. Louis Bucklin (Berkeley, C.A.) which ‘are the productive outputs of the marketing channel over which end users have demand and preference.’  Bucklin specifies four generic service outputs: bulk breaking, spatial convenience, waiting and delivery time, and product variety.  Of course, you will discover that there are other service output demands.  In buying a newspaper during workdays, for instance, I would look for ‘service outputs’ such as: availability of newspaper until 12:00 noon, it should be near my house or office, and quick service or delivery because of my hectic schedule. Someone reading this article might have other preferences like, newspaper delivered at doorstep, all-weather availability, and weekly or monthly payments.
 
Identify Relevant Channels.   Bucklin argues that, other things being equal (like price and physical product attributes), end users will normally prefer a marketing channel that provides a higher level of service outputs.  Let’s go back to buying a newspaper as our illustration.  In buying a newspaper during workdays, the possible channels which can meet my service demands (availability of newspaper  until 12:00 noon, near my house or office, and quick service or delivery) would be newsstands and convenience stores (especially in our office building).  On the other hand, other channels like supermarkets and news boys would score low.  However, for those who prefer newspaper delivered at their doorstep, all-weather availability, and weekly or monthly payments, the most relevant distribution channel would be subscription with free delivery and pre-paid or post-paid payment scheme.
 
Once you have identified the service output demands by consumer segment, you can now begin to focus your resources on those relevant marketing channels which provide higher level of service outputs.
 
 
 
Emilio “Bong” Macasaet III is Partner and Chief Distribution Strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines.  For inquiries, please email info@mansmith.net, call (+63-2) 584-5858 /412-0034 or text (63) 918-81-168-88. Please also send your marketing, sales, strategy and innovation questions to mentors@mansmith.net.