Creating Offerings & Using Channels to Create Value for Customers

 

Week 6 Writing Assignment

Creating Offerings & Using Channels to Create Value for Customers

Learning Outcomes

1. Offering Type of consumer offerings. Student can describe an offering based on features, benefits, price, and costs of ownership. Student can suggest marketing strategy implications based on the type of consumer offering under examination.
2. Product lifecycle. Student can suggest potential marketing strategies based on the product or service’s lifecycle stage.  
3. Marketing channel strategy.  Student can outline a multi-channel distribution system and recommend a marketing channel strategy for a product or service offering.
4. Pricing strategy.  Student can analyze a current pricing strategy and make recommendations for modifications.

Directions

• Your job in this Writing Assignment is to develop marketing mix strategies to ensure a value offering for the target market you identified in the previous assignment.
• We will be looking to see if you can apply the marketing concepts to the real world situation. Assume you now work for this company, and your goal is to help the company grow sales.  We don’t expect you to develop strategies based on insider knowledge of the product or service since you are most likely not employed by your product or service’s company. 
• Do not fall into the trap of simply “reporting on” the product or service.  This is obvious because your assignment will look like a rewrite of the company’s website.  Don’t be afraid to make strategy recommendations based on what you have discovered about the product or service, and how you think it can move forward.  Be creative, take reasoned risks.  
• Always keep in mind your product’s target market from the previous paper when making your recommendations.  
• You will also have a chance to recommend new distribution and pricing strategies based on your new target market to meet their needs.  

Part 1

1. Type of consumer offering.  Describe your product or service offering as it is currently in terms of features and benefits, price and the total cost of ownership as discussed in the week’s readings.  Is it more product dominant or service dominant?  What are the tangible and intangible aspects? Based on the four categories of type of offerings discussed in the readings,  describe the category in which your product or service offering belongs.  Based on your new target market, would that category of the offering change and if so, how?  How would it change the marketing strategy?  
2. Product lifecycle.  In which stage of the product lifecycle is your product or service offering now? Would the changes described in number 1 above change the lifecycle stage and if so how?  What would this mean to the lifecycle marketing strategy?  

Part 2

1. Marketing channels & strategy.  To the best of your ability, outline the marketing channels of your product or service offering as they currently exist.  See Figure 8.4, from Section 8.2 Typical Marketing Channels, in your Week 6 Reading for some ideas.  Most product and service offerings will have more than one channel, so your system should include at least two; for example (1)  a direct channel for internet sales:  manufacturer –> customer; and  (2) an indirect channel such as manufacturer –> distributor –> wholesaler –> retailer –> customer. If your product or service only has only a direct channel, explain why.  Would this channel strategy change as a result of your new target market?  Why or why not?
2. Pricing strategy.  Referring to the various pricing strategies outlined in the week’s readings, which one does your product or service currently use?  Would you recommend any changes for your new target market?  If so, how would you change it and why? 

Readings

8.1 Marketing Channels and Channel Partners

Chapter 15: Price, the Only Revenue Generator

Runninghead: Consumer Behavior, Market Segmentation & Positioning

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Running head:

Consumer Behavior, Market Segmentation & Positioning

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Consumer Behavior, Market Segmentation & Positioning

Consumer decision-making process.

Chipotle

focused on sustainability, great taste, great value, great nutrition, and support for

families because that is one of their main considerations in coming up with the product. Their

product strategy is unique compared to the other fast-food chain restaurants. It has an Integrity

program that aims to remove any genetically modified organism food from the menu.

The company has a cost-effective mechanism for advertising products. Clients finish and

customize the food orders from their mobile phones, making it possible for them to maximize

their time and prepare meals before the clients get to the restaurant. Their website has many

resources that attract the millennials that appeal. For instance, Chipotle describes the source and

process of food reception or preparation with all the ingredients. That enhances an understanding

of what is being consumed by the customers and the source or condition of the ingredients. They

blanch the onions, lemons, avocados, jalapenos, and limes in boiling water for five seconds to

eliminate any skin germs (Chipotle Mexican Grill, 2015). The company’s website has a nutrition

calculator that promptly computes calories, the quantity of sugars, salt … for clients.

Furthermore, they considered most families’ eating out habits as seeking convenience and

quality. Therefore, close analysis of the consumers and their decision shows that they recognized

the problem of wanting fast food, yet most were unhealthy and lacking freshness. To satisfy that

Running head: Consumer Behavior, Market Segmentation & Positioning

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demand Chipotle acquires ingredients from farm producers who have humane treatment towards

their animals. By attracting customers seeking fast food with fresh and healthy ingredients, this

very same customers started being advocates of what the company was offering. They helped the

company build authority by giving positive reviews and even becoming partners.

Market Segmentation.

Market segmentation serves significantly in the organization and clarifies the desires and

needs of particular people in a target market. Commercial enterprises utilize market

segmentation to enhance the assessment of markets and ensure a company realizes its goals.

According to Friedman (2011), market segmentation is where a market is separated into

primarily homogeneous groupings for the clients to comprehend their needs (Friedman, 2011).

That allows for understanding the target markets as particulars with mutual interests, priorities,

and needs that enhance the clients’ understanding. For instance, once the focus is on a given

segment of people related to income, tastes, gender, or age, a potential business might have a

greater understanding of the products they need to focus on and make it affordable for the

clients.

The implementation of market segmentation demands that an organization ought, to

begin with, the identification of what features a target market is. There are various market

segment features, including behavioural, demographic, geographic, and psychographic aspects.

For instance, in the demographic segmentation, there is ethnicity, age, education, income, gender

and occupation whereas psychographic segmentation focuses on the values, opinions, interests,

attitudes, and activities of the customers (New Charter University, 2016). As soon as the greatest

aspect of the product which is segmentation is determined through the features of the target

Running head: Consumer Behavior, Market Segmentation & Positioning

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market promotion and sales process. It is quite costly to advertise products because that makes it

possible to reach the target markets.

Businesses integrate segmentation features that relate with their products thus establishing the

place, way, and advertisement. Companies which go for all the population and not particular

people hardly thrive.

In the fast-food business, there is a great dependence on the basic principles of

segmentation that build restaurants’ success in easy access in the target market. For instance,

Chipotle Mexican Grill is a fast-food restaurant that meets the needs of particular generations

who are the “Millennials”. In America, the Millennials add up to 25% of the United States

population and that 50% of such population are more than ready to buy from a firm which

supports a they believe in (Millennials, 2016). Based on another research by The Nielsen

Company (2016), about 66% Millennials ready to buy products from a firm that support positive

environmental and social and impacts.

Market segmentation for Chipotle in the US market is millennials or individuals born between

1976 and 2000, especially those with the average annual income of $ 54000. The 1600

restaurants increase convenience for all the customers by ensuring they acquire what they need

within their neighbourhood. The primary target market are the locals. Known for fresh and

healthy alternatives, Chipotle appeals to that target age group in the society. The consciousness

to human attracts commuting workers, tourists, and people attending commercial events. The

product is associated with a fast-casual tag that is the exponentially growing market segment on

the restaurant industry.

Running head: Consumer Behavior, Market Segmentation & Positioning

5

Target Market & Strategy.

The retention of customers is easier than establishing new ones. Failure to define a market can

also be quite disastrous. Market segmentation allows an organization to classify the population

base on given features. That helps to establish the ideal clients and match the business plans and

advertisement to reach these potential clients and their needs. There is a need for an accessible,

durable, identifiable, unique, and substantial customer aspect to create a successful company

(NetMBA, 2010). Market segmentation could finally result in direct communication between the

target market and a company. For instance, the clients could give feedback that would permit the

organization to have a direct evaluation of how to meet the clients’ needs and desires.

Organizations can consistently change to the best and offer needed services. Nonetheless, the

organizations that fail to determine their target market will have difficulty determining how they

might expand and have suitable services for their clients.

I think the urban savvy young and middle age shoppers are suitable in the fast-food market.

Given that many people hardly have time to cook in urban areas, they also consider healthy food

and find convenience in pre-cooked and ready to order foods. They often go out for lunch and

dinner with their friends, colleagues or family.

Positioning.

High Price

High Quality
Low Quality

Low Price

Baja Fresh

Moe’s Mexican Grill

Taco Bell

Rubios

Qdoba

Chipotle

Running head: Consumer Behavior, Market Segmentation & Positioning

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For the perceptual map of Chipotle, I picked two criteria – food Price and Quality. Chipotle does

not have a monopoly and faces growing competition in the fast-casual Mexican food like Qdoba,

Moe’s and Baja Fresh. Looking at the map Chipotle at the moment is well-positioned as it offers

food prices slightly lower than its direct competitor but of higher quality. To remain competitive,

Chipotle might need to reconsider its current structure. As of now, Chipotle owns all of its

restaurants, but franchising might be something to consider in the future.

References

Consumer Behavior: How people make buying decisions. (2015). Principles of Marketing.

University of Minnesota Libraries

https://open.lib.umn.edu/principlesmarketing/part/chapter-3-consumer-behavior-how-

people-make-buying-decisions/

Chipotle Mexican Grill. (2015). A Focus on Food Safety. Retrieved fro

m

https://www.chipotle.com/foodsafety

Czaplewski, A., Olson, E., & McNulty, P., (2016). Going Green Puts Chipotle in the Black.

American Marketing Association. Retrieved from

https://www.ama.org/publications/MarketingNews/Pages/Going-Green–Puts-

Running head: Consumer Behavior, Market Segmentation & Positioning

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Chipotle- in-the-Black.aspx

Friedman, H., (2011). Market Segmentation and Targeting. Brooklyn College of the City

University of New York. Retrieved from

http://academic.brooklyn.cuny.edu/economic/friedman/mmmarketsegmentation.ht

m

Market segmenting, targeting, and positioning. (2015). Principles of Marketing. University of

Minnesota Libraries https://open.lib.umn.edu/principlesmarketing/part/chapter-5-market-

segmenting-targeting-and-positioning/

Millennial Marketing, (2016). Who Are Millennials? Retrieved from

Who Are Millennials

NetMBA. (2010). Market Segmentation. Retrieved from

http://www.netmba.com/marketing/market/segmentation/

Norman, D., (2016). Market Segmentation, Targeting and Positioning and the Product. New

Charter University. Retrieved from

https://new.edu/nodes/market-segmentation-targeting-and-positioning-and-the-product

Chapter 5: Market Segmenting, Targeting, and Positioning

Chapter 5: Market Segmenting, Targeting, and Positioning

Material in slides 2-14 of this overview adapted from Principles
of Marketing. (2015). University of Minnesota Libraries Press.

Cover

Using Marketing Channels & Price to Create
Value for Customers

Where the offering is and how it is priced communicates value to the
customer

6.1 Marketing channels and channel partners

6.2

Typical marketing channels

6.3

Functions performed by channel partners

6.4

Marketing channel strategies

6.5 Channel dynamics

6.6

Demand planning and inventory control

6.7 Warehousing and transportation

6.8 The pricing framework and a firm’s pricing objectives

6.9 Factors that affect pricing decisions

Marketing channels and channel partners

Goal = get a product to the customer when, where and
how the customer wants it.

Requires cooperating channel partners (or intermediaries)
that actively promote and sell the product as it travels
through the channels to the end customer.

Typical marketing channels

• Two major types of channel systems

• Direct channel— from producer
to consumer with no
intermediaries (farmer’s market,
internet if direct from the
manufacturer)

• Indirect channel — Any number
of intermediaries between
producer and consumer

• Many products have multiple
channels

Question: Wouldn’t fewer intermediaries be more
efficient and effective to get products to consumer when,
where and how they want them?

Answer: Some large retailers have been able to own more
of the channels themselves (disintermediation).

But, the channel member functions have to be performed
by some firm, but one firm can perform more than one
channel functions.

Only include channel members that add value for the
customer.

Functions performed by channel partners

• Disseminating marketing communications and promote brands

• Push versus pull strategy

• Sorting and regrouping products

• Storing and managing inventory

• Distributing products

• Assume ownership risk and extend credit

• Share marketing and other information

Marketing channel strategies

Factors affecting the marketing channel strategy
decisions

• Type of customer

• Type of product

• Channel partner capabilities

• Business environment and technology

Channel integration
• Vertical marketing system — formal agreements to cooperate

• Conventional marketing system — no formal relationships, all
independent operators

• Horizontal marketing system — Two companies at same channel level
agree to cooperate (usually for compatible but non competing products)

Channels versus supply chains — supply chains are channels that includes
the firms involved in distributing the raw materials for manufacturing.

Value chain — another term for supply chain BUT acknowledges the value
adding role of the intermediary.

Factors that affect a product’s intensity of distribution

• intensive distribution = want to sell product in as
many outlets as possible

• selective distribution = selling products at select
outlets in specific locations.

• exclusive distribution = selling products through one
or very few outlets

Demand planning and inventory control

• Demand planning — process of estimating how much
product customers will buy from you so can plan
production capacity to not run out

• Inventory control — process of ensuring have adequate
supply of products on hand and in sufficient assortment
to meet customer needs

• Product tracking — process to knowing where
inventory is at all times

Warehousing & transportation

• Warehousing — handles fluctuations in demand

• Distribution centers — a warehouse that focuses on
moving product to various wholesalers, retailers or
consumers

• Transportation — the logistics of moving goods via air,
boat, rail, pipeline, plane or truck

Pricing framework and a firm’s pricing objectives

A framework for how to set prices

Factors that affect pricing decisions

• How will customers perceive the price?

• How does it compare to competitors?

• Are there any external factors such as the economy,
government laws or regulations that impact the price?

• How much does it cost to create the offering?

Pricing strategies

Introductory pricing
strategies

• skimming

• penetration

• everyday low price

Sample pricing approaches

cost plus
markup

markdown
odd/even pricing
prestige pricing
leader pricing

sealed bid pricing
online auction

going rate price
price bundling
captive pricing

product mix pricing
two-part pricing
payment pricing

promotional pricing
price discrimination

Questions?

Be sure to take advantage of the Ask the Professor
Discussion to ask any questions, get clarifications, or

otherwise seek the advice and assistance of your
faculty member.