END-USER ANALYSIS
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The intensity of demand for quick delivery varies for the purchase of
original
equipment (for which it tends to be lower) versus the purchase of
post-sales service
(for which it is frequently very high). Consider a hospital purchasing an expensive
ultrasound machine. Its original machine purchase is easy to plan,
and the hospital
is unlikely to be willing to pay a higher price for quick delivery of the machine itself.
However, if the ultrasound machine breaks down, the demand for quick repair
service may be very intense, and the hospital may be willing to pay a premium
price for a service contract that promises speedy service. In such cases, a sophisti-
cated channel manager must price the product versus post-sale service purchases
very differently, to reflect the different concatenation
and intensity of demand for
these service outputs. Similarly, airline ticket prices change as the departure date
approaches, to account for both the number of seats remaining and the lower price
sensitivity of business travelers who need to reach a specific destination and do not
want to wait.
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Another example combines demands for bulk-breaking, spatial convenience,
and delivery time. In the beer market in Mexico, understanding market demand
requires an understanding of the market’s and consumers’ environmental char-
acteristics and constraints. A market with limited infrastructural development
usually is characterized by consumers with high
demands for service outputs, such
as spatial convenience (i.e., consumers cannot travel easily to remote retail loca-
tions), minimal waiting time for goods, and extensive bulk-breaking (consumers
lack sufficient disposable income to keep “backup stocks” of goods in their homes
in case of retail stockouts). In the Mexican market, major beer manufacturers sell
through grocery stores, liquor stores, and hypermarkets, as well as through restau-
rants.
As an additional channel, though, they sell beer through very small local
distributors—apartment residents who buy a small keg of beer and resell it by the
bottle to neighborhood buyers who cannot afford a six pack. The end-users also
usually provide their own (washed, used) beer bottles for the “local” distributor
to fill. The manufacturer values this channel, because the other standard retail
channels cannot meet the intense service output demands of these consumers.
Product Variety and Assortment
When the breadth of the variety or the depth of the product assortment available to
end-users is greater, so are the outputs of
the marketing channel system, but so too
are the overall distribution costs, because offering greater assortment and variety
means carrying more inventory.
Variety
describes generically different classes of
goods that constitute the product offering, namely the
breadth of product lines. The
term
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