Marketing Channel Strategy



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Marketing Channel Strategy An Omni-Channel Approach

process perspective
, there are three general steps to segmenting 
end-users by service outputs. First, it is essential to generate a comprehensive 
list of all the potential service outputs desired by each end-user for the products 
being offered. This list can be derived from qualitative focus groups or exploratory 
interviews, designed to generate unbiased summaries of all the service outputs 
that apply to the particular product and market in question.
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 Such research pro-
vides a set of service outputs that might be demanded by some or all groups of 
end-users in the market.
Second, using this list of possible service outputs, the actual segmentation 
of the market can proceed in multiple ways. The market might be divided into 
a priori segments (e.g., those often used in product or advertising decisions), 
then analyzed to determine whether those segments share common purchas-
ing preferences. Alternatively, research might be designed and conducted to 
define channel segments that best describe end-users’ service output needs and 
purchasing patterns. This latter path is preferable, because end-users’ preferred 
shopping and buying habits rarely correlate with their preferences for product 
features, media habits, lifestyles, or other traits that management and adver-
tising agencies usually employ in their segmentation strategies. In general, 
channel segmentation should be designed to produce groups of buyers who 
(1) are maximally similar within a group; (2) are maximally different between 
groups; and (3) differ on dimensions that matter for building a distribution 
system. Traditional marketing research techniques such as cluster analysis and 
constant-sum scales can identify groups of end-users with similar service output 
needs. It is not enough to ask respondents about their preferences for various 
service outputs though. With completely free choices, most people naturally 
prefer more of all the service outputs. To obtain information that is ultimately 
useful for designing marketing channels that can meet the key needs of target 


END-USER ANALYSIS
332
segments, it is essential to understand how end-users actually behave in the 
marketplace, by asking respondents to trade off one attribute of the channel for 
another (e.g., locational convenience versus low price; extensive product vari-
ety versus expert sales assistance). In Sidebar 10.2, we look at the end-user needs 
of the customer base of a true omni-channel pioneer, 1-800-Flowers.
SIDEBAR 10.2
1-800-Flowers, an Omni-Channel Pioneer
Jim McCann opened a flower shop in 1976 on the Upper East Side of New York City,
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 but more 
notably, he has been a true pioneer of multi-channel shopping. Quick to spot the potential of 
telephone-based commerce, he plunged into the market for telephone orders of floral arrange-
ments with 1-800-Flowers, investing heavily in call centers and staff who could provide excellent 
service and support. Through partnerships with independent brick-and-mortar florists, the com-
pany also could promise same-day delivery of floral arrangements nationwide.
Next, McCann realized the promise of e-commerce before nearly anyone else. The com-
pany launched its first online store (on compuserve) in 1991, had a presence on AOL, and 
debuted on the Web in 1995.
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 Continuing the tradition, it embraced social media immediately
becoming the first company to sell physical products via Facebook. Largely as a result of these 
market-sensing moves, 1-800-Flowers enjoys a 30.2 percent market share of the online floral 
business.
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 This positioning bodes well for the future, because even as brick-and-mortar floral 
shops struggle, floral sales are increasing in general, mainly through online options.
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An implicit element of this success story is the company’s recognition that different end-users 
buy differently. Some need same-day delivery; others have specific assortment preferences and 
will wait for the particular flowers to be ready, shipped straight from growers. In addition, their 
preferences might extend beyond flowers, so 1-800-Flowers includes a variety of plants, gift bas-
kets, and edible treats in its assortment, in collaboration with sibling companies such as Harry 
& David, Simply Chocolate, and the Popcorn Factory. In the modern global world, people send 
flowers to loved ones in other countries, so a florist that operates internationally is critical. If they 
don’t quite know what to send, consumers might prefer to solicit advice from a friendly, sympa-
thetic service representative, who will talk to them over the telephone about the best options. If 
they have a clear sense of their needs, they might instead order through a mobile app, and they 
likely want one-click capacities so they can quickly send off flowers (and receive reminders) each 
year in time for Mother’s Day or Valentine’s Day.
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Third, when the overall market has been segmented into similar groups of 
end-users, according to their preferred channel service outputs, price sensitivity, 
or other product-specific factors, the channel manager should name each segment 
to capture its identifying characteristics. Naming each segment facilitates internal 
communication and organizational alignment, which is helpful in executing an 
effective channel strategy.


END-USER ANALYSIS
333
Table 10.1 shows how constant-sum scales can be used to segment end-users in 
the business marketplace for a new high-technology product. The service outputs 
(references and credentials, financial stability and longevity, product demonstra-
tions and trials), along with price sensitivity, are listed along the left-hand side; the 
columns represent the segments (lowest total cost, responsive support, full-service, 
and references and credentials) that emerge according to respondents’ preferences. 
The names assigned to the segments derive from the strength of their preferences 
for specific service outputs. For example, the lowest total cost segment assigned 
32 out of 100 points to the service output “lowest price” but only 8 points to 
“responsive problem solving after sale” output; in contrast, the responsive support 
segment flipped its allocations (29 points to responsive problem solving after sale, 
but 8 points to lowest price). Finally, the percentage of respondents in each segment 
appears at the bottom of each column; the majority of respondents (and thus of 
the population of customers at large, assuming the sample is representative) are in 

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