IF View - Issue NV-6

IF Only organizations had a tool that helped them to design channel coverage and improve marketing channel effectiveness ...

Marketing Channel Strategy Consultants

Improving marketing channel effectiveness through GIS – STAR methodology

A carefully researched, developed and implemented marketing channel strategy is a powerful, proven tool with which a significant competitive advantage can be gained. Channel design and management built on a framework which balances marketing channel cost, control and coverage drives both channel partner and company profitability.

Coverage is a key element in a marketing channel strategy. It is a major determinant in consistent delivery of a company’s customer value proposition and its management of channel partner conflict. Effective coverage co-relates with a desired level of channel control. Control and coverage jointly drive channel cost management.

Effective market coverage is colloquially described as “ being at the right place at the right time”. From a customer’s frame of reference, coverage can also be labeled as reach; a measure of time, distance and cost. Adequate coverage enables organisations to maximize their income. Geo-mapping, a tool built on Geographical Information Systems, is useful for determining effective coverage and the role of channel partners in that coverage.

What are Geographical Information Systems (GIS)?

GIS helps management to display, question and analyze spatial information. It assists with location and coverage decisions by visualising, exploring and analyzing data based on location - revealing patterns, relationships and trends not readily apparent in traditional databases. Through GIS disparate information can be linked. A GIS is a key tool in determining the appropriate location and role of point of presence when taking into account factors such as time, distance and cost.

Geographical Information Systems are powerful and proven tools for channel coverage planning. STAR (Segment-Target-Approach-Reward) methodology, employs GIS and enhances the effectiveness of a targeted marketing program, improving the strike rate.

How does GIS – STAR methodology facilitate development of an effective marketing program?

GIS – STAR methodology employs management, display, questioning and analysis of spatial information to determine a channel coverage and customer approach plan describing and defining:

Different customer classes
Which customer classes bring longer lifetime value
How different customer segments should be approached
The lifetime rewards / benefits expected
The long and short-term risks in nurturing identified customer segments

What is GIS – STAR methodology?

GIS – STAR methodology provides directions, definitions and descriptions to the following issues using a four step process:

A. Segment

Define areas where opportunities lie
Define the different customer classes in the selected opportunity areas
Determine the discrete and different existing and future customer segments in the selected customer classes
Describe the selected customer segments
Determine the relationship among customer segments and define the pattern and nature of relationships among and within customer segments

B. Target

Determine the Life Time Value (LTV) of a customer and / or a segment to the organisation
Determine the nature and level of risk emanating form potential competitors as to net cash flow from selected customer segments
Determine which are the most desirable customer segments
Determine which customers are the optimum to acquire.
Determine the importance of selected customer segments given the organisation’s long term plans

C. Approach

Determine approach to selected customer segment/s

D. Reward

Determine how to reward customers
Determine how to reward channel partners
Specify the nature and level of expected benefits
Once the process is complete, verify results compared to expectations

GIS – STAR methodology: The benefits

1. Effective marketing channel coverage

Aligning desirable and feasible customer segments with suitable channels and channel partners, complemented with fitting channel support, delivers a channel structure geared to maximum returns.

2. Improved marketing program effectiveness

Selective customer retention “wheat from chaff” and targeted promotions lead to enhanced effectiveness of marketing programs which results in improved return on marketing activities.

3. Enhanced competitiveness

Simulation features give an organisation the capability to:
a) Foresee the impact of competitor activities on their cash flows
b) Assess and determine the most appropriate strategic response to possible competitor activity resulting in an organisation being able to effectively compete.

GIS – STAR: A powerful methodology

GIS - STAR is a powerful, results oriented methodology which can be used to simulate the effects of changing environments. As a real time application that is responsive to evolving market situations, GIS – STAR methodology provides organizations with the opportunity to measure potential coverage and control elements as part of an effective marketing channel strategy.

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