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Designing a marketing channel

Designing a marketing channel system involves analyzing customer needs, establishing

channel objectives, identifying major channel alternatives, and evaluating major channel

alternatives.Analyzing Customers desired service outut levels!

"n designing the marketing channel, the marketer must understand this service outut

levels desired by target customers. Channels roduce five service oututs!

#a$ %ot size & 'he number of units the channels ermits tyical customer to urchaseon one occasion. "n buying cars for its fleet, (ertz refers a channel from )hich it can

buy a large lot size* a household )ants a channel that ermits buying a lot size of one.

#b$ +aiting and delivery time & 'he average time customers of that channel )ait forreceit of the goods. Customers increasingly refer faster and faster delivery channels.

#c$ atial convenience & 'he degree to )hich the marketing channel makes it easy for

customers to urchase the roduct. Chevrolet, for e-amle, offers greater satialconvenience than Cadillac, because there are more Chevrolet dealers. Chevrolets

greater market decentralization hels customers save on transortation and search costs inbuying ad reairing an automobile.

#d$ roduct variety & 'he assortment breadth rovided by the marketing channel./ormally, customers refer a greater assortment because more choices increase the

chance of finding )hat they need.

#e$ ervice backu & the add0on services #credit, delivery, installation, reairs$rovided by the channel. 'he greater the service backu, the greater the )ork rovided by

the channel.

'he marketing channel designer kno)s that roviding greater service oututs meansincreased channel costs and higher rocess for customers. Different customers have

different service needs. 'he success of discount stores indicates that many customers are

)illing to accet smaller service oututs if they can save money1stablishing 2bjectives and Constraints!

Channel objectives should be stated in terms of targeted service outut levels. 3nder

cometitive conditions, channel institutions should arrange their functional tasks to

minimize total channel costs and still rovide desired levels of service oututs. 3sually,lanners can identify several market segments that )ant different service levels. 1ffective

lanning re4uires determining )hich segments to serve and the best channels for each.

Channel objectives vary )ith roduct characteristics. erishable roducts re4uire moredirect marketing. 5ulky roducts, such as building materials, re4uire channels that

minimize the shiing distance and the amount of handling. /onstandard roducts, such

as custom0built machinery and secialized business forms, are sold directly by comany

sales reresentatives. roducts re4uiring installation or maintenance services, such asheating and cooling systems, are usually sold and maintained by the comany or by

franchised dealers. (igh0unit0value roducts such as generators and turbines are often

sold through a comany sales force rather than intermediaries.Channel design must take into account the strengths and )eaknesses of different tyes of

intermediaries. 6or e-amle, manufacturers res are able to contact customers at a

lo) cost er customers because the total cost is shared by several clients, but the sellingeffort er customer is less intense than if comany sales res did the selling. Channel

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design is also influenced by cometitors channels. Channel design must adat to the

larger environment. +hen economic conditions are deressed, roducers )ant their

goods to market using shorter channels and )ithout services that add to the final rice ofthe goods. %egal regulations and restrictions also affect channel design. 3 la) looks

unfavorably on channel arrangement that may tend to substantially lessen cometition or

create a monooly."dentifying 7ajor Channel Alternatives!

Comanies can choose from a )ide variety of channels for reaching customers from sales

forces to agents, distributors, dealers, direct mail, telemarketing, and the internet. 1achchannel has uni4ue strengths as )ell as )eaknesses. ales forces can handle comle-

roducts and transactions, but they are e-ensive. 'he internet is much less e-ensive,

but it cannot handle comle- roduct. Distributors can create sales, but the comany

loses direct contact )ith customers.'he roblem is further comlicated by the fact that most comanies no) use a mi- of

channels. 1ach channel hoefully reaches a different segment of buyers and delivers the

right roducts to each at the least cost. +hen this does not haen there is usually

channel conflict and e-cessive cost.A channel alternative is described by three elements! the tyes of available business

intermediaries, the number of intermediaries needed, and the terms and resonsibilities ofeach channel member.

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more at htt!99))).citeman.com9:;i-zz:"ovm?C+

Designing a marketing channel system involves analyzing customer needs, establishing

channel objectives, identifying major channel alternatives, and evaluating major channelalternatives.

Analyzing Customers desired service outut levels!

"n designing the marketing channel, the marketer must understand this service oututlevels desired by target customers. Channels roduce five service oututs!

#a$ %ot size & 'he number of units the channels ermits tyical customer to urchase

on one occasion. "n buying cars for its fleet, (ertz refers a channel from )hich it canbuy a large lot size* a household )ants a channel that ermits buying a lot size of one.

#b$ +aiting and delivery time & 'he average time customers of that channel )ait for

receit of the goods. Customers increasingly refer faster and faster delivery channels.

#c$ atial convenience & 'he degree to )hich the marketing channel makes it easy forcustomers to urchase the roduct. Chevrolet, for e-amle, offers greater satial

convenience than Cadillac, because there are more Chevrolet dealers. Chevrolets

greater market decentralization hels customers save on transortation and search costs inbuying ad reairing an automobile.

#d$ roduct variety & 'he assortment breadth rovided by the marketing channel.

/ormally, customers refer a greater assortment because more choices increase thechance of finding )hat they need.

#e$ ervice backu & the add0on services #credit, delivery, installation, reairs$

rovided by the channel. 'he greater the service backu, the greater the )ork rovided by

the channel.

http://www.citeman.com/2756-channel-design-decisions.html#ixzz2IovSm3CWhttp://www.citeman.com/2756-channel-design-decisions.html#ixzz2IovSm3CW

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'he marketing channel designer kno)s that roviding greater service oututs means

increased channel costs and higher rocess for customers. Different customers have

different service needs. 'he success of discount stores indicates that many customers are)illing to accet smaller service oututs if they can save money

1stablishing 2bjectives and Constraints!

Channel objectives should be stated in terms of targeted service outut levels. 3ndercometitive conditions, channel institutions should arrange their functional tasks to

minimize total channel costs and still rovide desired levels of service oututs. 3sually,

lanners can identify several market segments that )ant different service levels. 1ffectivelanning re4uires determining )hich segments to serve and the best channels for each.

Channel objectives vary )ith roduct characteristics. erishable roducts re4uire more

direct marketing. 5ulky roducts, such as building materials, re4uire channels that

minimize the shiing distance and the amount of handling. /onstandard roducts, suchas custom0built machinery and secialized business forms, are sold directly by comany

sales reresentatives. roducts re4uiring installation or maintenance services, such as

heating and cooling systems, are usually sold and maintained by the comany or by

franchised dealers. (igh0unit0value roducts such as generators and turbines are oftensold through a comany sales force rather than intermediaries.

Channel design must take into account the strengths and )eaknesses of different tyes ofintermediaries. 6or e-amle, manufacturers res are able to contact customers at a

lo) cost er customers because the total cost is shared by several clients, but the selling

effort er customer is less intense than if comany sales res did the selling. Channeldesign is also influenced by cometitors channels. Channel design must adat to the

larger environment. +hen economic conditions are deressed, roducers )ant their

goods to market using shorter channels and )ithout services that add to the final rice of

the goods. %egal regulations and restrictions also affect channel design. 3 la) looksunfavorably on channel arrangement that may tend to substantially lessen cometition or

create a monooly.

"dentifying 7ajor Channel Alternatives!Comanies can choose from a )ide variety of channels for reaching customers from sales

forces to agents, distributors, dealers, direct mail, telemarketing, and the internet. 1ach

channel has uni4ue strengths as )ell as )eaknesses. ales forces can handle comle-roducts and transactions, but they are e-ensive. 'he internet is much less e-ensive,

but it cannot handle comle- roduct. Distributors can create sales, but the comany

loses direct contact )ith customers.

'he roblem is further comlicated by the fact that most comanies no) use a mi- ofchannels. 1ach channel hoefully reaches a different segment of buyers and delivers the

right roducts to each at the least cost. +hen this does not haen there is usually

channel conflict and e-cessive cost.A channel alternative is described by three elements! the tyes of available business

intermediaries, the number of intermediaries needed, and the terms and resonsibilities of

each channel member.8

ush trategy

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"nvolves the manufacturer using its sales forceand trade romotion money to

induceintermediaries to carry, romote and sell theroduct to end users.:. ull trategy

"nvolves the manufacturer using advertisingand romotion to induce consumers to

askintermediaries for the roduct, thus inducingthe intermediaries to order it.

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