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MARKETING CHANNELS
Channel Design
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Channel Design
• 1. Channel Design and Selection
• 2. Determining Channel Objectives
• 3. Assessing Channel Length, Width
• 4. Factors that Offset Channel Length
• 5. Allocating Channel Tasks
• 6. Selection of Resellers
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1. Design and Selection
Goal: optimal channel arrangement
• marketing strategy change
• geographic expansion • loss of major client • mergers, acquisitions
in industry
• existence or increase of gray market activity • new channel
introductions (net) • changes in buyer
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2. Channel Objectives
• integrate effects
– mergers and acquisitions – wider distribution
– gray market – new markets
• specific objectives
– service output requirements
• lot size
• market decentralization • waiting time
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• 3. Intermediary Requirements
– Channel length
• short - direct • long - indirect
– channel width
• determinants - investments, buyer behavior, volume • degrees - exclusive, intensive, selective
– types
• horizontal
• forward vertical • backward vertical
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4. Channel Length
• Aspinwall Theory
– characteristics of goods and parallel systems – replacement rate, gross margin, adjustment,
consumption time, searching time – goods - reed, orange, yellow
• Product factors
– customer base, geographic dispersion, customer density, sales gestation period, level of
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Channel Length (cont)
• Product factors
– bulk, perishability, unit value, product standardization, technical nature, gross margin
• Manufacturer Factors
– size, financial capability, desire for control, managerial expertise, customer knowledge
• Intermediary Factors
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Length Factors Summary
• lack of independence of variables
• need to consider multiple factors
• relationship simplification
• most closely related factors
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5. Channel Participant Tasks
• Selling
• Channel Support
• Physical Distribution
• Product Modification
• After Sale Service
• Risk Assumption
– Criteria - reducing costs, maximizing share, sales revenue, profits, optimizing ROI risks, meeting needs for info, availability,
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– Contact Bases
• selling intermediaries • stocking intermediaries
• stocking / servicing intermediaries • hybrid arrangements
• 6. Selection of resellers
– availability, preliminary evaluation, comprehensive analysis
– evaluations
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7. Revising Channel Arrangements
• ideal vs actual system - gap analysis
– creditworthiness– territorial coverage – image and reputation – service performance – pricing strategy
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7. Revising Channel Arrangements
(cont)
• Efficiency
• Effectiveness
– coverage – control
– effectiveness – efficiency
