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MARKETING CHANNELS

Channel DesignBerman Chapter 11

Version 3.0

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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

• 7. Revising Channel Arrangements

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1. Design and SelectionGoal: 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 behavior

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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

• product variety

• service backups

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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

• intertype - multiple, dual

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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 customer, average order size

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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– availability, cost, service quality

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Length Factors Summary

• lack of independence of variables

• need to consider multiple factors

• relationship simplification

• most closely related factors– product information, customization, quality

assurance, lot size, assortment, availability,

after sales service, logistics

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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, etc.,information sources

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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

• screenings, interviews, checklists, analyses, final process

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7. Revising Channel Arrangements

• ideal vs actual system - gap analysis– creditworthiness– territorial coverage– image and reputation– service performance– pricing strategy– wholesaler requirements– effects on current channel

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7. Revising Channel Arrangements(cont)

• Efficiency

• Effectiveness– coverage– control– effectiveness– efficiency

• Adaptability