Channel Design Decisions

Customer’s desired service output levels channels produce five service outputs

1)  Lot size - Number of units the channel permits a typical customer to purchase on one occasion

2)   Waiting and delivery time- Average time customers of that channel wait for receipt of goods

3)   Spatial convenience - Degree to which channel makes it easy for customers to purchase the product

4)   Product variety-  Assortment of products that the channel can supply to the customer -  more variety , better the chance of getting what the customer wants

5)   Service back up- Add o services like credit, delivery, installation and repairs are provided by the channel

Establishing objectives and constraints

1) Channel objectives vary with product characteristics – perishable products need direct marketing, bulky products need less shipping distance and less handling, customized products and high value products need company’s sales force

2)   Strength and weakness of the different  channels also needs to be studied

Identifying major channel alternatives – channel alternatives are identified by three elements

1)   The types of intermediaries needed

2)   The number of intermediaries needed

3)   Terms and responsibilities of each channel member – which include – price policy, conditions of sale, territorial rights, mutual services and responsibilities

Evaluating the major alternatives

1)   Economic criteria - cost and sales. Example: company’s sales force are trained to sell the company’s product.

2)   Control criteria - Control issue Example: agent might not know the technical details or handle sales brochure properly

3)    Adaptive criteria - some duration of commitment and loss of flexibility.