Channel design decisions consists of:

  1. Analyzing customer needs
    • Lot size – buying fleet of cars vs car for home.
    • Waiting and delivery time – prefers less waiting time
    • Spatial convenience – easiness of purchasing – more dealers
    • Product variety – prefer variety of products to choose from
    • Service backup – credit, delivery, installation, repairs etc.
  2. Establishing channel objectives
    • Result from firm’s marketing objectives – stating targeted service output levels.
    • Profit consideration and asset utilization must be considered.
    • Try to lower the total channel cost
    • Eg: Perishable goods – direct marketing is preferred
    • Eg: Customized goods – sold directly by company sales representatives (middlemen lack knowledge)
  3. Identifying major channel alternatives
    • Companies can choose from a wide variety of channels for reaching customers – salesforce, agents, distributors, dealers, direct mail, telemarketing, internet etc.
    • Elements of channel alternatives:
      • Type of intermediaries
      • Number of intermediaries
      • Terms and responsibilities of each channel participant – price, policies, territorial rights etc
  4. Evaluating major channel alternatives
    • Economic criteria – different levels of sales and cost – salesforce vs agents
    • Control criteria –
    • Adaptive criteria – Some duration of commitment – can not switch to other channels.
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