There are many design decisions that producers deal with. What is ideal and what is practical, the marketer tries between the two while designing marketing channels.
A new business organization begins selling in limited market area with limited capital. Determining on effective channel might not be an issue. The issue is just only that how to persuade on or some better intermediaries to handle the line.
Through current intermediaries the successful business organization might diversify. The business organization sell their products directly to the retailers in smaller markets but in case of larger market it might sell with the help of intermediaries.
It might allow sole franchises in one part of country and it might sell at all available outlets in another part of country. In this manner, marketing opportunities and conditions are meeting by channel systems that are mostly evolve.
Decision making and channel analysis should be more aimful, however, for more effectiveness. Below are the 5 channel design decisions steps that you need to know.
Channel Design Decisions Steps in Marketing
Analyzing Consumer Service Needs
The marketing channel can be consider as consumer value providing systems in which every member of channel include worth for the consumer. Thus, designing the distribution channel begins with the figuring out what aim consumers desired from the channel.
Read More: Functions of Distribution Channel
Do consumers want to travel to distant centralized location or they are willing to purchase from a nearby station? Would they rather purchase through phone, over the Internet, through the mail or purchase in person?
Does add-on services are desired by the consumers or will they get it from any other place? The quicker the provision, the higher the variety given, and the more add-on services provided, the increase the service of channel level.
But it’s not practical or possible to provide greater variety, quicker delivery and most services. All the desired services are not provided because of the reason that the business organization and its channel members have not the required skills or resources.
Also costs and prices will increase as a result of higher levels of service provision. The business organization should make equilibrium of the consumer services required not only against the customer price preferences but also against the feasibility & costs of fulfilling those requirements.
The victory of discount retailing and off-price represent that the consumers are mostly agree to take decrease service levels if this means decrease prices.
Setting Channel Objectives and Constraints
Channel goals should be mentioned in terms of wanted service level of target consumers. Generally, a business organization specifies many segments desiring various levels of channel service.
Decision should be made by the business organization that which segments to assist and the effective channels to utilize in every case. The total channel cost of fulfilling customer service needs is desired to be minimized by business organization in every segment.
The goals of channel of business organization are also affected by the nature of business organization, marketing intermediaries, its products, environment and the competitors.
For example, the business organization financial situation and its size decide which marketing operation it should give to intermediaries and which operations it can handle on itself.
Delays and too much handling are avoided by business organizations which sells perishable product and require more direct marketing.
In some situations, a business organization may desire to contend in or close the same outlet that contains the products of competitors. In other situations the manufacturer may avert the channels utilized by the competitors.
Ultimately, channel objectives and design may be affected by environmental factors like legal constraints and economic conditions.
For Example, in a depressed economy, the manufacturers desire to spread their products in more economical manner, utilizing smaller channels and leaving unnecessary services that add to the ultimate price of the products.
Identifying Major Alternatives
When the business organization has specified its goals of channel, it should next specify its main channel substitutes in the shape of number of intermediaries, kinds of intermediaries and the responsibilities of every channel member.
Types of Intermediaries
The kinds of channel members available should be specified by the business organization that can accomplish the channel work of the business organization.
For example, suppose a producer of test instrument has built an audio instrument that finds weak mechanical connections in machines with moving components.
The executives of business organization consider that all industries, in which combustion, electric or steam engines are used or made, would become a market of this product.
The existing sales force of the business organization is small and the issue is how effectively to reach these various industries.
Read More: Different Stages of Buyer Decision Making Process
The following channel alternatives might come out from discussion of management.
Company Sales Force: The direct sales force of the company should be expanded. The outside salespeople are hired and assigned the territories so that they should contact all the prospects in the area or business organization built separate sales forces for various industries. Or inside tele-sales operation is added in which telephone salespeople manage midsize or small business organizations.
Producer’s Agency: Producer’s agents are hired in the form of independent business organizations whose sales forces manage related products from many companies in various industries or regions to sell the new test instruments.
Industrial Distributors: In various industries and regions, distributors should be detected who will purchase and carry the new line. God margins, exclusive distribution, promotional support and product training should be given to them.
Number of Marketing Intermediaries
It should also be decided by the business organizations that what number of channel members to utilize at every level. Three kinds of strategies are available which are selective distribution, exclusive distribution and intensive distribution.
Intensive distribution is sought by manufacturers of convenience products and common raw materials. Under this distribution strategy these business organizations stock their products in as many outlets as possible. These products should be available when and where consumers desire them.
For Example, candy toothpaste and other similar items are sold in millions of outlets to give consumer convenience and maximum brand exposure.
On the other hand some manufacturers reduce the number of their intermediaries that manage their products. Exclusive distribution is extreme kind of this practice in which only few distributors are given the exclusive authority by the manufacturer that they can distribute its products in their territories.
In distribution of prestigious women clothing and new automobiles, exclusive distribution is mostly found. The image of car is enhanced by exclusive distribution along with increase in markups.
Selective distribution lies in between exclusive distribution and intensive distribution. In selective distribution a few intermediaries are permitted to carry out the products of business organization. Most furniture, television and small appliance brands are distributed in this way.
Good working relationships can be built with chosen channel members and a better-than-average selling struggle is expected. Better market coverage with less cost and more control is given by selective distribution, as compared to intensive distribution.
