Zero Based Channel Design

1. Distribution & Logistics
Management
Topic :Zero Based Channel Design
Prepared By : Manish Arora

2. Zero Based Channel
• Channel that meets the target market segments demands for
service output.
• At minimum cost of performing the necessary channel flows
that produce those service output.
• Its all about maximizing profitability by maximizing customer
satisfaction.
• In order to construct a perfect “Zero Based Channel” one
should know its :
i. Target Market-Understanding each target market segment
ii. Buyer Behaviour
iii. End User Demands
Further ,Meet those requirements with maximum utility and
minimum cost i.e , More efficiency than competitors.

3. Channel Levels
• Channel levels refer to the intermediary in
marketing distribution between the producer
or manufacturer and the end user i.e ,
Customer.
• Every Channel level plays a role in making the
goods available to the end consumer.
• Number of channel levels between the
producer and consumer could be either
0,1,2,3 or more.

4. • Zero level channel is a direct marketing
channel where there is no intermediary and
the producer sells directly to the consumer.
Example : Direct Mails
Telemarketing
• One level channel has one intermediary
typically a retailer between a manufacturer
and consumer.
• Two and Three level channel has 2 and 3
intermediary respectively.

5. Zero level 1st level 2nd level
Manufacturer
Consumer
Manufacturer
Retailer
Consumer
Manufacturer
Retailer
Retailer
Consumer

6. Channel Gap
• Any thing within the channel structure that is
preventing the channel from being a zero based
design.
• When distribution channel does not meet service
output demands then it is considered that there
is some channel gap.
• When channel operates in relatively high cost.
• When it cant perform the necessary channel flow.
Thus, we say “channel has a gap”

7. Sources Of Gaps
A. Environmental Bounds :
• Local Legal Constraints
B. Managerial Bounds :
• Lack of Knowledge
• Coordination Problem between channel
members
C. Supply Side Gaps :
• The total cost of performing all channel flow is
too high.
Ex : Employees training cost is high.

8. D. Demand Side Gaps : Happens when
SOS>SOD
SOS<SOD
Where ,SOS is Service Output Supplied
and SOD is Service Output Demanded
Further, In order to meet the target market segment
demands for service output and maximize
profitability with full customer satisfaction these
channel gaps should be avoided.