This document discusses channel systems and the process of designing distribution channels. It explains that channels bridge manufacturers and customers and are determined by factors like product nature, customer location/type, and market competition. The design process involves determining member roles and responsibilities, how activities achieve customer satisfaction, and performance evaluation. When choosing alternatives, companies consider available and needed intermediaries and their roles. Major alternatives are evaluated based on cost, control ability, adaptability, and volume handling ability. The three most important selection factors are product/market characteristics, company attributes, and channel member capabilities and attitudes.

1. DESIGNING CHANNEL
SYSTEMS

2. What are Channel Systems?
• The Channel system is a bridge between the manufacturer and the ultimate customer of
the products or services offered by the company
• Factors that determine the nature of the distribution channels:
 Nature of the product/ service
 Location and nature of the customers
 Nature of competition and its distribution systems
 Intensity of the distribution required
 Nature of the markets being targeted

3. Channel Design
• The process of design of the channel system answers some of
the following questions:
What activities are the channel members required to perform?
Which of these activities is to be performed by which channel
partner?
The number of channel members required in the network and
of each category.
Are the roles & responsibilities of the various channel
partners clearly defined?
How is the performance of these activities going to help the
company achieve its customer satisfaction objectives?
 Are the channel members aware of how their performance is
going to be judged, by whom and at what frequency?

4. Channel Alternatives
• At the time of deciding on the alternatives, the company will scan for:
i. Business intermediaries currently available in the market
ii. The number & type of intermediaries required
iii. Any new channel members that need to be specially developed
iv. Roles of each of the channel members

5. Evaluation of Major Alternatives
• The common criteria for evaluation are as follows:
 Cost
 Ability to manage & control
 Adaptability
 Range & volume to be handled

6. Factors influencing
Channel Selection
• The three most important factors influencing
channel selection are:
a) PRODUCT AND MARKET FACTORS-
nature of product, number of customers, the
purchase frequency, cost of the product,
simple/complex product, geographical
concentration of the market
b) COMPANY CHARACTERISTICS- financial
resources of the company, degree of control,
degree of risks the company wants to share,
management abilities
c) CHANNEL CONSIDERATIONS- level of
service capabilities of the proposed partners,
availability of middlemen, attitude of
intermediaries towards company policies