WHAT IS CHANNEL DESIGN?? Designing a channel system calls for analyzing customer needs, establishing channel objectives, and identifying and evaluating the major channel alternatives.

1. CHANNEL DESIGN
Presented By:
Sanower Azad
MBA(2013-2015)
GGSIPU , NEW DELHI

2. Channel Design
WHAT IS CHANNEL DESIGN??
Designing a channel system
calls for analyzing customer
needs, establishing channel
objectives, and identifying
and evaluating the major
channel alternatives.

3. ANALYZING THE SERVICE OUTPUT LEVELS DESIRED BY
CUSTOMERS
• In designing the marketing
channels, the marketer
must understand the output
levels desired by the target
customers.
• Channel produce
five service outputs:

4. 1. LOT SIZE
• The number of units the
channel permits a
typical customer to
purchase on one
occasion.

5. 2. SPATIAL CONVENIENCE
• The degree to which the
marketing channel
makes it easy for
customers to purchase
the product.

6. 3. WAITING TIME & DELIVERY TIME
• The average time customers
of that channel wait for
receipt of the goods.
SPATIAL CONVENIENCE
ANALYZING THE SERVICE
OUTPUT LEVELS DESIRED BY
CUSTOMERS cont..

7. 4. PRODUCT VARIETY
• The assortment breadth
provided by the
marketing channel.
Normally customer
prefer greater
assortment because
more choices increase
the chance of finding
what they need.

8. 5. SERVICE BACKUP
• . The add-on services
(credit, delivery,
installation, repairs)
provided by the
channel. ANALYZING
THE SERVICE OUTPUT
LEVELS DESIRED BY
CUSTOMERS

9. DETERMINE THE CHANNEL OBJECTIVES AND
CONSTRAINTS
• Channel objectives should be stated in terms
of targeted service output levels. Channel
institutions should arrange their functional
tasks to minimize total channel costs with
respect to desired levels of service outputs.

10. IDENTIFY THE MAJOR CHANNEL
ALTERNATIVES
After the channel objective have been determined,
the company should identify its major channel
alternatives in terms of
• (1) types of intermediaries,
• (2) the number of intermediaries needed, and
• (3) the terms and responsibilities of each channel
member.

11. 1. Four basic types of marketing
Intermediaries..
1. AGENT - is an independent
individual or company whose
main function is to act as the
primary selling arm of the
producer and represent the
producer to users. Agents take
possession of products but do not
actually own them. Agents
usually make profits from
commissions or fees paid for the
services they provide to the
producer and users.

12. Intermediaries..
2. WHOLESALERS - Wholesalers are
independently owned firms that
take title to the merchandise they
handle. The wholesalers own the
products they sell. Wholesalers
purchase product in bulk and
store it until they can resell it.
Wholesalers generally sell the
products they have purchased to
other intermediaries, usually
retailers, for a profit.

13. Intermediaries..
3. DISTRIBUTORS - Distributors are
similar to wholesalers, but with
one key difference. Wholesalers
will carry a variety of competing
products, for instance Pepsi and
Coke products, whereas
distributors only carry
complementary product lines,
either Pepsi or Coke products.
Distributors usually maintain
close relationships with their
suppliers and customers.
Distributors will take title to
products and store them until
they are sold.

14. Intermediaries
4. RETAILERS - A retailer takes
title to, or purchases,
products from other market
intermediaries. Retailers
can be independently
owned and operated, like
small “mom and pop”
stores, or they can be part
of a large chain, like 7
ELEVEN. The retailer will sell
the products it has
purchased directly to the
end user for a profit.

15. 2. Number of intermediaries needed
Companies have to decide on the number of intermediaries to
use.
a) EXCLUSIVE DISTRIBUTION
b) SELECTIVE DISTRIBUTION
c) INTENSIVE DISTRIBUTION

16. EXCLUSIVE DISTRIBUTION
• Exclusive distribution is a situation in which only
certain dealers are allowed to sell a certain product.
• It involves exclusive dealing arrangement, which the
resellers agree not to carry competing brands. By
granting exclusive distribution, the producer hopes
to obtain more dedicated and knowledgeable selling.

17. SELECTIVE DISTRIBUTION
• Only some available outlets in area are chosen to distribute a
product.
• The company does not have to dissipate its efforts over too
many outlets, it enables the producer to gain adequate
market coverage with more control and less cost than
intensive distribution.
• It is appropriate for shopping products, which consumers are
willing to spend more time visiting several retail outlets to
compare prices, designs, styles, and other features of these
product. Nike is a good example of selective distribution.

18. INTENSIVE DISTRIBUTION
• Intensive distribution is the use of all available outlets to distribute a product. It is
suitable for convenience products, such as soft drinks, bread, candy, newspapers,
etc. because they have high replacement rate and require almost no service.
• Multiple channels (i.e. convenience stores, service stations, supermarkets discount
store) are used to sell these products. Availability of these products is more
important than the nature of the outlet.
• For convenience of consumers, store must be located nearby and minimum time
will be necessary to search for the product at the store.