RSSDECS
Recognize need
Set and coordinate
Specify distribution tasks
Develop alternative
Evaluate relevant variables
Choose best channel structure
Select channel members
Channel Design Paradigm
Channel Design
Decisions involving the development of new marketing channels either where none had previously existed or to the modification of existing channels
1. A decision made
by the marketer
2. The creation or modification of channels
3. The active allocation of distribution tasks in an attempt to develop an efficient structure
4. The selection of channel members
5. A strategic tool for gaining a differentia
Channel Design Distinguishing points
firms
Look down the channel toward the market
wholesalers
Look both up and down the channel
retailers
Look up the channel to secure suppliers
Distribution tasks
_________ are a function of the distribution objectives and the types of firms involved.
Number of Levels
Range from two to five or more
� Number of alternatives is limited to two or three choices
1. Number of levels in the channel
2. Intensity at the various levels
3. Types of intermediaries at each level
Channel Structure Dimensions
Market Size
Number of customers in a market
Market Density
Number of buying units (consumers or industrial firms) per unit of land area
Market Geography
Location, geographical size, stance from producer
Channel member selection
the 7th and final phase of channel design
Market Behavior
Who buys, & how, when, and where customers buy
Intensive Selective Exclusive
Intensity Dimension
Selection
_______ may of may not be the result of channel design
FAS
1. Finding prospective channel members
2. Applying selection criteria
3. Securing prospective channel members
selection process
...the less the emphasis on selection
The greater the intensity of distribution...
FTRCATO
Field sales organization
Trade sources
Reseller inquiries
Customers
Advertising
Trade shows
Other sources
Finding Members
Trade magazine advertising
________ can generate a large number of inquiries from prospective Members.
Trade Sources
Trade associations Trade publications Directories Trade shows Firms selling similar products The "grapevine
reseller inquiries
main source of information about potential new channel members for some manufacturers.
Other Sources
1. Chambers of commerce, banks, & local real estate dealers
2. Classified telephone directories or the yellow pages
3. Direct-mail solicitations
4. Contacts from previous applications
5. Independent consultations
6. List brokers that sell lists of names o
conventions.
Wholesale and retail trade associations hold annual ______________
Small manufacturers
meet face-to-face with wholesalers & retailers.
Management Assistance Inducements:
manufacturer will help with the following: � training programs � financial analysis & planning � market analysis � inventory control procedures � promotional method
Producers & Manufacturers Wholesale Intermediaries Retail Intermediaries
Who Selects?
Who does the selecting?
Offering Inducements
Advertising & promotional support
Management assistance
Fair dealing policies & Friendly relationships
1. Manufacturer offers good product line with strong sales & profit potential :
2. Stress value of good product line from channel members' perspective
Product Line Inducements
Advertising & Promotion Inducements
Consumer Market:
Gain immediate credibility by using a strong program of national advertising.
Advertising & Promotion Inducements Industrial Market:
Gain recognition by using a strong program of trade paper advertising.
Variables Affecting Channel Structure
1. Market Variables 2. Product Variables
3. Company Variables
4. Intermediary Variables
5. Environmental Variables
6. Behavioral Variables
Manufacturer's Responsibility Fair Dealing & Friendly Relationship
To convey to prospective channel members that he or she is genuinely interested in establishing a good relationship based on trust and concern for their welfare as both business entities and as people
Product Variables
Bulk & Weight Perishability
Unit Value
Degree of Standardization Technical versus Nontechnical Newness
company variables
size
financial capacity
managerial expertise
objectives and strategies
size company variable
range of options relative to firm's size
financial capacity company variable
greater the capital, lower the dependence on intermediaries
managerial expertise company variable
intermediaries are necessary when managerial experience are lacking
objectives and strategies company variable
marketing and objectives may limit use of intermediaries
intermediary variables
availability
cost services
members
Environmental Variables
Economic Forces
Competitive Forces
Sociocultural Forces
Technological Forces
Legal Forces
behavioral variables
Develop congruent roles for channel members
benefit
Fairly simple prescriptions for channel structure
limitation
Mostly useful as rough guide to decision making
1. Management is incapable of knowing all possible alternatives.
2. Precise methods for calculating the exact payoffs associated with each alternative structures do not exist.
Why is choosing an optimal channel structure not possible?
Approaches for Choosing Channel Structure
� "Characteristics of Goods & Parallel Systems" Approach
� Financial Approach
� Transaction Cost Analysis Approach � Management Science Approaches
� Judgmental-Heuristic Approach
Good empirical data on costs and revenues is available
IF Management's ability to make sharp judgments is high