Design of Information Channel Components: A Practical Example Design of Information Channel Components: A Practical Example Extracted from: “Channel Selection for New Industrial Products,” by Rangan, Menezes, Maier Distribution Channel Strategy Spring Semester: BA 266 February 2000 L. P. Bucklin

The Channel Design Problem Determine the optimal channel for a new industrial product when EU have limited experience with the product How should alternative channels be defined? How should the selection be made among the alternatives?

Implementation Steps Measurement of service requirements –Development scales for each service factor –Identify multiple respondents Þ Lead users Þ Management experts Weighting management and EU views –Issue of correlation due to common viewpoint –Potential bias in judgments Þ Will EU weight service needs higher than appropriate? Þ Will managers have any hidden agendas that might affect preferences?

Application How does one rate the different service needs in identifying a superior channel? Note differences between new product and mature channel service demand –Service needs declined across the board –Strong learning effects about channel services Determination of the channel options –Limited to existing institutional framework? –Any hybrid systems possible?

Mean End-User Ratings Lot Size Assortment Availability Special Handling Product Information Quality Assurance Customization After-Sale Service Channel Service & Rating New Mature

Impact of High Service Level upon Channel Type Type of Service Channel with High Service Lot SizeIndirect AssortmentIndirect AvailabilityIndirect Complexity of Product HandlingIndirect? Quality AssuranceDirect Product InformationDirect CustomizationDirect Complexity of After-Sale ServiceIndirect?

Evaluation of Approach Can EU’s correctly identify their service needs? How much depends upon prior experience? Their recognition of their needs? To what extent can EU’s distinguish between their short and long term service needs? Given the above, what methods might be appropriate for the development of the questionnaire? How does one select appropriate respondents for the questionnaire? How does one detect the presence of market segments?

Generalizations The delivery of complex information benefits from the reduction of intermediary positions in the channel Changes in information requirements may occur overtime as a product matures and the end user becomes more knowledgeable The long run information channel may be different from the short run The ease of being able to shift from short to long term ideal may affect the short term selection

Determining Channel Costs How should potential costs for the commercial segment of each channel type be estimated? –Comparisons with extant channels –Engineering estimates—what is the impact of scale? Can cost estimates be protected from bias held by the decision makers? Use of consultants? How should costs be linked to the level of service by the end user? How does one control for costs incurred by partner firms in the channel? (A governance issue.)