1 MARKETING CHANNELS Channel Design Berman Chapter 11 Version 3.0

2 Channel Design 1. Channel Design and Selection 2. Determining Channel Objectives 3. Assessing Channel Length, Width 4. Factors that Offset Channel Length 5. Allocating Channel Tasks 6. Selection of Resellers 7. Revising Channel Arrangements

3 1. Design and Selection Goal: optimal channel arrangement marketing strategy change geographic expansion loss of major client mergers, acquisitions in industry existence or increase of gray market activity new channel introductions (net) changes in buyer behavior

4 2. Channel Objectives integrate effects –mergers and acquisitions –wider distribution –gray market –new markets specific objectives –service output requirements lot size market decentralization waiting time product variety service backups

5 3. Intermediary Requirements –Channel length short - direct long - indirect –channel width determinants - investments, buyer behavior, volume degrees - exclusive, intensive, selective –types horizontal forward vertical backward vertical intertype - multiple, dual

6 4. Channel Length Aspinwall Theory –characteristics of goods and parallel systems –replacement rate, gross margin, adjustment, consumption time, searching time –goods - reed, orange, yellow Product factors –customer base, geographic dispersion, customer density, sales gestation period, level of customer, average order size

7 Channel Length (cont) Product factors –bulk, perishability, unit value, product standardization, technical nature, gross margin Manufacturer Factors –size, financial capability, desire for control, managerial expertise, customer knowledge Intermediary Factors –availability, cost, service quality

8 Length Factors Summary lack of independence of variables need to consider multiple factors relationship simplification most closely related factors –product information, customization, quality assurance, lot size, assortment, availability, after sales service, logistics

9 5. Channel Participant Tasks Selling Channel Support Physical Distribution Product Modification After Sale Service Risk Assumption –Criteria - reducing costs, maximizing share, sales revenue, profits, optimizing ROI risks, meeting needs for info, availability, etc.,information sources

10 –Contact Bases selling intermediaries stocking intermediaries stocking / servicing intermediaries hybrid arrangements 6. Selection of resellers –availability, preliminary evaluation, comprehensive analysis –evaluations screenings, interviews, checklists, analyses, final process

11 7. Revising Channel Arrangements ideal vs actual system - gap analysis –creditworthiness –territorial coverage –image and reputation –service performance –pricing strategy –wholesaler requirements –effects on current channel

12 7. Revising Channel Arrangements (cont) Efficiency Effectiveness –coverage –control –effectiveness –efficiency Adaptability