Developing the

Marketing Channel
 Understanding Channel Design

• Definition of Channel Design

• Channel Design: The process of outlining the structure and framework of a
marketing channel to efficiently move products from producers to consumers.
• Key Components of Channel Design
• Channel Structure
• Determining the number of levels (e.g., direct or indirect channels) and types of
intermediaries.
• Channel Integration: Deciding the degree of coordination and collaboration among
channel members.
• Channel Member Roles: Specifying the roles and responsibilities of each channel
member.
• Distribution Intensity: Choosing the level of market coverage, such as intensive,
selective, or exclusive distribution.
Key Participants in
Channel Design
Key Considerations in
• Producers/Manufacturers
• Wholesalers
the Channel Design
• Retailers Process
• Customers/End Consumers
Key Considerations in the
Channel Design Process
• Product Characteristics
• Complexity Economic Considerations
• Perishability • Cost Implications
Market Factors • Resource Availability
• Geographic Dispersion Legal and Regulatory Factors
• Compliance
• Consumer Behavior
• Distribution Agreements
Competitive Environment
• Competitor Channel
• Market Positioning
Steps in Channel Design

Define and Objectives Select Channel Members

• Purpose • Criteria
• Considerations • Relationship Building
Analyze Consumer Needs Determine Distribution Intensity
• Research • Market Coverage
• Segmentation • Reach vs. Control
Evaluate Internal and External Develop Channel Policies
Factors • Guidelines
• SWOT Analysis • Consistency
• Competitor Analysis
Channel Design Models
• Direct Distribution Model:
• Characteristics: Involves direct sales from the producer to the end consumer.
• Examples: Online sales, company-owned stores.
• Indirect Distribution Model:
• Characteristics: Utilizes intermediaries such as wholesalers and retailers.
• Examples: Wholesale distribution, retail partnerships.
• Multichannel Distribution Model:
• Characteristics: Involves using multiple channels simultaneously.
• Examples: Combination of direct sales, online platforms, and partnerships with retailers.
• Franchise Distribution Model:
• Characteristics: Employs independent entrepreneurs (franchisees) to distribute products.
• Examples: Fast-food franchises, retail franchises.
Challenges in Channel Design and Management

• Channel Conflict:
• Vertical Conflict: Between different levels of the channel (e.g., producer vs. retailer).
• Horizontal Conflict: Among entities at the same level (e.g., between two retailers).
• Coordination Issues:
• Communication Gaps: Inadequate communication leading to coordination challenges.
• Logistical Challenges: Managing inventory, order fulfillment, and other operational aspects.
• Evolving Consumer Expectations:
• Omni-Channel Expectations: Consumers expect a seamless experience across various
channels.
• Technological Influences: Rapid technological changes impact consumer preferences.
• Global Distribution Challenges:
• Cultural Differences: Understanding and adapting to diverse cultural norms.
• Logistical Complexity: Dealing with global supply chain and distribution complexities.
Evaluating Channel Performance
• Sales Metrics:
• Revenue Generation: Assessing the overall revenue generated through the channel.
• Sales Growth: Monitoring sales growth over time.
• Customer Satisfaction:
• Feedback and Surveys: Gathering customer feedback on their satisfaction with the distribution
process.
• Repeat Business: Assessing customer loyalty and repeat business.
• Inventory Management:
• Stock Levels: Monitoring inventory levels and turnover.
• Order Fulfillment: Evaluating the efficiency of order fulfillment processes.
• Market Coverage:
• Geographic Reach: Assessing the extent of market coverage.
• Target Segments: Evaluating the effectiveness of reaching specific target segments.
• Channel Costs:
• Distribution Costs: Analyzing the overall costs associated with the distribution process.
• Cost-Efficiency: Ensuring cost-effectiveness in the channel design.
 Paradigm of the Channel Design Decision

Strategic Alignment Technology Integration:

• Alignment with Business Strategy • Innovation
• Competitive Advantage • Digital Transformation
Customer-Centric Approach Collaboration and Partnerships:
• Understanding Customer Needs • Strategic Alliances.
• Enhanced Customer • Mutual Benefits.
Market Intelligence:
Experience Flexibility and Adaptability • Competitor Analysis
• Changing Market Dynamics • Market Research
• Adaptable Structures Regulatory Compliance:
Efficiency and Cost-Effectiveness • Legal Framework
• Optimizing Resources • Ethical Considerations
• Cost-Efficiency
Phases of Channel Design

• Initiation and Goal Setting

• Research and Analysis
• Strategy Formulation
• Partner Selection and Relationship Building
• Channel Implementation
• Monitoring and Evaluation
• Adaptation and Optimization
Channel Structure
Understanding Channel Structure:
• Definition:
• Channel Structure: Refers to the organization and arrangement of different
levels of intermediaries involved in the distribution of a product.
• Levels of Channel Structure:
• Direct Distribution:
• Characteristics: Involves the producer selling directly to the end consumer.
• Advantages: Greater control, direct customer feedback.
• Indirect Distribution:
• Characteristics: Involves intermediaries (wholesalers, retailers) between the producer and
consumer.
• Advantages: Expanded market reach, cost-sharing.
CHANNEL MEMBERS
• Company own sales team
• C&FAs and CSAs (Carrying & forwarding agent,
carrying and selling agent)
• Distributors, dealers, stockists, value-added re-sellers
• Agents and brokers
• Franchisees
• Electronic channels
• Wholesalers
• Retailers
 Types of Channel Structure Models

• Common Channel Structure Models:

• Single-Level Channel:
• Characteristics: Involves only one intermediary between the producer and consumer.
• Example: Producer → Retailer → Consumer.
• Two-Level Channel:
• Characteristics: Includes two intermediaries between the producer and consumer.
• Example: Producer → Wholesaler → Retailer → Consumer.
• Three-Level Channel:
• Characteristics: Involves three intermediaries between the producer and consumer.
• Example: Producer → Agent/Broker → Wholesaler → Retailer → Consumer.
• Direct Channel:
• Characteristics: No intermediaries; the producer sells directly to the consumer.
• Example: Producer → Consumer.
Key Factors Influencing Channel Structure
Decision

• Product Characteristics
• Market Factors
• Competitive Environment
• Economic Considerations
• Legal and Regulatory Factors
CHANNEL INTENSITY

• Intensive (convenience goods)

Mass distribution and promotion
• Selective (shopping goods)
Reduced distribution, assortment breadth,
channel cooperation
• Exclusive (specialty goods)
Sacrifice market coverage for channel control
and prestige
 Channel Member Selection
• Importance of Channel Member Selection:
• Critical Decision: Choosing the right channel members is a crucial decision in channel design.
• Impact on Performance: The effectiveness of the distribution channel depends on the capabilities and alignment of selected
members.
• Criteria for Channel Member Selection:
• Expertise and Experience:
• Select members with expertise and experience relevant to the industry and market.
• Market Reputation:
• Consider the reputation of potential channel members in the industry and among consumers.
• Financial Stability:
• Assess the financial stability of prospective members to ensure their ability to fulfill their roles.
• Alignment with Brand Values:
• Choose members whose values align with the brand and contribute positively to the brand image.
• Distribution Infrastructure:
• Evaluate the distribution infrastructure of potential members to ensure efficient product movement.
• Geographic Coverage:
• Consider the geographic coverage of members to align with the target market and distribution needs.
• Adaptability and Innovation:
• Select members who are adaptable to market changes and open to innovative distribution strategies.
• Channel Member Evaluation Process:
Application and Screening:
Members express interest through applications, followed by a
screening process.
Interviews and Negotiations:
Conduct interviews to assess capabilities and negotiate terms and
conditions.
Trial Period:
Implement a trial period to evaluate the actual performance of
selected members.
Performance Metrics:
Establish key performance indicators (KPIs) to measure the ongoing
performance of channel members.
 CHANNEL MANAGEMENT
Channel management can be referred as the process of analysing,
planning, organizing and controlling the firm’s marketing channels. It
comprises of three specific attributes;

• Channel cooperation, i.e. bringing together efficient channel members

& implementing effective channel.

• Identifying and resolving channel conflicts

• Channel coordination
 RECRUITING A CHANNEL
The process of recruiting a channel may be undertaken through
psychological and logical research, they being:
• How well established is the channel in the market
• Its reputation among customers
Size of the business maintained and undertaken
Product Lines on the basis of
(1) competitive products, (2) compatible products, (3) complementary
products, and (4) quality of lines carried.
Market Coverage
Sales Performance
 RECRUITING CHANNEL MEMBERS
The process of recruiting a channel
member may be undertaken
through: Industry Networks and Associations
• References from existing channel
members Market Research
• Poaching from competitors Referrals and Recommendations
• Market research Online Platforms and Directories
• Carrying and forward agents
Professional Consultants
• Trade Sources
Social Media and Online Presence
• Trade Shows
• Business databases Collaborative Partnerships
• The Internet Publications and Journals
CRITERIA FOR SELECTING
CHANNEL MEMBERS
• Alignment with Objectives • Number of Years In Business
• Capability Assessment • Growth & Profit (Sale factors)
• Financial Strength
• Market Compatibility
• Cooperative and Coordination
• Flexibility and Adaptability
in the market
• Legal and Ethical • Service
Considerations • Reputation
• Customer Relationship
Application of Selection Criteria

• Alignment with Objectives

• Expertise and Industry Knowledge
• Market Reputation
• Financial Stability
• Distribution Infrastructure
• Geographic Coverage
• Adaptability and Innovation
• Communication and Collaboration Skills
• Legal and Ethical Compliance
• Flexibility in Operations
MOTIVATING CHANNEL
MEMBERS
• Capacity building programs
• Training
• Promotional support
• Marketing research support
• Working with company personnel
• Incentives
• Partnerships
• Margins and commissions
Securing the Channel Members

• Steps in Securing Channel Members:

• Negotiation and Agreement
• Contractual Agreements
• Onboarding Process
• Collaborative Planning
• Continuous Communication
• Performance Monitoring
• Feedback Mechanisms
• Conflict Resolution Strategies
• Adaptation and Flexibility
• Mutual Growth Strategies