Marketing channel design calls for analyzing consumer needs, setting channel objectives, identifying major channel alternatives, and evaluating them.

 

Analyzing Consumer Needs

As noted previously, marketing channels are part of the overall customer-value delivery network.

The company must balance consumer needs not only against the feasibility and costs of meeting these needs but also against customer price preferences.

 

Setting Channel Objectives

Companies should state their marketing channel objectives in terms of targeted levels of customer service.

The company should decide which segments to serve and the best channels to use in each case.

The company’s channel objectives are influenced by the nature of the company, its products, its marketing intermediaries, its competitors, and the environment. Environmental factors such as economic conditions and legal constraints may affect channel objectives and design.

 

Identifying Major Alternatives

Types of Intermediaries

A firm should identify the types, number, and responsibilities of channel members available to carry out its channel work.

Number of Marketing Intermediaries 

Companies must also determine the number of channel members to use at each level.

Three strategies are available:

1. Intensive distribution: Ideal for producers of convenience products and common raw materials. It is a strategy in which they stock their products in as many outlets as possible.

2. Exclusive distribution: Purposely limit the number of intermediaries handling their products. The producer gives only a limited number of dealers the exclusive right to distribute its products in their territories.

3. Selective distribution: This is the use of more than one, but fewer than all, of the intermediaries who are willing to carry a company’s products.

Responsibilities of Channel Members

The producer and intermediaries need to agree on the terms and responsibilities of each channel member. 

They should agree on price policies, conditions of sale, territorial rights, and specific services to be performed by each party.

 

Evaluating the Major Alternatives

Using economic criteria, a company compares the likely sales, costs, and profitability of different channel alternatives.

Using control issues means giving them some control over the marketing of the product, and some intermediaries take more control than others.

Using adaptive criteria means the company wants to keep the channel flexible so that it can adapt to environmental changes.

 

Designing International Distribution Channels

In some markets, the distribution system is complex and hard to penetrate, consisting of many layers and large numbers of intermediaries.

At the other extreme, distribution systems in developing countries may be scattered, inefficient, or altogether lacking.

Sometimes local customs can greatly restrict how a company distributes products in global markets.