Distribution and Supply Chain Management

Module 2
Dr.Vasudevan M

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What is Channel Design?

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Channel Design

There are variations in usage of the term ‘design’ of

marketing channel:
•a noun to describe channel structure
•The formation of a new channel from scratch/
modifications to existing channels
•‘Selection’

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What is Channel Design

•It refers to those decisions involving the
development of new marketing channels
where none had existed before, or to
modification of existing channels.

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Channel Design
Key distinguished points associated with channel design:
•It is presented as a decision faced by the marketer (same as other marketing
mix).
•It is used in the broader sense to include either setting up channels from the
scratch or modifying existing channels (reengineering).
•The management has taken a proactive role in the development of the channel.
•The term ‘selection’ refers to only 1 phase of channel design (selection of the
actual channel members).
•It is a strategic tool for gaining a differential advantage.

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Who Engages in Channel Design

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A Paradigm of the Channel Design Decision

The channel design decision can be broken down

into 7 phases or steps:
1.Recognizing the need for a channel design decision
2.Setting and coordinating distribution objectives
3.Specifying the distribution tasks
4.Developing possible alternative channel structures

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Cont...

5.Evaluating the variables affecting channel

structures
6.Choosing the best channel structure
7.Selecting the channel members

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How will you recognize the need for channel

design decision?

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Can Someone Talk about this?

https://economictimes.indiatimes.com/industry/cons-products/food/itc-partners-with-amway-india-to-sell-new-immunity-
beverage/articleshow/76066640.cms?from=mdr

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Phase 1: Recognizing the Need for a Channel Design Decision

1.Developing a new product/product line

2.Aiming an existing product at a new target market (i.e. additional
channel from b2b to b2c)
3.Making a major change in some other component of the marketing mix
(i.e. new pricing policy emphasizing lower prices)
4.Establishing a new firm
5.Adapting to changing intermediary policies (i.e. if intermediaries begin to
emphasize their own private brands, adding new distributors for the
manufacturer may be needed.)
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Cont….
6.Dealing with changes in availability of particular kinds of intermediaries
7.Opening up new geographic marketing areas (territories)
8.Facing the occurrence of major environmental changes
9.Meeting the challenge of conflict or other behavioral problems (i.e. A
loss of power by a manufacturer to his/her distributors or communication
difficulties)
10.Reviewing and evaluating undertaking by a firm may point to the need
for changes in existing channels/ need for new channels

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Phase 2: Setting and Coordinating Distributing Objectives

In order to set distribution objectives that are well

coordinated with other marketing and firm objectives and
strategies, the channel manager needs to perform 3 tasks:
1.Become familiar with the objectives and strategies in the other
marketing mix areas
2.Set distribution objectives and state them explicitly
3.Check to see if the distribution objectives set are congruent with
marketing and other general objectives and strategies of the firm
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How does Apple sells its product in India? and any idea
about its future distribution plan?

https://economictimes.indiatimes.com/tech/hardware/app
le-to-open-its-first-store-in-india-next-
year/articleshow/74329158.cms?from=mdr
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Also Read About HUL’s perfect village initiative

https://hbr.org/2016/12/how-unilever-reaches-rural-consumers-in-emerging-markets

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Phase 4: Developing Possible Alternative Channel Structures

•Number of levels

•Intensity at the various levels

•Types of Intermediaries

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Red Goods - FMCG

Yellow Goods - Durables

Orange Goods - fashion / Clothing

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The Selection Process

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Finding Members

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Field Sales Organization

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Trade Sources

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Reseller Inquiries

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Customers

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Advertising

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Trade Shows

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Other Sources

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Selection Criteria
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(Pegram’s)

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Adapting Selection Criteria

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Securing Channel Members

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Offering Inducements

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Product Line

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Management Assistance

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Fair Dealing & Friendly Relationship

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