What is Channel Design?

Channel design is the process of identifying and selecting the most effective marketing channels to reach target customers
and achieve company objectives. The goal of channel design is to create a system that optimizes customer engagement and
minimizes costs. It begins with an understanding of customer needs and how they can best be met. Marketing channels are
the means by which companies communicate with and deliver value to customers. They include all the touchpoints a
customer has with a company, from awareness and acquisition to service and support Also, is a plan for the distribution and
movement of products and services from the producer to the customer. Additionally, channel design is also understood as
the process involved in the development of new marketing channels that no one had tried before or it can also refer to the
strategy of modifying existing channels

Reference:

June 12, 2023 | Hitesh Bhasin | https://www.marketing91.com/channel-design/

Who Engages in Channel Design? *

Generally, three parties are engaged in marketing channel design:

 Firms i.e., manufacturers, producers, franchisors, and service providers. They look down the marketing channels.
 Wholesalers- They look down as well as up the marketing channels.
 Retailers- They look up the marketing channels for securing suppliers.

Reference:

2023| WebThe-definition.com|https://the-definition.com
Answer:

1)Market Variables
It is the most fundamental variables to consider when designing a marketing channel. There are four basic sub categories of
market variables are particularly important in influencing channel structure. They are market geography, market size,
market density and market behavior. Also, help you split an audience into segments by providing you with possible
categories to group your contacts into.

2) Product Variables

Product variables is a product type that lets you sell a single product with different variations. Moreover, each variation can
have its own price, stock, image, and you can manage them differently. A shirt with multiple colors or sizes is a one example
of a variable product variable. Also, in product variable it also includes such as bulk and weight, perishability, unit value,
degree of standardization (custom-made versus standardized), technical versus nontechnical and newness affect alternative
channel structures

★ Bulk and Weight- Heavy and bulky products have very high handling and shipping costs relative to their value. Therefore,
a producer should attempt to minimize these costs by shipping only in large lots to the fewest possible points.

★Perishability- Products subject to rapid physical degeneration and those of rapid fashion obsolescence require rapid
movement from production to consumption.

★Unit Value- The lower the unit value of the product, the longer the channel should be. This is because low unit value
leaves a small margin for distribution costs When the unit value is high relative to its size and weight, direct distribution is
feasible because the handling and transportation costs are low relative to the product's value.

★Degree of Standardization- Custom-made products should go from producer to consumer while more standardized
products allow opportunity to lengthen the channel.

★Technical versus Nontechnical- In the industrial market, a highly technical product will generally be distributed through a
direct channel This is because the manufacturer may need sales and service people capable of communicating the
product's technical features to the user, in the consumer market, relatively technical products are usually distributed
through short channels for the same reasons.
★Newness-New products, both industrial and consumer, require extensive and aggressive promotion in the introductory
stage to build demand. Usually, the longer the channel of distribution the more difficult it is to achieve this kind of
promotional effort from all channel members.

3) Company Variables

The most important company variables affecting channel design are (A) size. (B) financial capacity. (C) managerial expertise,
and (D) objectives and strategies

★ Size - In general, the range of options for different channel structures is a positive function of a firm's size. Larger firms
have more options available to them than smaller firms

★ Financial Capacity-Generally, the greater the capital available to a company, the lower its dependence an Intermediaries

★ Managerial Expertise-For fins lacking in the managerial skits necessary to perform distribution tasks channel design must
of necessity include the services of intermediaries who have this expertise. Over time, as the firm's management gains
experience, it may be feasible to change the structure to reduce the amount of reliance on intermediaries

★Objectives and Strategies- The firm's marketing and general objectives and strategies, such as the desire to exercise a
high degree of control over the product may limit the use of intermediaries.

4) Intermediary Variables

The key Intermediary variables related to channel structure are (A) availability, (B) costs, and (C) the services offered

★ Availability-The availability (number of and competencies of) adequate intermediaries will influence channel structure.

★ Cost-The cost of using intermediaries is always a consideration in choosing a channel structure. If the cost of using
intermediates is too high for the services performed, then the channel structure is likely to minimize the use of
intermediaries.
★ Services-This involves evaluating the services offered by particular intermediaries to see which ones can perform them
most effectively at the lowest cost.

5) Environmental Variables

The environmental variables include all those factors which are external to a firm and which affect the decision-making
process. According to Philip Kotler, marketing environment is constantly spinning out new opportunities and new threats,
and the firms find their markets collapsing. Philip Kotler goes on to state further that a company’ s marketing executives
must constantly monitor the changing marketing scene and observe the changing environment through marketing research
and first-hand knowledge. “By creating early warning systems, the marketers will be able to alter the marketing strategies
to meet new challenges and opportunities in the environment.” Also, he said that, “a company’s marketing environment
consists of the factors in the company’s immediate environment that affect its ability to serve its markets. The macro-
environment consists of the larger societal forces that affect all of the factors in the company’s micro-environment-the
demographic, economic, physical, technological, political, legal, and socio-cultural farces”. Also, an environment variable
is a variable whose value is set outside the program, typically through functionality built into the operating system or
microservice. An environment variable is made up of a name/value pair, and any number may be created and available for
reference at a point in time.

6) Behavioral Variables

It is the division of a market into groups according to their knowledge of, and behavior towards, a particular product.
Behavioral dimensions commonly used to segment markets include benefits sought, user status, usage rate, loyalty status
and buyer readiness stage. Also called Behavioristic Segmentation.

References:

Apr 2023 | Monash University |https://www.monash.edu/business/marketing/marketing-dictionary/b/behavioural-

variables
1.Market geography - refers to the geographical extent of markets and where they are located. If the channel manager asks
the questions “What do our markets look like geographically?” and “How distant are our markets?” the concern is with the
market geography dimensional market that is classified by geographical segmentation is a geographic market. Geographical
segmentation seeks to identify marketing strategies accounting for variations within geographical markets in regard to
language, climate, and lifestyle. Geographic markets can range in size or in market definition. Three geographical units that
distinguish geographic markets are regions, countries, and population density; each of these units can be split into
subunits.

2. Market size - refers to the number of buyers or potential buyers (consumer or industrial) in a given market. Also, market
size is the total revenue generated by the sales of all products and services in a given market. In other words, it is the
measurement of the total volume of a given market. It is also called the ''total market value'' or ''total market size.

3.Market density - refers to the number of buyers or potential buyers per unit of geographical area or within certain area.
This market dimension should also be considered in channel design strategy because of its relationship to channel
structure.

4.Market behavior - consists of four subdimensions: when the market buys, where the market buys, how the market buys
and who buys. Also, a market behavior is a broad economic term that refers to the behavior of consumers, businesses, or
the stock market. It is often analyzed and used to generate various marketing strategies aimed at boosting sales or brand
recognition when dealing with businesses and consumers by analyzing their purchasing behavior.
CITE YR REFERENCES

What is Channel Design?

June 12, 2023 | Hitesh Bhasin | https://www.marketing91.com/channel-design/

Who Engages in Channel Design?

2023| WebThe-definition.com|https://the-definition.com

DISCUSS THE FOLLOWING:

Market variables

2022/2023 | https://www.studocu.com/ph/document/bicol-university/bs-management/designing-the-marketing-
channel-1/35126207

Feb 13, 2023| Mailchimp| https://mailchimp.com/resources/what-are-segmentation-variables/#:~:text=Marketing

%20variables%20help%20you%20split,depth%20in%20the%20next%20section.

Product variables

2011 - 2023| LitExtension.com All Rights Reserved. | https://litextension.com/blog/difference-between-variable-

products-variations-and attributes/#:~:text=A%20variable%20product%20is%20a,example%20of%20a%20variable
%20product

Company variables

2022/2023 | Adamson University| https://www.studocu.com/ph/document/bicol-university/bs-management/designing-

the-marketing-channel-1/35126207

Intermediary variables

2022/2023 |Adamson University| https://www.studocu.com/ph/document/bicol-university/bs-management/designing-

the-marketing-channel-1/35126207

Environmental variables

Shital P. | https://www.businessmanagementideas.com/marketing/marketing-environmental-variables-and-their-
effects-marketing-management/11541

Dec 20, 2018| Jim Medlock | https://medium.com/chingu/an-introduction-to-environment-variables-and-how-to-use-

them-f602f66d15fa

Behavioral variables

Apr 2023 | Monash University |https://www.monash.edu/business/marketing/marketing-dictionary/b/behavioural-

variables