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Channel Design Berman Chapter 11 Version 3.0


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

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

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

3. Intermediary Requirements
Channel length
short - direct long - indirect

channel width
determinants - investments, buyer behavior, volume degrees - exclusive, intensive, selective

horizontal forward vertical backward vertical intertype - multiple, dual

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

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

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

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

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


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

7. Revising Channel Arrangements (cont)

Efficiency Effectiveness
coverage control effectiveness efficiency