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Designing Channel Systems

September 09, 2013

Designing Channel Systems

Planning factors Channel alternatives Evaluating channel alternatives Channel partners selection Enhancing channel effectiveness Emerging channels

Planning Factors
Product or service nature & specific requirements Customers locations, numbers, nature, frequency &

intensity of coverage.

Competition system, intensity, unique features-if any Intermediaries role definition, required quality, numbers,

readiness vs. training needs, supervision needs.

Costs margins, logistics / transportation, market servicing,

Channel Alternatives

Intermediaries - current vs. required C&FAs; logistics

service providers ; super distributors; distributors; wholesalers ; retailers ; service centres

Numbers & types - required vs. currently available;

optimal needs ; training requirements ; financial strength current & future requirements

Hybrid - combination of one or more channel types viz.

Own sales force for specific outlets / customers + distributors for mass distribution + e-commerce portal own vs. existing for online selling increased reach yet important customers serviced as per requirement ; faster & authenticated information flow ; controlled dependence

Evaluating Channel Alternatives

Infrastructure present vs. required Ability to understand policy guidelines, operate & manage the

SOPs w.r.t. operations & reporting

Adaptability w.r.t. addition / deletion of product range, service

support, territorial extension, fairness in distribution, additional volumes warehousing & financing

Cost of operation own vs. exclusive /non-exclusive

partners optimal alternative deliver required service at least cost

Channel Partner - Selection

Necessary requirements

Market coverage of existing & development of new Key Accounts development & service Working capital inventory, market credit, claims, promotions Technical service & support product category based Customer complaints resolution Reporting - business transactions, market & competition C&FA selection matrix Distributor selection matrix

Enhancing Channel Effectiveness

1. 2. 3.

5. 6. 7.

Referent position of eminence of the company Expert specialized training on business development & service Support promotion, subsidies, incentives Competition contests, performance parameters adherence Reward & punishment periodical w.r.t. performance parameters Coercive credit, delivery, service etc. Legitimate NO MORE USED

Enhancing Channel Effectivenesscontd

1. 2. 3.

5. 6.

Product, market, competition class room / field ERP transactional processes ( on-line) Warehouse maintenance stacking, general hygiene Meetings with senior management launch of new products, major promotions, annual events Reporting, statutory compliances, feedback Technical products - specification, installation procedure, performance demos, servicing

Emerging Channels
2. 3. 4. 5.


Door-to-door Vending machines Tele-shopping Catalogues - not prevalent so far in India Direct selling multi-level marketing / pyramid schemes E-commerce - B2C, B2B

Reference Text

Sales & Distribution Management Havaldar & Cavale



Selling & Sales Management Jobber & Lancaster

Chapter 4

Class Quiz- 8

Selection Matrix C&FA

Sl. No. 1. 2. Selection Parameter Location of party Location of warehouse & management of warehouse Past experience Financial strength IT Capability Flexibility Transportation facilities Attitude & Commitment Integrity Selection Criteria Vicinity of the market Outside octroi limits, transport access, labour, utilities and communication support, stacking , FMFO C&FA for similar business, ability to maintain confidentiality To incur operating expenses untill reimbursement Adequate own hardware, trained staff to operate companys ERP programmes Operating hours to handle peak loads Reliability, consistency, capability to handle spurts Disciplined with resources to expand business Known reputation of high integrity

3. 4. 5. 6. 7. 8. 9.


Selection Matrix - Distributor

Sl. No. 1. 2. Selection Parameter Experience of similar business Financial strength Selection Criteria Current business portfolio, volumes and values handled To invest in stocks & market credit


Market coverage

Own sales force, ready stock, delivery resources

Knowledge, relations, regularity, beat plan adherence, credit extension, Current business awards, certificates, prizes Education of partners, direct or indirect involvement Merchandising, displays Sales promotions, documentation & transparency Adherence to stocking norms

5. 6. 7. 8. 9.

Sales performance Management of business Market working Operating promotions & integrity Inventory management