CH 14

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc.
c. All rights reserved.

Channel Component Dimensions
First, the channel structure must be designed to accomplish

desired marketing objectives.
Difficulty to selecting channel
– the alternatives are numerous
– marketing goals differ
– the variety of business market segments often
requires that separate channels must be employed
concurrently.
Second, once the channel structure has been specified, the
business marketer must manage the channel to achieve
prescribed goals.
Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
• The link between manufacturers and customers is the channel of distribution.
• Channel management centers on these questions: which channel tasks will
be performed by the firm and which tasks, if any, will be performed by
channel members?
Channel
Alternative
s in the
Business
Market
Direct Sales Approach is Viable When:
1. The customers are large and well defined.
2. The customers insist on direct sales.
3. Sales involve extensive negotiations.
4. Control of the selling job is necessary to ensure

proper implementation of the total product
package and to guarantee a quick response to
market conditions.
Indirect Distribution
is Generally Found Where
 Markets are fragmented and widely

dispersed.
 Low transaction amounts prevail.
 Buyers typically purchase a number of items.
E-Channel Use
Level 1:
Information Platform.
Level 2:
Transactional Platform.
Level 3:
Platform for Managing Customer Relations.
Three Primary
Distributor Classifications
General-line distributors
• They stock and extensive variety of products.
Specialists
• Focus on one line or on a few related lines.
Combination House
• Operates in two markets: industrial and consumer.
The Channel
Design Process
• Channel design is the dynamic process of developing new

channels where none existed and modifying existing
channels.
• Channel design is an active rather than a passive task.
• Frequently, the manager has little flexibility in the selection of
channel structures because of trade, competitive, company, and
environmental factors.
• The decision on channel design may be imposed on the manager.
Factors Limiting Choice of Industrial Channel
• Availability of Good Intermediaries

• Traditional Channel Patterns
• Product Characteristics
• Company Financial Resources
• Competitive Strategies
• Geographic Dispersion of Customers
Channel Alternatives Issues
1. The number of levels to be included in the channel.

2. The types of intermediaries to employ.
3. The number of channel intermediaries.
4. The number of channels to employ.
Manufacturer-Rep Channel Used When:
• The product is not standard but is closer to made-to-order.

• The product tends toward technical complexity.
• The gross margin is not large.
• A relatively few number of customers, concentrated
geographically and concentrated in a few industries.
• Customers order relatively infrequently and allow fairly
long lead times.
Evaluating Alternative Channels
• Takes into account all the elements of the channel design process as well
as important customer requirements.
• Approach is to create an “ideal” channel system that fully addresses
customer needs.
Channel Administration
• Channel participants must be selected, and

arrangements must be made to ensure that all
obligations are assigned.
• Members must be motivated to perform the
tasks necessary to achieve channel objectives.
• Conflict within the channel must be properly
controlled.
• Performance must be controlled and evaluated.
Motivating Channel Members
A Partnership
Dealer Advisory Councils
Margins and Commission
International Market
Three Distinct Channels
• American-based export intermediaries.
• Foreign-based intermediaries.
• Company-managed and company-organized
sales force.

CH 14

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CH 14

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Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc.

c. All rights reserved.

First, the channel structure must be designed to accomplish

1. The customers are large and well defined.

2. The customers insist on direct sales.

3. Sales involve extensive negotiations.

4. Control of the selling job is necessary to ensure

 Markets are fragmented and widely

• Channel design is the dynamic process of developing new

Factors Limiting Choice of Industrial Channel

• Availability of Good Intermediaries

1. The number of levels to be included in the channel.

• The product is not standard but is closer to made-to-order.

• Channel participants must be selected, and

Dealer Advisory Councils

Margins and Commission

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