Incomplete Solutions

Channel Design
• Channel design decisions includes:
– The number of channels to employ.
– The number of levels to be included in each
channel.
– The type of intermediaries to employ.
– The number of channel intemediaries at each level
A typical channel for the FMCGs
Company

Co. Godown /
C& F agent

Stockist

Wholesalers

Retailers

Consumers
Services: Mutual Funds

Company

Mutual Fund
Management
company

Brokers
Replaceable market-Industrial goods

Company

Regional Co. Godowns

Dealers
• Channel design involves the development
of new marketing channels where none
existed before, or to the modification of
existing channels
• Channels need to be adopted depending on
the target segment and positioning
• It may not possible for a company to have a
common channel for all its products and
markets
 Framework for designing a Channel

Place utility

Time utility
• Thus the process of identifying the feasible
alternatives uses a bottom’s up approach
• In case the above process suggests more than
one alternative then the alternatives have to
be evaluated. The criteria for evaluation
include (a) cost, (b) middleman profitability,
(c) adaptability and (d) control
 Buyers’ needs
• As seen in the last session a consumer is willing to
travel a certain distance to satisfy his
requirements (or not travel if the consumer is
looking for Convenience).
• So, the last point of the channel should be those
outlets which satisfy the buyers’ needs.
– For example: A consumer buying a TV may visit a multi-
brand outlet to satisfy his (her) need of comparison.
– A traditional landlord may purchase his FMCG
requirements from the town outlet as it could be
satisfying his requirement of variety, credit etc.
Moreover it also satisfies his Status requirement. He
may consider it below his dignity to buy from a village
outlet.
• So, the selection of the last point in the
channel has to be decided after understanding
the requirements of the target segment.
• Therefore, if a product caters to two segments
with different needs, then there is a need to
have different channels catering to the
different segments.
 Similarly, behaviour of consumers in a segment may vary. So, different channels
would be required to satisfy different needs.
Type of Grocers & Super Chemists Pan Bidi
outlet General markets outlets
Merchants
Target Middle income Middle Middle All groups
segment groups upwards. income income
groups groups
upwards upwards and
floating
population.
Buyers’ Monthly Trial and Impulse Emergency
behaviour shopping variety buying purchases of
satisfied seeking middle
behaviour. income
group and
trial
purchases by
lower income
groups.
 Retailers’ requirements

• The retailers’ considerations would depend

on (a) nature of the product (b) servicing
requirements.
• Nature of the product
– Bulky
– Perishable
• Servicing requirements
– Time utility
 Legal Requirements

• Type of outlet
– Liquor
– Pharma
• Tax implications
• Sole Selling Agents
 Distribution Needs

• The role of the channel as defined by the

selling strategy
• Reach- This determines the width of the
channel.
 Rural segments

Direct Villages within Villages Remote village

factors/ a radius of connected by (not connected
Indirect factors 10kms. from public transport by public
urban center transport)

Traditional Highest urban High urban Moderate

landlords orientation orientation urban
orientation
Neo rich High urban Moderate urban Low urban
orientation orientation orientation

Other farmers Moderate urban Low urban Lowest urban

and agricultural orientation orientation orientation
labour
 Store decisions: Rural segments
Direct factors Villages within a radius Villages connected by Remote village (not
Indirect factors of 10kms. from public transport connected by public
urban center transport)
Traditional landlords Super premium / Consumer Durable Cheap varieties of
premium products of brands promising Consumer durables
consumer durables value for money from the towns and
and non durables from towns and premium to
from towns premium consumer moderately priced
non durable brands consumer non
from village outlets. durables from
village outlets.

Neo rich Consumer Durable Cheap varieties of A market for small packs
brands promising Consumer durables of national brands of
value for money from the towns and consumer non
from towns and premium to durables and ‘look
premium consumer moderately priced alikes’ (duplicates).
non durable brands consumer non Purchases are mainly
from village outlets. durables from from the haats.
village outlets.

Other farmers and Cheap varieties of A market for small packs Not a market for the
agricultural labour Consumer durables of national brands of consumer goods
and premium to consumer non manufactured in the
moderately priced durables and ‘look organised sector.
consumer non alikes’ (duplicates).
durables from Purchases are mainly
village outlets. from the haats.