DESIGNING CHANNEL

SYSTEM
Variables that affect channel structure
• Market related: How much market we would like
to cover.
• Product related: Physical characteristics of the
product like size, weight, unit value, level of
customization, perishability influence the channel
structure.
• Company related: size of the company, financial
strength.
• Intermediary related: How many channels
needs to be empaneled, how much they cost,
what services they are going to offer.
Stages in channel development
• Defining the customer needs:
• Lot size
• Waiting time
• Assortment
• Spatial convenience
• Service support
Defining channel objectives
• What a channel member is expected to do in support of
customer service.
• To carry out maximum activities at least cost.
• What kind of service levels required for different segment
of customers and who will provide service to different
segment. For example: retail and institutional customers.
• What competitors are adopting.
• Industrial product?
• Consumer product?
• Fertilizers and pesticides?
• House construction items?
• Pharmaceutical products?
Channel alternatives
• Intermediaries currently available in market

• The number and type of intermediaries required

• Any new channel member that specially needs to be

designed.

• Role of each channel member.

Evaluation of major alternatives
• Cost- margins, commissions, cost of transportation, cost of
order processing, cost of returns.

• Ability to manage and control- Depth of market coverage,

frequency of coverage, calls per day, stock levels, extent of
credit, efforts on displays, participation in exhibitions fairs,
after sale service.
• Adaptability to changing circumstances.- adoption and
elimination of product, additional service support required,
new territory coverage, price increase and adverse
consumer reaction.

• Range and volume to be handled

Selection of channel partner
• Market coverage
• Development of new market
• Development of new key accounts
• Holding inventory
• Extending credit to market
• Proper implementation of promotion
• Key account management
• Technical capability
• Service support
• Complaint handling
• Market feedback and reporting
Training channel members
• On the field training for sales people.
• Class room training to the distributor and staff.
• Special meetings for launch of new products.
• Training on submitting reports and maintaining records.
• Statutory requirements.
• Care of company products in custody of channel member.
• In case of technical products training has to be on all
specification, installation, repair and maintenance.
• Servicing of technical products.
Motivating channel partner

• On the basis of some powers given by “French and

Raven”
• Referent power
• Expert power
• Legitimate power
• Support power
• Competition power
• Reward power
• Coercive power
Discussion question
• What should be parameter for selection of channel partner
for consumer good between:

• Carrying and forwarding agent ( C&FA)

• Distributor
C&FA Distributor
Location of party Size of channel partner
Location of warehouse Financial strength
Past experience Own sales force
History of past business reputation
It capability Market coverage
networking Credit extended
Flexibility Stock availability
transportation infrastructure
commitment Sales performance
Handling of sales promotion