Channel design decisions

Ø Analyzing customer needs

Lot size
Waiting and delivery time
Spatial convenience
Product variety
Service backup

Ø Establishing channel objectives

Channel objectives should be stated in terms of targeted service output levels. Channel design must take into account the strengths and weaknesses of different types of intermediaries.

Ø Identifying major channel alternatives

A channel alternative is described by three elements : (a)the types of available business intermediaries, (b) the number of intermediaries needed, (c) and the terms and responsibilities of each channel member.

Evaluating major channel alternatives

Analyzing customer needs

(a) Lot size :

q In buying cars for its fleet, Hertz prefers a channel from which it can buy a large lot size.

q A Household wants a channel that permits buying a lot size of one.

b) Waiting and delivery time :
The average time customers of that channel wait for receipt of the goods. Customers increasingly prefer faster and faster delivery channels.

c) Spatial convenience :

The degree to which the marketing channel makes it easy for customers to purchase the product.
Example : Chevrolet offers greater spatial convenience than Cadillac, because there are more Chevrolet dealers.
Chevrolet’s greater market decentralization helps customers save on transportation and search costs in buying and repairing an automobile.

(d) Product variety :

The assortment breadth provided by the marketing channel.
Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need.United Spirits Limited (USL) is the largest spirits company in the world by volume, selling 114 million cases for the fiscal ending March 21, 2011.

(e) Service backup :

• The add-on services are the credit, delivery, installation, repairs and others provided by the channel. The greater the service backup, the greater the work provided by the channel.

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