1. Designing the Marketing Channel

2. What is Channel Design
There are variations in usage of the term ‘design’ of marketing channel:
a noun to describe channel structure
The formation of a new channel from scratch/ modifications to existing channels
‘Selection’

3. What is Channel Design
It refers to those decisions involving the development of new marketing channels where none had existed before, or to modification of existing channels.

4. Channel Design
Key distinguished points associated with channel design:
It is presented as a decision faced by the marketer (same as other marketing mix).
It is used in the broader sense to include either setting up channels from the scratch or modifying existing channels (reengineering).
The management has taken a proactive role in the development of the channel.
The term ‘selection’ refers to only 1 phase of channel design (selection of the actual channel members).
It is a strategic tool for gaining a differential advantage.

5. Who Engages in Channel Design
Producers/ Manufacturers
Wholesalers
Retailers
Market

6. A Paradigm of the Channel Design Decision
The channel design decision can be broken down into 7 phases or steps:
Recognizing the need for a channel design decision
Setting and coordinating distribution objectives
Specifying the distribution tasks
Developing possible alternative channel structures

7. A Paradigm of the Channel Design Decision
The channel design decision can be broken down into 7 phases or steps:
Evaluating the variables affecting channel structures
Choosing the best channel structure
Selecting the channel members

8. Phase 1: Recognizing the Need for a Channel Design Decision
Many situations can indicate the need for a channel design decision. Among them are the following:
Developing a new product/product line
Aiming an existing product at a new target market (i.e. additional channel from b2b to b2c)
Making a major change in some other component of the marketing mix (i.e. new pricing policy emphasizing lower prices)
Establishing a new firm
Adapting to changing intermediary policies (i.e. if intermediaries begin to emphasize their own private brands, adding new distributors for the manufacturer may be needed.)

9. Phase 1: Recognizing the Need for a Channel Design Decision
Many situations can indicate the need for a channel design decision. Among them are the following:
Dealing with changes in availability of particular kinds of intermediaries (i.e. reducing number of prestigious department stores in the U.S. affected French manufacturers of luxury goods)
Opening up new geographic marketing areas (territories)
Facing the occurrence of major environmental changes
Meeting the challenge of conflict or other behavioral problems (i.e. A loss of power by a manufacturer to his/her distributors or communication difficulties)
Reviewing and evaluating undertaking by a firm may point to the need for changes in existing channels/ need for new channels

10. Phase 2: Setting and Coordinating Distributing Objectives
In order to set distribution objectives that are well coordinated with other marketing and firm objectives and strategies, the channel manager needs to perform 3 tasks:
Become familiar with the objectives and strategies in the other marketing mix areas
Set distribution objectives and state them explicitly
Check to see if the distribution objectives set are congruent with marketing and other general objectives and strategies of the firm

11. Phase 2: Setting and Coordinating Distributing Objectives
Becoming familiar with the objectives and strategies in the other marketing mix areas
Short shelf life
Uses almost 13,000 drivers/salespeople to deliver products directly to grocery stores
Longer shelf life
“Freshness”

12. Phase 2: Setting and Coordinating Distributing Objectives
Set distribution objectives and state them explicitly
Example:
IBM originally was to “have retailers displaying PCs within driving distance of anyone in the U.S. who wanted to buy one”.
Later, when IBM decided to use mail order channels, its distributor objective was broadened to “make its PCs directly available wherever its customers are”

13. Phase 2: Setting and Coordinating Distributing Objectives
Check to see if the distribution objectives set are congruent with marketing and other general objectives and strategies of the firm
Firm’s overall objectives and strategies
*Interrelationships and Hierarchy of Objectives and Policies in the Firm
General marketing objectives and strategies
Product objectives and strategies
Pricing
objectives and strategies
Promotion
objectives and strategies
Distribution
objectives and strategies

14. Phase 3: Specifying the Distribution Tasks (Functions)
The kinds of tasks required to meet specific distribution objectives must be precisely stated.
Example:
A manufacturer of high-quality tennis racquets aimed at serious amateur tennis players would need to specify distribution tasks as the following:

15. Phase 3: Specifying the Distribution Tasks (Functions)
Example:
Gather info. on target market shopping patterns
Promote product availability in the target market
Maintain inventory storage to assure timely availability
Compile info. about product features
Provide for hands-on tryout of product
Sell against competitive products

16. Phase 3: Specifying the Distribution Tasks (Functions)
Example:
Process and fill specific customer orders
Transport the product
Arrange for credit provisions
Provide product warranty service
Provide repair and restringing service
Establish product return procedure

17. To be continued with peter!

18. Midterm Exam (25%) Ch1 Marketing Channel Concepts
Ch2 Channel Participants
Ch4 Behavioral Processes in Marketing Channels
Ch17 Marketing Channels for Services
Ch18 International Channel Perspectives
Ch6 Designing the Marketing Channel (*only up to phase3)

19. Midterm Exam Part A: T or F (with the correction) 10%
Part B: Short answer questions 15%
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Implications of service characteristics for channel management
Environment of international channel management
Conflict in marketing channel