Channel Systems

1. DESIGNING CHANNEL
SYSTEMS

2. What are Channel Systems?
• The Channel system is a bridge between the manufacturer and the ultimate customer of
the products or services offered by the company
• Factors that determine the nature of the distribution channels:
 Nature of the product/ service
 Location and nature of the customers
 Nature of competition and its distribution systems
 Intensity of the distribution required
 Nature of the markets being targeted

3. Channel Design
• The process of design of the channel system answers some of
the following questions:
What activities are the channel members required to perform?
Which of these activities is to be performed by which channel
partner?
The number of channel members required in the network and
of each category.
Are the roles & responsibilities of the various channel
partners clearly defined?
How is the performance of these activities going to help the
company achieve its customer satisfaction objectives?
 Are the channel members aware of how their performance is
going to be judged, by whom and at what frequency?

4. Channel Alternatives
• At the time of deciding on the alternatives, the company will scan for:
i. Business intermediaries currently available in the market
ii. The number & type of intermediaries required
iii. Any new channel members that need to be specially developed
iv. Roles of each of the channel members

5. Evaluation of Major Alternatives
• The common criteria for evaluation are as follows:
 Cost
 Ability to manage & control
 Adaptability
 Range & volume to be handled

6. Factors influencing
Channel Selection
• The three most important factors influencing
channel selection are:
a) PRODUCT AND MARKET FACTORS-
nature of product, number of customers, the
purchase frequency, cost of the product,
simple/complex product, geographical
concentration of the market
b) COMPANY CHARACTERISTICS- financial
resources of the company, degree of control,
degree of risks the company wants to share,
management abilities
c) CHANNEL CONSIDERATIONS- level of
service capabilities of the proposed partners,
availability of middlemen, attitude of
intermediaries towards company policies