Channel Planning

The channel design and planning process is very similar to any other marketing task and has to start with positioning putting customers in similar groups based on their needs. The second step is positioning creating the right channel system to meet these customer needs. A channel system may not be able to service all the segments of customers and has to focus on the ones it will address. At the development stage, one defines the roles and responsibilities of the channel members prior to actual implementation. Conflicts may arise and need to get resolved after implementation. The channel system is a bridge between the manufacturer and the ultimate customer of the goods and services offered by the company. While deciding the most suitable channel alternatives the company would, therefore, consider product mix and marketing mix (types of goods and services, the price, promotional support and width and depth of the coverage planned), long term commitments required from the channel partners, level of customer services the company is willing to deliver, the factors requiring control of the channel and the affordable cost. Planning and designing a suitable channel system will require defining the customers needs, clarifying the channel objectives, looking at the alternative systems which can meet these objectives, cost of the channel and finally evaluating the various alternatives to hone in an ideal channel system. Stages of Channel Planning
Segmentati on Positioning Focus Developme nt

Designing a channel system includes the following steps:

Analysing Consumer Service Needs

Designing the distribution channel begins with determining what (e.g. convenient location to buy the products, immediate delivery, credit, repairs, long-term warrant) the consumers want from the channel. The company must balance the consumer service needs with the feasibility and costs plus prices.

Setting the Channel Objectives and Constraints The company must decide which segments to target and the best channels to use in each segment. Here, the objective of the company is to minimize the total channel cost. Besides the target market, the companys channel objectives are influenced by;
The nature of its product, e.g. perishable products requires more direct marketing to

avoid delays and too much handling.

which functions it can handle, how many channels it can use, which transportation can be used.
Characteristics of intermediaries, intermediaries differ in their abilities to handle

promotions, customer contact, storage and credit e.g. the companys own sales force is more intense in selling.
Competitors channel, some companies may prefer to compete in or near the same

outlets that carry competitors products, some may not e.g. Burger King wants to locate near McDonalds
Environmental factors, economic conditions and legal constraints affect channel

design decisions e.g. in a depressed economy, producers want to distribute their goods in the most economical way, using shorter channels.

Identifying Major Alternatives After the channel objective have been determined, the company should identify its major channel alternatives in terms of Types of intermediaries Number of intermediaries, and The responsibilities of each channel member.

Types of Intermediaries

A firm should identify the types of channel members that are available to carry out its channel work.

Number of Marketing Intermediaries Companies must also determine the number of channel members to use. There are three strategies;

Intensive distribution; is a strategy in which companies stock their products in as many outlets as possible. Convenience products and common raw materials must be available where and when consumers want them e.g. toothpaste, candy Procter & Gamble, Coca-Cola distributes its products in this way. Here, the advantages are maximum brand exposure and consumer convenience. Exclusive distribution; is a strategy (opposite to intensive distribution) in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Often found in new automobiles and prestige womens clothing e.g. Rolls-Royce. Here, the advantages are establishing image and getting higher mark-ups. Selective distribution; (is between intensive and exclusive distribution) is a strategy in which the company uses more than one but fewer than all of the intermediaries. Most television, furniture brands are distributed in this way. Here, the advantages are; it provides good market coverage with more control and less cost than intensive distribution + it does not spread its efforts over many outlets as in intensive distribution.

Responsibilities of Channel Members

The producer and intermediaries must agree on price policies, discounts, territories, and services to be performed by each party. E.g. McDonalds provides franchisees with promotional support, training, management assistance, in turn, franchisees must meet company standards for physical facilities, buy specific food products...

Evaluating the Major Alternatives In order to select the channel that satisfy the company objectives in the best way, each alternative should be evaluated by using;

Economic criteria; the company compares the projected profits and costs of each channel. Control issues; the company prefers to keep the channel where it has the highest control. Adaptive criteria; the company prefers to keep the channel which is the most flexible to the changing marketing environment.

Choosing channel members

In a developing country like India, where most international companies have established themselves in all product categories, if a new company were to start looking for partners of members to set up their distribution network, it would be really difficult.

Some of the methods employed to select channel partners are: Sales people identify prospects and talk to them. Press advertising can be given so that a pool of applicants can be found out and the best one out of them could be selected. Existing channel partners can give good references. These references can also be used to create a pool and the best one which will fit into the company can be selected and made partner with the distribution network. Competitors channel members for reference, not poaching.

Factors that need to be considered while selecting a channel member are: Financial strength. The financial strength of the channel partner is to be studied and after that only it could be decided whether it should be chosen or not. Market coverage. If the market coverage is good for one channel member over the other than it becomes easy to select the best one. More the market coverage means more interaction and hence persuasion of the ultimate customer. Management strength. It also plays an important role as better management strength would lead to good operational activities. Equipment facilities. For highly technical products and other products also the equipment facilities with the channel member play an important role.

Sales strength. Sales strength should be better for effective market coverage and hence sales growth. Willingness. It is an important factor for sure as willingness of the channel member should be there to become a channel member in ones company. Ordering and payment procedures should be effective and transparent. Better the system highly are the chances of the channel member to get selected. Compatibility Working culture compatibility can also be considered as an important factor for choosing a channel member.

References:

Sales and Distribution Management by Krishna K Havaldar and Vasant M Cavale. Distribution Management and Marketing Mix by Manoharlal Internet.