Guides the channel managers --initial design of the channels --ongoing management over time Creating new channels

in already existing markets

FRAMEWORK FOR CHANNEL DESIGN AND IMPLEMENTATION

Channel Design Process:
SEGMENTATION: Recognize and respond to target customers service output demands

Channel Implementation Process:

CHANNEL POWER: Identify sources for all channel members CHANNEL CONFLICT: Identify actual and potential sources

Decisions About Efficient Channel Response:

CHANNEL STRUCTURE: What kinds of intermediaries are in my channel? Who are they? How many of them? SPLITTING THE WORKLOAD: With what responsibilities? DEGREE OF COMMITMENT: Distribution alliance? Vertical integration/ownership? GAP ANALYSIS: What do I have to change? MANAGE/DEFUSE CONFLICT: Use power sources strategically, subject to legal constraints

GOAL: Channel Coordination

INSIGHTS FOR SPECIFIC CHANNEL INSTITUTIONS:

Retailing, Wholesaling and Logistics, Franchising

Producing the channel service outputs to the end users in an efficient way and at a minimum possible cost. -to understand what the work of channel is -what type of intermediaries must be included in the channels

Segmentation Channel structure decisions Splitting the workload Degree of commitment Gap analysis

Splitting the market into groups of end-users depending upon what type of channel outputs they need. The value added services created by the channel members along with the product are called as service outputs.
bulk breaking, product/usage information, customer service, delivery and waiting time etc..,

Based on the segment the channel structure is designed. STEPS: 1. Types of channel members 2. Identities of specific channel members 3. Channel intensity (intensive, selective, exclusive)

Assign channel flows to channel members

Meet target segments service output demands Reliable Minimize total cost, while meeting service level

minimum cost can be achieved by Activity Based Costing (ABC)

Transactional relationships
Pursue individual goals No guarantee of continued business

Alliances

Enduring connections throughout companies Pursue common goals

This is a stage of deciding what to target & what not to target This keeps the channel focused on key segments for profitable sales Reason for not all segments being targeted
Internal: Managerial bounds(unwilling to allocate funds) External: Environmental bounds & Competitive bounds

If no channel, knowledge of optimal channel to reach the segment & the bounds will help If channel exists then Channel manager should perform gap analysis Gap analysis: The difference b/w optimal & actual channel Gaps exist both on supply as well as demand side.

Demand side:

Service o/p demand not appropriately met Under supplied or over supplied Undersupply will lead to dissatisfaction Oversupply leads to higher prices for end users More than one service o/p means several gaps need attention

Supply side:
Here gaps means high cost of channels Leading to low profit margin, high price for end users, reduced sales & market share It is due to lack of up-to- date expertise in channel flow or waste in the channel

There are strategies to close gaps in channel Closing the gaps is costly & very difficult So initial channel design has strategic importance

Identifying power sources Identifying channel conflicts The goal of channel coordination

Implementing optimal channel design is very important Channels multiple entities may or may not have same incentives to implement channel design. Failure by one may cause a fatal damage. Eg: poor transportation system Including all entities is very critical

Implementing channel design with interdependent channel partners requires possession and use of channel power. Channel member power: Ability to control the decision variables in marketing strategy of another member It will help to deliver the demanded service output at a lower cost.

Is common and dangerous for achieving the goals Affects overall success of channel efforts & harm total channel performance Goal conflict: difference between channel members goals & objectives Domain conflict: difference over domain of action & responsibility in channel Perceptual conflict: differences in perceptions in marketplace

Management should do the following First: Channel manager should identify the conflict Second: He should take actions to manage & reduce those channel conflicts Conflicts are reduced by using channel power. Eg: Manufacturer and distributor having goal conflict

It is not a one time achievement But an ongoing process of analysis & response to the

market, competition, the abilities of the members of the channel

Retailers Wholesalers Logistics firms Supply chain issues Franchises

THANK YOU