What is Channel Design Decision in Marketing?
Channel design is a strategy for moving and distributing goods and services from the producer to the consumer. A channel is defined as “a series of interconnected firms or individuals through which a product or service moves from one person or firm to another.” Besides, Channel design is often used in conjunction with strategic marketing which aims to understand customer needs and desires to incentivize them accordingly. One such example of this is supply chain design which ties in closely with channel design. Learn more about the Core concepts of marketing.
Manufacturers face several channel design decisions. Manufacturers often struggle between what is ideal & what is practical in designing marketing channels. Having limited capital offer limited sales in a limited market area of a firm. In these cases, this firm needs to choose the best channel that’s more effective. There is a problem that how to convince one or a few good intermediaries to handle the line.
If these intermediaries become successful then a new segment may select to enter. In the small markets, the producer directly sells to retailers but in the large market, the producer chooses distributors to persuade consumers. Gather knowledge on – integrated marketing communications program.
Thus, for maximum revenue, channel analysis & channel design decision plays a vital role. This channel design calls on analyzing consumer needs, setting channel objectives, identifying major alternatives, and evaluating those alternatives.
Channel design decisions in marketing management
To be effective, channel design is merely the first step in the planning process. From selecting a channel member through training and motivation to performance evaluation, channel management decisions can take care of the entire implementation process.
What is channel design strategy?
By strategically allocating resources between several sales channels, or “channels,” a company can maximize the efficiency of its overall business operations. Indirect channels might include a variety of partners, distributors, and marketplaces, while direct channels often consist of field sellers and e-commerce platforms. Explore – Marketing Automation Strategies
Channel design decisions in marketing management
To be effective, channel design is merely the first step in the planning process. From selecting a channel member through training and motivation to performance evaluation, channel management decisions can take care of the entire implementation process.
- Analyzing consumer needs
Previously we learned that marketing channels are part of the overall customer value delivery network. Each channel member adds value to the customer. In this case, designing a marketing channel, the producer needs to find out some questions like-
- What do the target consumers want from the channel members?
- Does the consumer want to buy from nearby locations?
- Or are they willing to travel more distant?
- The way of purchasing system of consumers.
- Do they value the breadth of assortment?
- Do they prefer specialization?
- Do consumers want many add-on services like delivery, warranty, repair, installation, and credit terms?
- Will they obtain these services elsewhere? Therefore, you can use Marketing Automation Strategies for Sustaining Success
2. Setting channel objectives
In this step, the company should decide its marketing channel objectives. The nature of the company, its products, marketing intermediaries, competitors & environment are influenced by the channel objectives.
3. Identifying major alternatives
It has too many major alternatives. Here, I’ll discuss three major alternatives.
- Types of intermediaries
At first, a company identifies the different channel members who can work for the producer to carry out its channel work. For example: at first, Dell directly sold to final consumers as well as business buyers. Dell uses phone calls or internet marketing channels to sell directly to the customer. But at present to match with its competitors HP or Apple, dell starts indirect selling through retailers & value-added resellers, and independent distributors. Explore more on – Digital Marketing White Paper - The number of marketing intermediaries:
At each level of marketing intermediaries, a company must determine the number of channel members. There’re three strategies available.
- Intensive distribution: Intensive distribution is a strategy in which sellers collect products as many as they can & make them stored for future selling.
- Exclusive distribution: Exclusive distribution is a strategy in which the producer gives the right to a limited number of dealers to distribute the company’s products.
- Selective distribution: Selective distribution lies between intensive & exclusive distribution. It has more than one but less than all intermediaries who’re worked for carrying out the company‘s products. Learn more on – High ticket digital marketing
- Responsibilities of channel members: All the channel members should agree on the terms & conditions with the producer. They should maintain their responsibilities & agree on price policies, territory rights & sale conditions. At first, the producer fixed a list price for channel members then the channel members set discount prices for customers. These members are much concerned about their territory & their customers. Explore – Interoperability in digital marketing
All the channel members should work together. Because mutual understanding between them can be so effective.
4. Evaluating the major alternatives
Imagine, after identifying all major channel alternatives, a company wants to select one segment that will satisfy the long-run objectives. There’re three core factors that will affect the channel –
- Economic: After using economic criteria, a company can get a better idea about its sales, costs & profitability in the different alternatives channel. Like, how much investment will need in the future? What’ll be the results in the near future?
- Control: All companies must consider the control issues. It means the company should give less control over the marketing of the product. But others things should keep equally if possible. Explore more on – Business continuity strategy
- Adaptability criteria: Finally, a company needs this adaptability ability to cope with all favorable or unfavorable situations.
