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Channel Design Strategies Explained

Channel design refers to decisions about developing or modifying marketing channels. The process involves defining customer needs, ideal channel structure, and channel objectives. It has two phases - setting a broad supply chain structure and specifying channel location, capability, and demand allocation. Factors influencing channel design include customer needs, costs, product delivery method, response time, product availability, flexibility, return policy, order visibility, and time to market. There are six main channel design systems: direct shipping by manufacturer, direct shipping with in-transit merging, distribution storage with carrier delivery, manufacturer/distributor with customer pickup, retail storage with consumer pickup, and combinations of these approaches.

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21 views17 pages

Channel Design Strategies Explained

Channel design refers to decisions about developing or modifying marketing channels. The process involves defining customer needs, ideal channel structure, and channel objectives. It has two phases - setting a broad supply chain structure and specifying channel location, capability, and demand allocation. Factors influencing channel design include customer needs, costs, product delivery method, response time, product availability, flexibility, return policy, order visibility, and time to market. There are six main channel design systems: direct shipping by manufacturer, direct shipping with in-transit merging, distribution storage with carrier delivery, manufacturer/distributor with customer pickup, retail storage with consumer pickup, and combinations of these approaches.

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nostradam
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Channel Design

Prof [Link]
BBA/BBA-IB
Indira College of Commerce and
Science
What is Channel Design?

• Channel design refers to those decisions involving the


development of new marketing channels where none had
exited before or to the modification of existing channel.
Process of Channel Design
Defining
the
customer
needs

Defining
Ideal
the
channel
Channel
structure
Objectives

Evaluation
Channel
of major
alternatives
alternatives
Process of Channel Design
The process of developing and effective channel design can be
divided into two phases
a) A broad structure of supply chain set
• This step includes the decisions to be taken about whether
the product can be sold or directly or through some
intermediary agent.
b)The second phase
• Is broken into smaller activities to specify the
location,capability of the channel and capacity of demand
allocation.
Factors influencing Channel Design
Managers have many factors to consider when choosing a
product distribution channel.
Cannel choice may include questions like,
1. To whom shall we sell this merchandise immediately?
2. Who are our ultimate users or buyers?
3. Are the customers needs met?
4. What are the costs of meeting needs?
5. Will the customer pick up the product personally or will the
product be delivered to customer location?
Other factors for concerning channel as a network are:-

❖Response time
❖Product
❖Product availability
❖Adoptability, Flexibility to adopt
❖Return ability
❖Order Visibility
❖Time to Market
There are six important distribution
network systems or channel design

a) Direct shipping by the manufacturer (Also called drop


shopping).
All inventories are stored at the manufacturer.
The inventory flows from Customer-Retailer-Manufacturer
while the product is supplied directly from the manufacturer
to the customer
Eg dell,e-bags,[Link]
Direct Shipping with in transit merge
• Merge-in-transit (MIT) is a distribution method in which
several shipments from suppliers originating at different
locations are consolidated into one final customer delivery.
This removes the need for distribution warehouses in the
supply chain, allowing customers to receive complete
deliveries for their orders.
• When a customer orders a personal computer from Dell along
with a Sony moniter,the package carrier pick ups the
computer at the Dell factory,the moniter at athe Sony
factory,and combines the two together at a hub before
making a single delivery to the client.
Distribution storage with carrier delivery

• Under this option inventory is not held by manufacturers at


the factories but is held by distributors ,retailers in
intermediate warehouses and package.
• Carriers are used to carry products from the transitional
location to te final customers.
Manufacturer /Distributor with
customer pickup
In this approach ,inventory is stored at the manufacturer or
distributor warehouse but customers place orders online or
on the phone and then come to the allocated pickup points
to collect their orders.
Orders are transported from storage site to the pickup points
as required.
Eg Grocery stores,Convenience stores,coffee stores
Retail storage with consumer pickup

• The inventory is stored locally at retail store


• Customers either walk into the retail store or place an order
or on the phone, and pick it u at the retail store.
• Eg Walmart
Thank You

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