For DM
For DM
For DM
MODULE 8:
DESIGNING CHANNEL
SYSTEMS
BY: Amazona, Pjay M.
Bautista, Angelica B.
Lontoc, Rhona Mae
De Chavez, Grescy G.
Cantos, Brendalyn
INTRODUCTION: Factors need to be collected
Nature of competition and its distribution
Nature of the product or service being distributed
systems
The expectations from the system. The 'deliverables’ Intensity of distribution required
of the system
Nature of the markets being targeted
Location and nature of the customers
Channel objectives are dictated by the product characteristics also. Some examples are given below:
Business intermediaries currently available in the market. Consumer product and pharma
companies can also target any distributors, all wholesalers and retailers already operating
in the market, to support their product distribution.
The number and type of intermediaries required depend on customer expectations, service
levels, and distribution intensity. Metro city retailers require more distributors or salesmen
Engineering companies may develop sophisticated testing equipment and train exclusive
distributors and salesmen instead of existing technical product distributors for new channel
members
Channel partners, including C&FAs, distributors, and retailers, have specific roles in
reaching the end user, with the company defining these roles to avoid confusion or conflict.
Cost of the Channel System
Sales management is crucial in balancing customer service needs with company distribution system costs,
considering cost elements such as channel network elements.
• Margins of the channel partners
• Cost of transportation of goods between the company and the end user
• Cost of stock returns/date expired stocks taken back from the market
• Cost of stock returns/date expired stocks taken back from the market
• Cost of any reverse logistics required - for example getting empties
back.
Current intermediaries
As business activity has grown over the years, a number of intermediaries or ready channel partners are already in operation and can
be utilized. Some of the intermediaries are:
The number of intermediaries is a careful balance between the need to ensure full coverage of the
markets/outlets and ensuring that there are not so many intermediaries that none of them is making
money selling the product.
The main consideration to decide the number of intermediaries is the 'intensity' of distribution which
the company desires.
Exclusive is when the channel system has been set up for use by the company only.
Selective is when the company chooses to use only a limited set of intermediaries to keep its
distribution tight and well controlled.
Intensive the objective is to spread the availability to reach the maximum number of dispersed
customers where the customer universe itself is very large.
Renewed Focus on Distribution at HLL
HLL wants to renew its distribution focus to contact the customer at the point of purchase not only
through product availability but also brand communication and direct brand experience.
HLL is also helping increase out-of-home consumption of its products using the strength of its
distribution reach.
Cost of operations
Adaptability
Range and Volume to be
Table 12.4 Parameter for Evaluating channel Alternatives handled
Ideal channel structure
The ideal channel structure has to be optimal in terms of customer service delivery and the costs
associated with it.
Obligations of Channel Partners
Market coverage
Development of new markets
Development of new key accounts
Holding inventory
Extending credit to the market
Proper implementation of promotions
Key Account management
Technical advice and support
Service support
Complaint handling
Market feedback and reporting
` Table 12.5 Obligations of Channel Partners
SELECTING CHANNEL PARTNERS
if a new company were to start looking for partners to set up their
distribution network, it would be really difficult.
The two examples from the consumer products industry on the parameters
For companies like FMCG and pharmaceuticals only some of the channel partners like C&FAS and
distributors can be recruited.
The other channel members like wholesalers, retailers and chemists already exist in the market
and automatically become part of the network.
There is no effort re- quired in selecting these channel members. The effort is only in persuading
them to stock and sell the company products.
If a company were looking at building a distribution network to penetrate rural markets with
agricultural inputs like fertilizers, seeds and insecticides they would prefer to look at wholesalers in
feeder markets where most farmers would be coming for their purchases.
Change of Channel Members
Different distribution strategy
Situation Before:
Actions points on Distribution Integration
All C&FAs were not required
Distribution retained from the territories where the respective company had higher market shares.
For new distributor it was a Greenfield selection.
Salesman ideally should have been based on one salesman to manage 10-12 distributors.
Surplus supervisors and ASMs were also separated.
Branch managers were about 5 in excess.
Both the GSMs were retained with one having responsibility.
The entire distribution integration took 6 months to complete.
Training Channel Members
This starts at the time the channel member is recruited and continues right through the
time that the channel member is associated with the company. The training is done for
the channel member owners and their staff.
Training could include:
• The service level objectives have to be drilled down into the activities which the channel is
expected to perform to achieve those objectives.
• The company would like to outsource some of the activities to its channel partners who are better
qualified to do the job.
• Now the channel structure is possible to define with a set of channel partners who are expected to
do set tasks to deliver the customer service at the optimum or minimum cost.
• Now the ideal channel structure as arrived at is to be compared with the existing channel network
to identify the gaps.
Modifying an Existing Channel Network
● Bridging these gaps gives us the new channel system.
● When comparing the ideal and the existing the criteria to be used include:
● Efficiency
● Effectiveness
● Capacity
● Agility
● Consistency
● Reliability and
● Integrity
● Comparisons with competition or other companies in the same industry are required when the
company is looking for a greenfield distribution system.
Probability figures
Mercury
Mercury is the closest
planet to the Sun
Mars
Despite being red, Mars is
a very cold place
Solving normal distribution problems
1 2 3 4
Basics
Key parameters Probability traits
Mercury is very small Jupiter is a gas giant
Chi-square distribution: an introduction
Aspect Description
A probability distribution used in statistics to measure the relationship
Definition
between categorical variables in a data set
Formula f(x; ν) = (1 / (2^(ν/2) * Γ(ν/2))) * x^(ν/2 - 1) * e^(-x/2)
- Used in tests of independence and goodness of fit
Characteristics - Positively skewed (not symmetric)
- Parameter of degrees of freedom (df)
Pearson's chi-squared test in contingency tables to analyze the
Common example
independence between two categorical variables
- Medical and health research
Applications - Social sciences
- Quality control in industry
Fonts & colors used
This presentation has been made using the following fonts:
Inter Tight
(https://fonts.google.com/specimen/Inter+Tight)
Figtree
(https://fonts.google.com/specimen/Figtree)
PHASE 1
Task 1
Task 2
PHASE 2
Task 1
Task 2
PHASE 1
Task 1
Task 2
...and our sets of editable icons
You can resize these icons without losing quality.
You can change the stroke and fill color; just select the icon and click on the paint bucket/pen.
In Google Slides, you can also use Flaticon’s extension, allowing you to customize and add even more icons.
Educational Icons Medical Icons
Business Icons Teamwork Icons
Help & Support Icons Avatar Icons
Creative Process Icons Performing Arts Icons
Nature Icons
SEO & Marketing Icons