Selecting the appropriate variant within a given design

Usually, within a given channel design different variants can be thought of. For example, firm A and firm B may opt for the same channel design consisting of conventional wholesalers and retailers. Still, their approaches within the model can vary from one another. Firm A may opt for a wholesaler weighted system, while firm B for a retailer–weighted system. For example, Nirma Chemicals distributes Nirma soap with a wholesaler-weighted system. In contrast, HLL distributes its Lifebuoy in the same market through a retailer- weighted system. Nirma off-loads the products on the wholesalers at a larger discount; the retailers buy the product from the wholesalers. HLL reaches out directly to a large number of retailers, using wholesalers/C&F agents to the extent necessary.

The two variants have their associated advantages and disadvantages. For instance, the wholesaler oriented system obviates the need for a large sales force, thereby resulting in considerable saving in related costs. But, brand building may suffer somewhat in that system. The firms have to study in detail the trade off between the two approaches and have to see which one would best suit the firm.

An eye on the future is essential:

Once a channel structure is created and channel members are put in place and channel compensations are streamlined, it will be difficult for the firm to exit from that structure and put an alternative in its place. Therefore, as a general rule, an eye on the future is essential while adopting a channel system and structure.

One unified system:

For the optimization of the physical distribution task, all elements of physical distribution/marketing logistics, such as transportation, warehousing and inventory management must be handled as a single, unified system. In the same way, the firm has to handle wholesaling retailing and other forms of selling as one unified systems and not as separate entities. The linkage among them in terms of functions, costs and efficiency being quite strong, looking

at them as independent entities will lead to sub optimization of the channel management task as a whole. Compensation pro-vided to the different tiers has also to be properly intertwined, since the functions performed by the different tiers are intertwined.

Building channel system by bottom up method:

The purpose of having marketing channels is to serve customers needs effectively. This means that the prime task in channel design is to determine the type of retailers who are best suited to serve customer needs in the specific context and develop the distribution system by the bottom up method. Once the type of retailers suited for the context is determined, the wholesaling arrangement that would best suit the chosen retail arrangement can be chosen and put in place.

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