Marketing channel design must be closely correlated and integrated with all other aspects of a firm’s marketing strategy/ Decisions about ad strategies for dealing with products have a particularly critical role in shaping the design and structure of channel. Product attributes, new product development, Product life cycles, and brand strategies are discussed below, with a emphasis being placed of their influence on channel design.
A product is actually a bundle of attributes, all of which are important implications for channel design. Attributes such as unit value, perish ability, handling characteristics technical complexity, and standardization are key determinants of appropriate channel structure.
Unit Value: Products that have a low unit value generally move through several distribution levels, resulting in longer marketing channels. The rationale for this is that these products generally do not generate sufficient gross margin dollars to allow manufacturers to absorb the high cost of more direct forms of distribution. Thus, consumer products such as processed foods, health and beauty aids, and hardware tend to involve several intermediaries. Similarly, industrial goods such as office supplies or maintenance and repair items generally move through industrial distributors to the end user. Conversely items with high unit value usually generate sufficient gross margins to allow more direct distribution channels. In such cases, the cost of distribution may be a low percentage of the total product value, allowing one channel member to easily absorb that cost.
Unit value also tends to correlate with the intensity of distribution coverage, although there are clearly many exceptions. As a general rule, low unit value items tend to be considered convenience items by customers; thus they require intensive distribution Higher unit value product tend to be treated as shopping or specialty items allowing more flexibility in decisions concerning selective or exclusive distribution.
Perish ability is another product attribute that affects channel design. Highly perishable product such as fresh produce and seafood usually require direct cannels so that delays in movement and handling which would increase the danger of product spoilage, are avoided. Perish ability is not limited to physical deterioration. It may involve products whose commercial life is limited because of short-lived customer demand, as in the case of high fashion apparel; these products are usually directly distributed.
Handling Characteristics products that are heavy, bulky, fragile or otherwise difficult to handle generally require direct forms of distribution. Because of the difficulty such products, each turnover results in significantly increased cost. Handling also increases the likelihood of damage to more fragile items. So that costs associated with handling are reduced, the number of times a product is physically exchanged is minimized in direct channels.
Technical Complexity: technically complex products frequently require exacting service, or at least highly trained personnel for product demonstration. For these reasons, such products frequently involve direct distribution channels. Most industrial products as well as many consumer goods fit this category. For example, one problem encountered by manufacturers of personal computers in the early 1980s was the lack of technically competent retail sales personnel. For this reason, some manufacturers opened their own computer stores or used very selective policies in choosing stores that could provide adequate service and training for customers.
Standardization: Product standardization is frequently related to technical complexity with highly nonstandard products generally requiring greater technical knowledge or skills in the distribution channel. To the extent that each customer has a unique need and products must be customized to fit those, direct channels are required. Thus, industrial buyers; needs for customized facilities and equipment or consumers demand for custom homes or clothing require direct contact between producer and buyer. More standardized items that do not require such customization may move through more indirect channels.