DESIGNING CHANNEL SYSTEM

•Prepared by:
•Arquero Kristine Aissel A.
•Arquero Blessed Joy
•Doctolero Wilita
•Ganit Anjel
•Martinez, Clarice
 Introduction
Channel design is the strategic process that commercial organizations use to balance
resources across direct and indirect channels or routes to market. Direct channels typically
include field sellers and e-commerce platforms, while indirect channels can include a mix of partners,
distributors and marketplaces.
The contemporary definition of 'marketing' as a process of moving goods from producer to
consumer with an emphasis on sales and advertising first appeared in dictionaries in 1897. The term,
marketing, is a derivation of the Latin word, mercatus meaning market-place or merchant.
Marketing channels are a collection of interdependent businesses engaged in the distribution of
goods and services. Academic research has demonstrated that marketing channels are the means
through which customers can access goods and services. All products are delivered through channels,
and the marketing strategy will rely on the distribution method. A marketer must decide which
channel is ideal for his specific product, therefore the path the product takes from production to the
consumer is crucial. One may say that the channel serves as the intermediary between producers and
consumers. The management must make important decisions on the marketing channel system.
Today, the most popular types of marketing channels are websites, email, targeted digital
advertising, and events (digital or in-person). In the past, people usually used a direct distribution
channel (like mailers) or an indirect marketing channel (like television).
 History of Designing
Channel System
International
International marketing channels consist of interdependent organizations
participating in business activities necessary to make a product or service
available for use in markets around the world.
The structure or design of global channels can vary widely, comprising
various organizational participants (foreign distributors, agents, subsidiaries, etc.)
engaged in a diverse set of functional activities (selling to foreign customers,
warehousing inventory, etc.).

Local
Metro Manila is the commercial capital of the Philippines. 
The use of local agents or distributors greatly improves the opportunity for
market success.  There are currently two types of importers in the Philippines:
stocking distributors and indenters.  Stocking distributors are bound by a contract
to buy and sell a prescribed number of items as stated in their agreement with the
foreign supplier
History of International Warehouse
“Amazon”
 Amazon has come a long way since it was founded by Jeff Bezos in his garage in Bellevue, Wash.,
on July 5, 1994. The following is a brief history and timeline of events that have evolved Amazon
from its humble beginnings to a multinational business empire. The 1990s Amazon officially opened
for business as an online bookseller on July 16, 1995. Originally, Bezos had incorporated the
company as Cadabra but later changed the name to Amazon. Bezos is said to have browsed a
dictionary for a word beginning with A for the value of alphabetic placement. He selected the name
Amazon because it was exotic and different and as a reference to his plan for the company's size to
reflect that of the Amazon River, one of the largest rivers in the world. Since its inception, the
company's motto has always been "get big fast.“

Amazon (Amazon.com) is the world's largest online retailer and a prominent cloud service
provider. Originally started as an online bookselling company, Amazon has morphed into an internet-
based business enterprise that is largely focused on providing e-commerce, cloud computing, digital
streaming and artificial intelligence (AI) services.

Following an Amazon-to-buyer sales approach, the company offers a monumental product range
and inventory, enabling consumers to buy just about anything, including clothing, beauty supplies,
gourmet food, jewelry, books, movies, electronics, pet supplies, furniture, toys, garden supplies and
household goods. Headquartered in Seattle, Amazon has individual websites, software development
centers, customer service centers, data centers and fulfillment centers around the world.
History of Local Warehouse “Airspeed”
Airspeed is an end-to-end logistics solutions and express courier
company that has been in the industry for over 35 years.

The Airspeed team are always committed to make it happen to serve its
clients and stakeholders in providing their logistics needs. We help our
business grow their businesses. We customized our services based on their
logistics requirements.

Airspeed invests in the best facilities and technology to ensure that your
cargo is handled and monitored efficiently. Our own warehouse space is
equipped with cctv cameras and alarm systems to ensure safe storage

Because in Airspeed, WE MAKE IT HAPPEN.

 We double down on making our services as easy to deal with as possible. We have the latest
equipment and vehicles, the logistic experts, and the heart to make sure your delivery will go as
smoothly as possible.

Warehouse management
With Airspeed, you can monitor and manage the flow of your inventory, and reduce unnecessary
warehousing costs to help improve your bottom-line profit and customer service.

Pick and pack

Whether at our customer’s site or within our warehouse, Airspeed can gather your products to
bundle or dismantle, for either temporary storage or delivery to your customers. This will reduce cost
and will ensure speed-to-market, tailored to your needs.

Nationwide Distribution
Door-to-Door Delivery, Inter-island Delivery – We can gather your items in a bundle, and send
them out to your customers within turn-around time and efficiently.
 Advantage of Designing Channel System
1. It provides businesses with a greater level of cost efficiency.
Because sales are handled through the distribution channel instead of directly to the end customer, then the
ability to sell becomes easier and more efficient. Instead of an individualized approach, the distribution channel
can reach multiple end users simultaneously with a consistent message. This creates fewer expenses in return.

2. There are options available which allow for rapid distribution.

Mass deliveries are much easier to accomplish with a good distribution channel. Because the channels are
automatically in contact with the end users, implementing a contact to a targeted demographic is easy and
delivering wanted products is even easier.

3. Distribution channels still offer some level of end user knowledge.

Although there are fewer opportunities to interact with specific end users, an organization that uses
distribution channels can be aware of regional influences. By knowing what the customer purchasing habits
happen to be in a specific location on the globe, the company’s specialists can tailor their marketing messages and
products to meet these expectations so a meaningful value proposition can be offered.
4. No customers feel left out when distribution channels are used appropriately.

If one set of customers in a targeted demographic receive products and marketing

effectively and another region feels like they’re left out, then this can create discord within
the customer base. Discord always leads to lost profits. Because there are such broad
levels of coverage through an effective distribution channel, the organization can reach a
vast majority of those within their targeted demographics so very few individual end users
feel left out.

5. Distribution channels don’t cost much to get started.

The average organization can take advantage of existing channels that exist within each
region they wish to target. Because there is no need to create a new channel, the actual
expenditures to reach a targeted demographic are often quite small. Instead of a large
upfront investment, all that is typically required is a small, manageable ongoing
investment whenever communication or product distribution needs to happen.
 Disadvantage of Designing Channel System
1. The ability to interact with the end user is completely eliminated.
When distribution channels are used, then contact with the end users are sacrificed for the ability to reach
multiple end users simultaneously. When an organization knows more about the interests, habits, and passions of
their end users, they’re able to engage with them on a more personal level. The end result is a higher level of
brand loyalty, something which distribution channels don’t necessarily provide.

2. Some distribution channels can be extremely complex.

When distribution channels are simple, then they are effective. Point A connects with Point B and this lets
everyone experience satisfaction. When a distribution is forced to add Points C, D, E, and F to the equation, then
this creates a time delay within the channel. The end result is a decrease in efficiency, which ultimately creates
individualized dissatisfaction at the end user level.

3. Distribution channels may require multiple intermediaries.

Whenever there are intermediaries between an organization and its end users, then there are going to be added
costs involved. An organization needs to make a certain amount of profit in order to survive. If that organization
needs to pay intermediaries for their actions, then this adds to the cost of the final profit so that everyone can get
their needed share. The end user pays the higher costs almost every single time and that higher cost could turn
some of them away.
4. There’s very little flexibility within this structure.

Once an organization implements a distribution channel strategy, it becomes difficult

to change it. The created structures are designed to be more of a mass marketing
approach than an individualized approach. Companies that focus on the end user first can
create distribution channels, but companies that create distribution channels first struggle
to cast them aside because there’s no relationship with the end user.

5. Different intermediaries may have different goals that they wish to accomplish.

If an organization can setup a distribution channel with intermediaries who share a

similar vision, then all will be well with this strategy. Far too often, however, the
intermediaries tend to have their own strategies for optimizing their profits and this can
get in the way of a successful business relationship. When there are different strategic
goals fighting for dominance, there is discord that gets communicated to the end user.
Caricature
 Channel Design Factor
 Market Related Factors- Customers, Competition, and Existing
Channels of Distribution
 Product Factors- Perishability, Nature of Product, Technicality,
Seasonality, Variety offered, and Unit Value
 Company Factors- Company financial Strength, The extent of
Control Desired, Reputation of the Company, Companies Marketing
Policies, Past Experience,
 Channel Related Factors- The Ability of the Channels, The Financial
Strengths of the Channels, and Ability to Provide After Sales Service
 Environmental Factors- Economic Situation, Legal Factors, and
Fiscal Structures
 Channel
Design and
Planning
Process
 Channel Design and Planning Process
1. Segmentation
Putting customer in similar clusters based on their needs.
2. Positioning
Its objective is to occupy a clear, unique and advantageous position in the
customer’s mind.
3. Focus
It may not be possible to meet needs of all segments-cost and practically
considerations (the managerial talent available for instance)
4. Development
At this stage the channel system is being put in place to achieve the
objectives.
 Selecting Channel Partners
Getting good channel partners is a difficult part of doing
Business

Some of the methods employed to select channel

partners are;
 Sales people identify prospects and talk to them
 Press advertising (industrial goods)
 Existing channel partners can give good references
 Competitors channel members for reference
 Channel Design Comparison
 Efficiency: input vs output
 Effectiveness: How well channel meets its objectives
 Capacity: How effectively channel can handle changes
in volume
 Agility: How well can channel handle changing
demand pattern
 Consistency: of performance
 Reliability: Commitment on performance
 Integrity: is the channel fair
 Channel Design Implementing
• Define cafeteria appointment of channel partners
• Document channel objectives for sales people and channel partners
• Define the profile of the customers to be services
• List down all customer service levels in details
• List the tasks in sequence which will drive these service levels
• Get benchmark of good practices from knowledge of competition
• Define channel structure and channel partners who constitute it
• Allocate the task among the channel partners
• Work out cost of delivering CS levels and prepare a budget
• Advice the channel partner on the task and their benefits
• Define channel partner performance appraisal system and share it
 References
• https://medium.com
• https://www.slideshare.net
• https://www.slideshare.net/angelravi02/12designingchannelsystems
• https://
www.civilserviceindia.com/subject/Management/notes/designing-and-managing-
marketing-channels.html
• https://brandongaille.com/12-pros-and-cons-of-distribution-channels/
• https://www.techtarget.com/whatis/definition/Amazon
• https://
venngage.com/templates/social-media/amazon-history-timeline-5e9942ed-1474-4
4d3-ba8a-3d283eabe34a
• onlinelibrary.wiley.com/doi/abs/10.1002/9781444316568
THANK YOU

QUIZ
1-3. What are the 3 following specific factors have to be understood
in Market related factor's?

4-5. Give at least 2 Product factors have to be considered.

6. It is the process of identifying and selecting the most effective

marketing channels to reach target customers and achieve company
objectives.

7-10. What are the 5 Channel design factor?