Lior PowerDesigning

Channel Systems

Introduction

Factors that determine the nature of the distribution channel

Nature of the product or serviceLocation and nature of the customersNature of competition and distribution systemsIntensity of distribution requiredNature of the markets being targeted

Channel design and planning process

1. Channel Stages in channel planning

Segmentation stage

Positioning stage

Focus stage

Developing the right channel alternative

Channel design and planning process

2. Defining the customer needs

Lot size

Waiting time

Choice to the consumer

Place utility

Service support

Channel design and planning process

Designing channel objectivesIndustrial products require direct-marketing by the companyConsumer products should be available in large no of outletsSelling will need rural distributionMulti level marketing will require their distributors to appoint further distributors

Channel design and planning process

Channel Alternatives study

• Business intermediaries currently available• The no and type of intermediaries required• Any new member to be specially developed• Roles of each channel member

Channel design and planning process

Cost of channel system

• Margins of the channel partners• Cost of transportation of goods between the co and

the end user• Cost of order booking and execution• Cost of stock returns/ date expired stocks taken back• Cost of reverse logistics required (getting empties back)

Channel design and planning process

Current intermediaries

Distributors or redistribution: stockiest of some other companiesC&F agents: can be further utilized for collections and other work

Channel design and planning process

Number of intermediaries

Should be adequate for expected coverage of the target markets at the same time should not be too much to dilute the effort and add to the costs.Its not easy to get rid of channel members

Evaluation of Major alternatives

Cost:Every channel will have different costs associated with

Ability to manage and controlConsidering coverage, frequency, productivity, inventory, credit, merchandising, distribution, promotions, after-sales-service, pre-sales-sales, channel salespeople, stock points

AdaptabilitySensitivity of channel to addition, elimination of products, additional service, new territory coverage, generating leads, handling price change, stock rationing

Range and volume to be handledAbility to handle large range of products and volumes.

Selecting channel partners

Location of the partyIn or close to main market of the company

Location of the warehouseClose to a major marketOutside octopi limitsShould have proper road/ transport accessLabor availabilityUtilities supportConnected by phone

Past experienceAs a C&FA for a similar companyAs a transporter should have access to a good warehouse

History of past businessShould have handled similar but non-competing companiesAbility to maintain confidentiality of transactions

Selecting Carrying and Forwarding agent

Financial strengthTo handle all operating expenses till re-imbursementInsurance

IT capabilityAdequate own hardwareTrained staff to handle simple programmers' and repairing formats

FlexibilityIn operating hours dailyTo handle peak loads

Transportation facilitiesReliability, consistency in source of vehiclesAdditional volumes to be handled at short notice

Attitude, commitmentTo be of the highest order/ positiveWilling to expand the businessDisciplined

Selecting channel partnersSelecting DistributorSize of the channel partner

Current business portfolioFinancial strength/ asset ownership including personal assets of partners

Own sales forceNo of sales peopleQualifications, background, experience

Current businessProducts handled, volume handledShould be of similar products but non-competitiveProduct quality, compatibility and complimentary

ReputationLeadership in the marketIntegrity, fairness in dealings

Market coverageTerritory/ intensityRegularity, reliabilityRelationship, productivityBeat plan adherenceValue of institutional business handled if any

Credit extended in the market% of outlets& of current businessBad debts, if any

Stock distributionReady stocks or order booking

Infrastructure availabilityWarehouseDistribution vansHardware/ personal computers/ connectivity

Sales performanceOn current businessAwards, prizes, certificates won on performance

Management of businessEducational background, qualification of partners

Market workingEfforts on merchandising, displays

Handling sales promotionsPast experience

Inventory managementAdherence to stock norms recommended by the company

Change of channel members

Why to change channel members?

Training channel members On the job training Class room training Special meetings to launch new products Training on submitting reports Statutory requirements Product related responsibilities of channel members Training on technicalities Training on specifications, installments, repair and maintenance Training on after sales service

Motivating channel partners

Efforts in designing capacity building programmersTrainingPromotional supportMarketing researchWorking along with company people

Channel power

Referent power: Power out of eminent position of the company

Expert power: Power out of special knowledge of the company

Legitimate power: Power of legal agreement with company

Support power: Support in the form of promotions, subsidies, additional help

Competition power: Comparison with other channel members

Reward power: Incentives, special incentives

Coercive power: Power of ‘threat’

Channel design implementation

Document channel objectives for sales people and channel partners

Define the profile of the customers to be services

List down all the customer service levels in detail

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 tasks among the channel partners

Work out cost of delivering CS levels and prepare a budget

Advice the channel partners on the tasks and their benefits

Define channel partner performance appraisal system and share it

Define criteria for appointment of channel partners

List down reports, records and frequency from each channel partner

Lior Power Electrical Pvt Ltd3/266/22, Lior House, Sector-3, Vidhyadhar Nagar, Jaipur, Rajasthan 302039.Tele. – 011-45823696, 022-61094528. Mobile- +91-9214567383.Email- info@liorpower.com & support@liorpower.comWebsite- www.liorpower.com