Product Issues in Channel Design &

Management

6-Step Channel Design Process

Step 1 •Identify End-User customer segment

Step 2 •Identify and Prioritize customer’s channel function requirements

Step 3 •Benchmark existing channel and competitor’s capabilities to channel function requirements

Step 4 •Develop feasible channel options

Channel Design Tool Based on What Customers Value

low

Product information

Product Customization

Product Quality Assurance

Lot Size

Assortment

Availability

After Sales Service

Logistics

54321high

6-Step Channel Design Process

Step 5 •Evaluate the benefits and costs for each option

Step 6 •Elaborate the channel overlaps for multiproduct, multi-market businesses using data from Step 5

The Channel Helps To Differentiate a Product and Company in Consumer’s Mind

The Channel Helps To Position a Product in Consumer’s Mind

The Channel Helps To Set The Frame Of Reference for Consumer

Channel Design Can Augment or Detract A Product’s Differentiation Strategy

http://www.youtube.com/watch?v=xLOpuXNrBmI

Support from Channel Members is Critical to the Success of New & Existing Products

Encourage Input Foster Acceptance

Provide Education Trouble-Free Products

Channel Success

Channel Design And Mgmt. Must Be Aligned With Product Lines, Not Just Individual Products

How Manufacturer’s Can Influence Channel Partners

• Incorporate channel member’s opinions before expanding/contracting Product Lines

• Explain rationale and adequate advance notice

• Differentiate products within the product line enough to motivate channel members to sell them all; not focus only on the highest earning products

Potential Problems With Product Lines

• Delicate balance between product proliferation and product losses

• Differences of opinion between manufacturer and channel members on which customers to target

• Cannibalization of the product line

Channel Needs To Adapt OR Change As Products Mature

Adequate market coverage

Adequate supply

Adequate market coverage and inventory levels

Gauge effects of competition on channel support

Make sure the product remains attractive to channel

Possible changes in channel structure to extend maturity phase

Phase out marginal channel members

Determine impact of product deletion on channel

Introduction

Growth

Maturity

Decline

Sales($)

Entering New Markets Will Typically Require Changes To Existing Channels and/or Creation of New Channels

New Market

Adequate channel coverage

Confidence of channel in manufacturerBrand strategy may

cause rifts

Market Maturity Impacts Channel Design And Management

Source: Deloitte, “Channel Strategy – Getting straight to the point

Coca-Cola India : Rural vs. Urban

Bottling Plant

Large Distributors (Hubs)

Smaller Distributors (Spokes)

Retailers Retailers Retailers

Bottling Plants Retailers Consumers

Rural Market Urban Market

Let’s Build a Channel For a New Product

Product 1 - A Humanoid Robot that walks, talks, and helps from Honda

Product 2 – A Household vacuum cleaner from Black&Decker

Product 3 – Personalized Sweaters and Other Clothing ITems

Channel Management wrap-up graphic

Channel Design Product Issues

CustomerDifferentiationPositioningFrame of referenceCompany resources

Channel Management Product Issues