[MUSIC] Welcome back. Today, we are going to learn to design a distribution channel. Where we'll find out what important aspects do we need to take into account. In designing marketing channels, manufacturers struggle between what's ideal and what is practical. A marketing channel design goes for four steps. Analyzing customer needs, setting general objectives, identify the remedial alternatives and evaluating those alternatives. Step number one, we need to start by analyzing customer needs and wants, find out what the target customer want from the channel. Providing the fastest delivery, the greatest assortment and the master pieces may not be possible and practical. Step number two, we have to establish general objectives and constraints. A company states objectives in terms of target levels of customer service, their associated cost and the support level. And also decides which segments to serve at the best channels to use in each of the cases. Channel objectives are also influences by the nature of the company, its product, marketing intermediaries, competitors and environmental factors. For example, in cosmetics, we have Medicaid using direct channels versus [INAUDIBLE] using intermediaries like department stores. The third factor would be to identify major channel alternatives. When the company has defined its channel objectives, it should next identify its major channel alternatives. In terms of type of intermediaries, number of intermediaries and responsibilities of each channel member. If we start with type of intermediaries. They are the type of channel members available to carry out its channel work. Using many type of resellers in a channel provides both benefits will reach more and different buyers. And also drawbacks is difficult to manage and control. And they compete and conflict may arise. Depending on the length, that means number of intermediary levels or each layer performing channel functions. Channels can be short or long and what we call either direct or indirect. So a [INAUDIBLE] level channel or a short or also called direct channel is the one in which the manufacturer sells directly to the final customer. For example, Internet, the manufacturer-owned shop, the mail order, the home party, the TV selling, the door-to-door, the special [INAUDIBLE]. You see that there are many of them and the rest will be the indirect or longer channels. Most of the companies use a mix of both channels simultaneously, for example, you can say with Coca-Cola, with a banks. And the length depends on several factors. I mean the length of the channels. Factors such as the nature of that product, the client, the complexity of the purchasing process, the maturity of the costumer. And even on other factors like traditions, habits, legislation, a physical concentration or dispersion of the population, educational level, the weather. All these other factors also influence a channel being shorter or longer. A second aspect to establish channel objectives and constraints is the number of intermediaries who have to determine the number of channel members to use at each level. Three strategies are available. The intensive one, the intensive distribution. The stock is available in many outlets. The examples are the convenience products. Would be examples like 7-Eleven or Spar, we have the exclusive distribution. We limit purposely the number of intermediaries handling this products. The main example are the luxury products, Hermes, Rolex, Rolls-Royce. And there is a third type that is the selective distribution, it uses more than one channel but fewer than all the ones willing to carry the product. And example would be for example, the TV distribution, the furniture, the home appliances, would be brands like Samsung or Sony. Finally, we need to agree and know the responsibilities of a channel member. Producer and intermediaries meet to agree on the terms and responsibilities of each channel member. And agrees especially in the first policies, in the conditions of sale, in the territory rights and in the specific service to be performed. To finalize, we have the step four in designing a distribution channel, we need to evaluate the major alternatives. Each alternative should be evaluated against economic, control and adaptability criteria. The economic one would be using criterias to compare ratios such as likely sales, cost, profitability control. We have to decide how much control we are going to give to the intermediaries. And finally, adaptability. Channels often involve long-term commitment. However, the company wants to keep channel flexibility to adopt to environmental changes. So if you choose a long-term commitment channel, it must show you a clear superiority in economic and control terms. Okay, now that we know the steps to follow to design a distribution channel, in the next class, we will learn how to manage them and to solve conflict. See you. [MUSIC]
