Directorate of distance education

Channel Functions & Flows
Info-Promotion-Negotiation-Ordering-Financing-Risk taking-
Physical possession-Payment-Title 
All of the functions have 3 things in common:
1. They use up scarce resources.
2. Can be performed better through specialization.
3. They are shift able among channel members.
Channel Levels
Each intermediary that performs work in bringing the product & 
its title closer is a channel level.
➢
Zero-channel level (direct-marketing channel) consists of a 
manufacturer selling directly to the final customer (i.e. door-to-
door sales, mail order. Telemarketing, TV selling)
➢ One level channel contains one selling intermediary (i.e. retailer)
➢ Two level...(wholesalers, retailers)
➢ Three level...(wholesalers, jobbers, retailers)
➢ The longer the channel, the more difficult it is to exercise control.
Channel-Design Decisions
Designing a channel system calls for analyzing customer needs, 
establishing channel objectives, & identifying & evaluating the major 
channel alternatives.
Analyzing Customers’ desired service output levels
Channels produce 5 service output levels:
1. 
Lot size: 
# of units that the marketing channel permits a typical 
customer to purchase on a purchase occasion
2. 
Waiting time: 
Average time that customers of that channel wait for 
receipt of the goods.

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Notes
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3. 
Spatial convenience:
Degree to which the marketing channel 
makes it easy for customers to purchase the product.
4.
Product variety:
assortment breadth.
5. 
Service backup:
add-on services provided by the channel 
(installation, repairs, credit).
Establishing the Channel Objectives & Constraints
The channel objectives should be stated in terms of targeted 
services output level. Under competitive conditions, channel institutions 
should arrange their functional tasks so as to minimize total channel costs 
with respect to tasks desired levels of service output. 
Effective channel planning requires manufactures to determine 
which market segment to serve and the best channels to use in each case. 
Each producer develops its channel objectives in the face of constrains 
stemming from products, intermediaries, competitors, company policy, 
environment and the level of service output desired be target customers.
Product characteristics:- Perishable products require more direct 
marketing because of the dangers associated with delays and repeated 
handling. Bulky products require channels that minimize the shipping 
distance. 
Custom-built machinery and specialized business forms are sold 
directly by company sales representatives because middlemen lack the 
requisite knowledge. Products requiring installation and/or maintenance 
services are usually sold and maintained by the company or exclusively 
branches dealers.
Competitive characteristics:- Channel design is influenced by the 
competitor’s channels. The produces may want to compete in or near the 
same outlets carrying the competitor’s products. In some other industries, 
producers may want to avoid the channels used by competitors.
➢ Channels objectives vary with product characteristics.
➢ Channel design must take into account the strengths & weaknesses 
of different types of intermediaries.

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Notes
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➢ Channel design is also influenced by the competitors’ channels.
➢ Channel design must also adapt to the larger environment.
➢ Legal regulations & restrictions also affect channel design.