1 / 12

Distribution Channel Strategy Spring Semester: E 266 February 2000 L. P. Bucklin

Design of Information Channel Components: A Practical Example Extracted from: “ Channel Selection for New Industrial Products,” by Rangan, Menezes, Maier. Distribution Channel Strategy Spring Semester: E 266 February 2000 L. P. Bucklin. The Channel Design Problem.

taylor-harper
Download Presentation

Distribution Channel Strategy Spring Semester: E 266 February 2000 L. P. Bucklin

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Design of Information Channel Components: A Practical ExampleExtracted from: “Channel Selection for New Industrial Products,” by Rangan, Menezes, Maier Distribution Channel Strategy Spring Semester: E 266 February 2000 L. P. Bucklin

  2. The Channel Design Problem • Determine the optimal channel for a new industrial product when EU have limited experience with the product • How should alternative channels be defined? • How should the selection be made among the alternatives? • How should one distinguish between the information and logistic needs to shape the design?

  3. Functions-Service Delivery • Functions may be seen as logistic or information activities related to the services that they perform • Consumer service levels required for each of these functions are set forth as the collective determinants of channel design

  4. Impact of High Service Level upon Channel Type Type of Service Channel with High Service • Lot Size Indirect • Assortment Indirect • Availability Indirect • Complexity of Product Handling In-Direct? • Quality Assurance Direct • Product Information Direct • Customization Direct • Complexity of After-Sale Service In?-Direct?

  5. Implementation Steps • Measurement of service requirements • Weighting management and EU views • Identify multiple respondents • Lead users • Management experts • Issue of correlation due to common viewpoint • Development of scales for each service factor • Potential bias in judgments • Will EU weight service needs higher than appropriate? • Will managers have any hidden agendas that might affect preferences?

  6. Application • How does one rate the different service needs in identifying a superior channel? • Note differences between new product and mature channel service demand • Service needs declined across the board • Strong learning effects about channel services • Determination of the channel options • Limited to existing institutional framework? • Any hybrid systems possible?

  7. Mean End-User Ratings Channel Service & Rating New Mature • Lot Size .50 .32 • Assortment .67 .46 • Availability .67 .50 • Special Handling .11 .02 • Product Information .70 .56 • Quality Assurance .84 .38 • Customization .96 .51 • After-Sale Service .72 .45

  8. Evaluation of Approach • Following the decision logic, the design decision was derived from apparent assumption that all channels could provide the necessary services • Channel cost became the determining factor • The major contribution from the survey was identification of the initial need of both a high level of information and logistics • This led to the combination channel employed

  9. Interactions Between Information and Logistic Services Hybrid Direct Commercial Warehouse Pure Direct Channel High EU Information Needs Pure Indirect Channel Hybrid Broker Drop-ship Low Pure channel: same logistic and information structure Hybrid channel: different logistic and information structure High Low EU-Logistical Needs From CL2B-Design Concepts

  10. Design Generalizations • The need to deliver complex information diminishes the potential for a contribution from information intermediaries in the channel • Changes in information requirements may occur overtime as a product matures and the end user becomes more knowledgeable • The long run information channel may be different from the short run • The ease of being able to shift from short to long term ideal may affect the short term selection

  11. Governance Issues • Once channels are established, change from one design to another may be expected to diminish cooperation at launch of the initial channel and to engender conflict at point of change • These conflicts may be more significant in a non-integrated system, but internal conflict within the integrated system will still be present

  12. Determining Channel Costs • How should potential costs for the commercial segment of each channel type be estimated? • Comparisons with extant channels • Engineering estimates—what is the impact of scale? • Can cost estimates be protected from bias held by the decision makers? Use of consultants? • How should costs be linked to the level of service by the end user? • How does one control for costs incurred by partner firms in the channel? (A governance issue.)

More Related