THECHANNELMANAGEMENTPROCESS 271
EvaluateandSelectfromChannelAlternatives
Detenniningthespecificchanneltasksisa prerequisitefortheevaluationandselection
process.Therearefourbasesforchannelalternatives:(1)numberoflevels,(2)intensityat
thevariouslevels,(3)typesofintermediariesat eac h level,and(4)applicationofselection
criteriontochannel alternatives.^3
NumberofLevels
Channels canrangeinlevels fromtwotoseveral (fivebeingtypical). Thetwo-levelchan-
nel (producertoconsumer) is a directchannelandispossibleonlyifthe producerorcus-
tomerarewillingtoperformseveralofthetasks performedbyintermediaries.Thenumber
oflevelsina particularindustrymightbeth e sameforallthecompaniessimplybecause
oftradition.Inotherindustries,thisdimensionismoreflexibleandsubjecttorapidchange.
IntensityatEachLevel
Oncethenumberoflevelshasbeendecided, thechannelmanagerneedstodeterminethe
actualnumberofchannelcomponentsinvolved at eachlevel.Howmanyretailersin apar-
ticularmarketshouldbeincludedinthedistributionnetwork?Howmany wholesalers?
Althoughtherearelimitlesspossibilities,thecategoriesshowninFigure10.6havebeen
usedtodescribethegeneralalternatives.
Theintensitydecisionis extremelycritical, becauseit isanimportant partofthefirm's
overallmarketingstrategy. CompaniessuchasCoca-ColaandTimexwatcheshaveachieved
high levelsofsuccess throughtheirintensivedistributionstrategy.
TypesofIntermediaries
Asdiscussedearlier, there areseveraltypes ofintermediariesthatoperateina particular
channelsystem. The objectiveistogatherenough informationtohavea generalunderstanding
ofthedistributiontasks theseintermediariesperform.Basedonthisbackgroundinforma-
tion,severalalternativeswillbeeliminated.
(1)Exclusivedistribution(suchasEthanAllenandDrexelHeritageFurniture)
- Theuseofa singleorv eryfewoutlets
- Createshighdealerloyaltyandconsiderablesalessupport
- Providesgreatercontrol
- Limitspotentialsalesvolume
- Successoftheproductisdependentupontheabilityofa singleintermediary
(2)Intensivedistribution(suchascandy)-themanufacturerattemptstogetasmany
intermediariesofa particulartypeaspossibletocarrytheproduct - Providesforincreasedsalesvolume,widerconsumerrecognition, andconsiderable
impulsepurchasing - Lowprice,lowmargin, andsmallordersizesoftenresult
- Extremelydifficulttostimulateandcontrolth is largenumberofintermediaries
(3)Selectivedistribution(suchasBaskin-Robbins)-anintermediarystrategy,withtheexact
numberofoutletsinanygivenmarketdependentuponmarketpotential,densityof
population,dispersionofsales,andcompetitors'distributionpolicies - Containssomeofthestrengthsandweaknessesoftheothertwostrategies.
- It isdifficulttodeterminetheoptimalnumberofintermediariesineachmarket
FIGURE10.6 Levelsofchannelintensity