THECHANNELMANAGEMENTPROCESS 269
suchcases, thesecompaniesmayestablisha temporaryorquasi-pelmanentrelationshipin
ordertoworkwitheachother,andcreatethechannelmechanismrequiredtoreachtheir
targetmarkets. Thisarrangementhasbeenlabeledahorizo ntalchannelsystem.Forexam-
ple, twosmallmanufacturersmightcombinetheirshipmentstocommonmarketsinorder
to gainfullcarloadtransportationratesthateachcouldnotobtainseparately. Anothercom-
monscenariois fora largeretailertobuyoutseveral competingsmallretailersinorderto
gainentryintocertainmarketsorwithcertaincustomers.
TheChannelManagementProcess
Evidencesuggeststhata channelshouldbemanagedjustliketheproduct,promotion,and
pricingfunctions. Thischannelmanagementprocesscontainsfivesteps.
AnalyzetheConsumer
Webegintheprocessofchannelmanagementbyansweringtwoquestions. First,towhom
shallwesellthismerchandiseimmediately?Second,whoareourultimateusersandbuy-
ers? Dependingupona hostoffactors,includingthetypeofproduct, f unctionsperformed
inthechannel, andlocationinthechannel,theimmediateandultimatecustomersmaybe
identicalorthey maybequiteseparate.Inbothcases,somefundamental questionswould
apply.Thereisa needtoknowwhatthecustomerneeds,wheretheybuy, whentheybuy,
whytheybuyfromcertainoutlets,andhowtheybuy.
Itisbestthatwefirstidentifythetraitsoftheultimateuser,sincetheresultsofthis
evaluationmightdeterminetheotherchannelinstitutionswewouldusetomeetthese needs.
Forexample, thebuyingcharacteristicsofthepurchaserofa high-qualityVCRmightbe
as follows :
- Purchasedonlyfroma well-established,reputable dealer.
- Purchasedonlyafterconsiderableshoppingtocomparepricesandmerchanclise
characteristics.
- Purchaserwillingtogotosomeinconvenience(timeanddistance) tolocatethe
mostacceptablebrand.
- Purchasedonlyafterextendedconversationsinvolvingallinterestedparties,includ-
ingdealer,users,andpurchasers.
- Purchasemaybepostponed.
- Purchasedonlyfroma dealerequippedtorenderpromptandreasonableproduct
service.
Thesebuyingspecificationsillustratethekindsofrequirementsthatthemanufacturermust
discover. Inmostcases,purchasespecificationsarefairlyobviousandcanbediscovered
withoutgreatdifficulty.Ontheotherhand,somearedifficulttodetermine. Forexample,
certainconsumerswillnotdineat restaurantsthatservealcohol;otherswillpatronizeonly
supermarketsthatexhibitdefiniteethniccharacteristicsintheirmerchandising. Nonethe-
less , bycarefulandimaginativeresearch,mostofthecriticalfactors thatbearonconsumer
buyingspecificationscanbedetermined.
Knowingthebuyingspecificationsofconsumers,thechannelplanner candecide on
thetypeortypesofwholesalerand/orretailerthroughwhicha product should besold. This
requiresthata manufacturercontemplatingdistributionthroughparticular typesofretail-
ersbecomeintimatelyfamiliarwiththepreciselocationandperformancecharacteristics
ofthoseheisconsidering.
