Core Concepts of Marketing

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