Chapter 4Principle & Process of Channel Design

Case Study

Hongguang Company was initiated by three yong men who had contracted an old machine factory.The price of its baby carrier “Kukuzai” is 20%-30% higher than others in the industry.It covers more than 35% market with a high pricing strategy.Now the company extends its product category to the children’s apparel.Compared with the “Kukuzai”baby carrier,‘”Kukuzai”children’s apparel pinpoint higher with its target households having annual income ranging from 50,000 ￥ to 80,000 ￥ .Compared with the common children’s apparel,the price of the “Kukuzai” underwear is 80%-100% higher,and compared with the other common children’s apparel,100%-120% higher.

Now Mr Zhao is troubled by whether it’s better to share the baby carriers’ channel or develop a brand new channel to reach its target market.Could you fix this for him according to your knowledge?

The decisions the channel management make during the

process of designing ,evaluating and selecting channels

among the various options in order to build the new

marketing channels or perfect the existed channels, which

aims at achieving the organizations’ channel goals.

What is Channel Design

All the channel members are faced with the problems

of channel design.

Principle of Channel Design

Make the customers satisfied at the largest latitude based on the minimum costs .

Make the channel expeditious to achieve high efficiency

Maintain the stablility of the channel to well controll it

Coordinate the channel chain and make it balanced

It can be fully embodied in the four aspects here

Be creative to take advantages

Process of Channel Design

1. Identifying the necessities of channel design

3. Clarifying the channel task

4.Designing the channel structure

5. Evaluating & Selecting the channel design schemes

2. Commodities transportation management

6. Recruiting the channel members

Identify the Necessities of Channel Design

1)Design a brand-new channel

When the company plans to expand into a new target market

During the Company’s initial stage

When a new corporation emerges as a result of mergers and acquisitions

2) Improve the existed channel

Interior ： strategic changes/new products/new target markets

Exterior ： channel conflicts/distributor changes /environment changes

Identify the Channel Goal

1)Analyze consumers’ channel needs( bulk buying/waiting time/trip distance/selection range/after-sale service)

2)Identify the corporate channel goal(market coverage/channel control/channel flexibility)

3)Coordination of channel goals

Identify the Channel Task

Sales PromotionSales Promotion

Channel SupportChannel Support

LogisticsLogistics

Products Products Amendment & Amendment & After-sale After-sale ServiceService

Risk BearingRisk Bearing

Thank you for your time!