The selection of channel is not an easy job. Let me give certain points that you have to considered before selection of the channel
1. Nature of Product: The is the first and most important consideration. Product features, size, shape, color, durability, perishability, Value of product etc are the factors that constitute the product characteristics. Perishable items needs strong packaging and shorter channel whereas items with long life can have longer channels. Size and handling also affects the channel. Odd sizes, difficult handling are often found to have shorter channel. Industrial machinery, that requires particular customer preference are often sold through direct channels.
2. Customer Characteristics: If the product has got huge customer base and are geographically dispersed, buying product in small quantities requires longer channels. This is because producers needs to have wide network of retailers and wholesalers to make the product easily accessible in the local market. For eg product like Pepsi needs a longer channel. Unlike above, industrial products, where customers have preferences regarding the technology and the functions to be incorporated needs shorter channel, because the product is needed to be adjusted according to customer preference.
3. Nature of Market: The location and the coverage of the market also determines the channel selection. If the market is dense, spread across in length and breath, requires longer channel. Whereas if the product has niche market, the channel can be short.
4. Cost Consideration: The cost of maintaining the channel is also a key consideration. Every producer would like to have shorted channel, may be direct channel, but its cost. Now this cost has to be compared with the benefits derived. Longer channel, with high number of middleman also tend to raise the price of the product, because every middleman, looks for his share and wants a larger share.
5. Time: Time taken by the channel to make the product available to the consumer, is one other factor. Longer channel are often found to take shorter time. This is because the middleman are well versed with the market and are efficient in distribution of product. Keeping a channel short means that the customers have to first look for distributor and place his orders.
6. Competition: Manufacturers are often found to use the same channel of distribution as the competitors are using. If one deviates, other plan for the same. Longer, indirect channels are to be used if the competition is intense, however shorter channel can be used, if competition is less. For eg Industrial product, where the competition is less uses more direct and shorter channel than the FMCG products where the competition is more.
7. Availability of Middleman: Availability of middleman in foreign nations, is one other factor to be considered, specially for industrial product, or product with high end specification. Product which are customer oriented, which are brought regularly, may be everyday, which is a necessity can use longer channel, as middleman are very easily available. However product with specific technology, industrial equipments, middleman are not easy to come by. Even middleman needs to be trained with the product feature thereby marketing the same in their local markets.
8. Technological Factors: The technology component of the product also affects the channel selection. Products which are not technology oriented can have longer channels are product Is not needed to be explain to the customers. However, if the product is highly technical, requires a shorter direct channel, as it functioning is to be explained to the consumers.
9. Consumption Pattern: Consumption pattern is also a factor to be considered before designing the channel. If the product is consumed regularly, may be periodic, then such products should longer channels, as consumers would like such product to be easily accessible. People will not like to make great research and run around for such product, and will buy anything which is easily available.
10. Other Factors: To end with, there are some other factors like infrastructure in the foreign nation, political environment, legal regulations, social attitude, culture, values etc that may affect the selection of the particular channel.
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