With the completion of the foregoing steps, the number of alternatives would have narrowed down considerably; the firm must evaluate these alternative designs and choose the best among them. Actually, two distinct evaluations-an economic evaluation and a conceptual evaluation-may be necessary.
Economic evaluation; balancing cost, efficiency and risk:
Cost and efficiency are the two main parameters in economic evaluation. Often, though not necessarily, the two are directly proportional. The firm has to rate the risk associated with the different alternatives. The firm’s choice is a compromise among the three parameters. The first step here is the determination of the sales volume that can be obtained through each alternative design. Second, the costs of selling that volume through that alternative have to be assessed. In other words, the firm determines the unit cost of selling in each of the alternatives. The firm chooses the one, which is attractive from the cost vs. efficiency angle and is also relatively less risky.
Conceptual evaluation; flexibility and controllability:
Conceptual evaluation is also equally important. It has to be used for assessing the flexibility and controllability of the alternative. It is possible that economic evaluation points to one particular alternative as superior, while conceptual evaluation gives it a low rating. For example, a marketer-oriented channel design may show merit in terms of unit cost of selling, but may show severe limitations from the standpoints of controllability/flow of market feedback as well as requirements of long-term market development. With conceptual evaluation, the firm can also check out whether the alternative is compatible with its business objectives.
Some Vital Aspects in Finalizing the Channel
The job is not over with the selection of the basic channel design. Within a given design, .different arrangements are possible. It means that further decisions are needed. The important aspects to be decided are:
- Channel intensity
- Number of tiers
- The appropriate variant within the design
