Product Line Design for a Distribution Channel.

Abstract When designing a product line, a manufacturer is often aware that it does not control the ultimate targeting of the products in the line to the different consumer segments. While the manufacturers can attempt to influence the target customers through communications in appropriate media, product design, and the choice of channels of distribution, the ultimate targeting is made by a retailer, which might only care about its own interests, and is fully in control of interactions with customers, including how the product is sold and displayed. This occurrence is widespread in numerous markets, for example, frequently purchased consumer products, home appliances, personal computers, automobiles, etc. The audience for this paper includes practitioners and academics who want to better understand how a manufacturer selling through an intermediary can better induce this intermediary to have a targeting strategy consistent with the manufacturer's intentions and be willing to carry the full product line.The paper attempts to find what are the main issues a manufacturer selling through a distribution channel has to worry about when designing the product line. The problem of the product line design for a distribution channel is modeled with the manufacturer, the retailer or several competing retailers, and the consumers. In this way all the three levels of the distribution system are included.The model can be summarized as follows. The manufacturer decides how many products to have in the line and the physical characteristics of each product, quality. Each product may or may not be targeted at a different market segment. The manufacturer decides as well how many market segments to try to target and the prices to charge the retailer for each type of product. Given the product line being offered by the manufacturer, the retailer (or competing retailers) decides which products to carry, the market segments that are going to be targeted, which product to target to each ... [ABSTRACT FROM AUTHOR]