The channel objectives should be stated in terms of targeted services output level. Under competitive conditions, channel institutions should arrange their functional tasks so as to minimize total channel costs with respect to tasks desired levels of service output. Effective channel planning requires manufactures to determine which market segment to serve and the best channels to use in each case. Each producer develops its channel objectives in the face of constrains stemming from products, intermediaries, competitors, company policy, environment and the level of service output desired be target customers.

1. Product characteristics:- Perishable products require more direct marketing because of the dangers associated with delays and repeated handling. Bulky products require channels that minimize the shipping distance. Custom-built machinery and specialized business forms are sold directly by company sales representatives because middlemen lack the requisite knowledge. Products requiring installation and/or maintenance services are usually sold and maintained by the company or exclusively branches dealers.
2. Competitive characteristics:- Channel design is influenced by the competitor’s channels. The produces may want to compete in or near the same outlets carrying the competitor’s products. In some other industries, producers may want to avoid the channels used by competitors.