After a company has defined its target market and desired positioning it should identify its channel by three elements:-

1. The type of business intermediaries

2. The number of intermediaries and

3. Terms and responsibilities of each channel participants.

1. Types of intermediaries:-

The firm has following channel alternatives-

Company Sales force:- Expend the company’s direct sales force. Assign to contact all prospects in the area. Or develop separate sales force for different products.

Manufacture’s Agency:- Hire agencies in different regions sell the equipment.

Industrial Distributors:- Find distributors in the different regions who will buy and carry device. Give them exclusive distribution adequate margins and promotional support.

2. The number of intermediaries:-

Company has to decide on the number of middlemen to use at each channel level. Three strategies are available.

• Intensive Distribution:- Producers of convenience goods etc. typically seek intensive distribution that is stocking their product in numerous outlets. These goods must have place utility.
• Exclusive Distribution:- Some producers limit the number of intermediaries handling their products. Through exclusive distribution the manufacturer hopes to obtain more aggressive and knowledgeable selling and more control over intermediaries polices on prices, promotion, credit and various activities.

3. Terms and responsibilities of channel members:– The producer must determine the conditions and responsibilities of the participating channel members. The main elements in the trade relation mix are price policies, conditions of sale, territorial rights and specific service to be performed by each party.