When making the model of a transponder for your cockpit, a good option for frequency input knobs is to use binary-coded 8-position rotary switches. They are small and easy to install behind the transponder cover panel.
The key advantage of their 8 fixed positions is the tactile experience very similar to real transponder knobs.
A minor drawback of using these 8-pos switches instead of encoders is their increased number of inputs, 1 more for each knob. Using 8-position rotary switches here requires 12 inputs, compared to 8 with encoders.
However, this is not an issue if you use a dedicated 16-input multiplexer for the transponder, which will also allow you to use its remaining 4 inputs for the transponder's mode switch and the "Ident" button.
You can read more about binary-coded rotary switches here.
