A Detailed Description for You to Understand Channel Management

Channel management definition
Channel management involves using marketing to sell products to customers within a framework. The Buzzle write-up below outlines a detailed description of channel management.
Did You Know?
According to recent IT upgrades, technological innovation is predicted to be seen in terms of percentages - the asset/distribution/supply chain/channel management seem to have an opportunity of 46%, while reinsurance has 48%.
The advertising/marketing phase of a product launch is one of the most important phases. In fact, it could be considered as the most important, even more than the design and production phase. It is how effectively a product is promoted that determines its initial, and in many cases, the future success rate as well. There are plenty of jargon associated with marketing and sales, and channel management is just one of them. Not many people though (including some marketers themselves) are very clear about what this term means (in depth, at least). The words are tossed around during campaigns, as and where they fit in. Therefore, the paragraphs below elaborate on what is channel management, its importance, and some channel management examples.

A Background
  • It's a completely competitive, tech-savvy world out there, with companies and products increasing by leaps and bounds.
  • In the earlier days, businesses relied on good consumer service and word-of-mouth publicity in order to thrive; unfortunately, these strategies are insufficient today.
  • Irrespective of what your product offers, it needs to be launched in the most elaborate way possible.
  • There are a number of marketing methods - one can go in for print media (newspapers and magazines), digital marketing (cell phones and tablets), web advertising, campaigns, telemarketing, etc.
  • In the promotional phase, it is important to understand what the masses want, for they are the ones who could make or break your company.
  • To understand this, you first need to understand what kind of people prefer what kind of products and what kind of marketing.
  • To be more precise, people from a certain part of the city would prefer a particular brand of toothpaste, and would rely on telemarketing to know about the same.
  • Some others, residing elsewhere, may prefer some other brand, and may believe in promotional campaigns to buy that product, and so on.
  • Some prefer buying it directly from the company, while some prefer wholesalers.
  • It is important to understand the varying nature of this phase, and channel management helps in achieving this goal.
  • Thus, channel management is a process by means of which companies can market their products through the distribution network.
Goals
  • To effectively categorize the masses into required channel segments
  • To direct the channels properly to obtain maximum promotion for the company (or product)
  • To list down desired outcomes and plan activities to achieve the same
  • To carry on customer surveys and discover new routes to market products
Strategy
  • Channel management strategies vary as per many pointers.
  • Basically, the strategy comprises the different 'channels' or routes that a company goes through to ensure that the product reaches the consumer.
  • These change according to whether the direct model is used, or the indirect model, or the strategies of marketing and distribution mix, etc.
  • A channel by itself is an intermediary, which has further sub-divisions. They are all different, like sales channel management, marketing, distribution, etc.
  • Some strategies/types of channel management are enumerated below. In fact, these channels are widely used in marketing mix.
  • Every channel is named differently; in case of the distribution mix, the channels are called exclusive distribution, selective distribution, and intensive distribution.
  • More commonly, there are also channels called VAR/VAM (value-added reseller/value-added marketer), retail outlets, the web, etc.
Direct Sales

PRODUCERCONSUMER
  • This channel involves no middleman, i.e., no agent.
  • Whatever sales are carried on, are done directly between the provider and the customer.
  • This strategy has been analyzed and is found to work for a particular section of the masses, who prefer direct communication between the provider and customer.
  • The customers believe that they are relieved of any transactions that may take place between the company and the agent, and that they are directly benefited.
  • A large section of the urban population also prefers this kind of marketing; there are people who trade directly with the company rather than relying on their promotional campaigns and other marketing strategies.
Indirect Sales (One intermediary)

PRODUCERRETAILER/DISTRIBUTORCONSUMER
  • As you can see, this channel works when an agent, like a retailer or wholesaler is present between the producer and consumer.
  • He will buy goods from the producer, and sell it to the public.
  • The discussions about price, advertising, sale, etc., remain unknown to the customer, of course.
  • Goods, like clothes, toys, furniture, etc., are first sold to the retailer.
  • This helps the producer sell his stock faster and also to a company that already has an established name in the market.
  • That is to say, before reaching the end-user, these products reach the retailers, and which helps the products come into the limelight faster.
  • The case is different with wholesalers; when you buy goods from wholesalers, extra costs are cut off, unlike the case with retailers.
  • Thus, consumers can buy stock in bulk at a lesser price.
  • Again, this need not be the case always, since the wholesalers can sell the products directly to the retailers instead of the consumers, which means that the price will again increase in order to make a profit for every party.
Indirect Sales (Two intermediaries)

PRODUCERAGENTRETAILER/DISTRIBUTORCONSUMER
  • This channel management strategy involves two middlemen - one is the agent between the manufacturer and the retailer/wholesaler, and the other is the retailer/wholesaler himself.
  • When the products are ready, negotiations are carried on between the wholesaler and the agent.
  • After the discussions are over, the wholesaler sells the products to the end-user.
Examples

Example I
  • Farmers selling their vegetables and other produce, directly to consumers instead of going through the wholesalers, is an example of direct sales.
  • He has the freedom to set the prices in a fair manner, without having to be in the middle of an issue with the wholesale store.
  • In fact, many regular goods, like clothes, bags, accessories, furniture, etc., can be bought directly from the manufacturer.
Example II
  • Consider a soft drink. The manufacturer can either sell it to restaurants (in bulk), to grocery stores across the city, directly from his company (through advertising first), etc.
  • When he goes through an agent, the channel comes under indirect sales.
  • Goods like bikes and automobiles are again mostly sold through dealers.
  • Depending upon the customer value for that product, limited/excess amount of advertising is done, and the goods go through a number of routes from manufacturing till they are actually sold.
Example III
  • Consider a very simple instance. Consider that you need to book plane tickets.
  • A famous airline company would have already advertised themselves well enough, so you have the option of trusting agents to book your ticket, or you could call the airlines directly.
  • You can therefore go book your tickets by calling the airline office directly, booking through online websites, assigning a travel agent, combing through airline offices, or going directly to the airport.
Effects of Channel Management
  • A product can be marketed by various means, through the internet, digital media, events, etc. These are all tactics to spread awareness about the product and increase its sale.
  • Identifying the distribution network is always an advantage, as you will know from where exactly the customers buy goods.
  • Promotional events are not attended by all and sundry, neither will all customers rely solely on one form of media.
  • Adhering to the various marketing techniques, consumers will decide to buy from the manufacturer or the retailer.
  • Thus, channel management helps in achieving customer satisfaction, which is a primary need for companies to go on.
  • The producer can come to know the customer's reaction through these strategies - if, for example, a customer complains about the goods to your retailer, you can find out what was wrong and ensure it doesn't happen again.
  • You can carry out surveys to find whether the customers are satisfied and how they wish to carry on future transactions.
  • Channel management helps increase sales, and also helps to understand the magnitude of sales, i.e., you will come to know how many people shop online, which company is the most trustworthy, how many people prefer direct selling, etc.
  • Accordingly, you can adjust your production as well as distribution processes.
  • Your market share and position will be impacted via channel management; you will know where your company stands, and if you need to change your retailer, or your product quality, etc.
  • You can calculate your costs more effectively through these strategies as well.
A company or product thrives solely on public support. Therefore, it is important that it is efficiently promoted. Channel management is an effective method that helps companies sell and service consumers within a specific network. When used properly, it can work wonders for the company.
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