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Marketing Channel Management

The marketing channel (interorganizational network of institutions comprised of agents, wholesalers, and retailers), by performing a variety of distribution tasks, plays a significant role in the flow of products from producers to consumers and on company profitability. Thus, manufacturers are increasingly concerned about the level of performance their channel institutions provide

Like other areas of business, marketing channels require careful administration, as superior channel management policies and strategies help a firm attain a differential advantage but concomitantly are difficult to duplicate. Marketing channel management refers to the process of analyzing, planning, organizing, and controlling a firm’s marketing channels

URconnect India | Marketing and Distribution

URconnect India provides support for all seven decision areas of Marketing Channel Management:

  • formulating channel strategy,
  • designing marketing channels,
  • selecting channel members,
  • motivating channel members,
  • coordinating channel strategy with channel members,
  • assessing channel member performance, and
  • managing channel conflict.

All these seven areas are critical to superior market performance and long-term customer loyalty for every company. Any Ambiguity surrounding these important channel functions can adversely affect customer relationships and company profits.

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Business Distribution Channel

Industrial/institutional distribution is frequently adapted by specific branches of the industry, which manufacture's those products that are either technical and/or price-oriented. The industrial distribution activity is less marked by hype and the impulse buying element is completely eliminated.

A subset of industrial distribution is technological differentiation marked by the employment of technical Staff on the one side and highly skilled technical buyers on the other.

URconnect India | Business Distribution Channel

Business Distribution is therefore a logistical function at the physical level modulated by technical communications activities. Channels have evolved over time and continue to change as participants attempt to take advantage of change as it occurs in the market.

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Consumer Distribution Channel

Distributors are typically referred to as service wholesalers. They are businesses that secure products from the manufacturer and sell them to retailers. Service wholesalers are widely used because they offer many advantages over selling direct to retail

Economic activity viewed functionally consists of aggregating valuable commodities into centers of production where value is added to the commodities by labor. The products of many suppliers are centralized into manufactories. The structural function of a distribution channel is to invert this movement, causing the transformed commodities to reach end-users again.

URconnect India | Business Distribution Channel

When a manufacturer creates a well defined programs for selling and servicing customers within a specific channel, can really impact the business growth.

To get started with Consumer Distribution Channel, first segment the target customers by their characteristics (their needs, buying patterns, success factors, etc.) and then customize the channel management program that must include:

  • Goals Define the specific goals you have for each channel segment. And, remember to consider your goals for both acquisition and retention.
  • Policies Construct well defined polices for administering the accounts within the selected channel. Be sure to keep the unique characteristics of each segment in mind when defining policies, order management, product fulfillment, etc.
  • Products Identify which products are most suited for each segment and create appropriate messaging.
  • Sales/Marketing Programs Design a support system for your channel that answers their needs. The standard considerations are product training, co-op advertising, seasonal promotions, and merchandising. Again, this is not a one-size fits all, so be diligent about addressing this segment’s SPECIFIC needs.

A well defined consumer channel management strategy for each segment allows the manufacturer to be more effective within each segment, while gaining efficiency at the same time. Simultaneously, maintain the brand consistency across all channel segments as it's critical for long-term success.

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Impact of dual distribution upon Marketing Channel

The whole marketing process involves producing, pricing, distributing and promoting goods and services to existing and potential customers at a profit. If you cannot successfully distribute your product or service to your customers, all of your other marketing efforts may be useless.

As an entrepreneur, whether you are a producer or service provider, you must match your ability to produce and supply goods and services with the needs and demands of the various market segments or target groups you have identified.

URconnect India | Business Distribution Channel

As both vertical integration and market governance have distinctive economic and structural characteristics and marketing functions, the advantages and disadvantages of dual distribution arise from the aggregation of benefits and costs of each channel and the synergy across the dual channels.

Advantages of Dual Distribution

  • Greater control over operations in vertical integrated channels.
  • Lower costs and higher returns in market-based channels.
  • Market-based channels are more responsive to market needs.
  • Market-based channels provide low cost, low risk access to new markets.
  • Synergy between dual channels.

Disadvantages of Dual Distribution

  • Moral hazard problems in market-based channels
  • Uncertainty about income from market-based channels

The IMPACT

As discussed, dual distribution offers several advantages including lowering a firm’s capital requirements, operating costs, monitoring costs and risk. From a shareholder value perspective, market-based channels create relational, knowledge and intellectual assets that increase future cash flows while reducing their risk. From a real options perspective, market-based channels are an ‘options’ investment useful for managing demand growth and uncertainty. Hence, an increasing proportion of market-based channels should increase a firm’s intangible value.

However, agency theory accounts suggest some disadvantages of dual distribution including potential under-investment and free-riding by market agents. Hence, an increasing proportion of market-based channels in such firms may decrease their future cash flows and increase the uncertainty of these cash flows, negatively affecting their intangible values.

Optimizing Channel Performance

The supply channel you use depends primarily on your product/service and your target customers. URconnect India has often seen that in most cases there is lack of communication between their marketing and sales efforts. This often is caused by a poorly designed or implemented distribution channel strategy.

Well-designed distribution channel strategies take into account both the sales activities with channel partners and the marketing efforts to better reach and serve end-users. Distribution Channel Management builds a coherent framework that unites marketing and sales efforts in a collaborative learning environment.

But for those companies which sells directly and indirectly, managing their channel performance is of utmost importance. Companies must identify the right channel-mix, develop their channel-partners and unleash the potential of channel-based CRM to preserve sales growth and boost market share.

Of course, channel management cannot be fully effective if it is a stand-alone effort. Channel management must be closely interlinked with products, pricing, quality, branding, segmentation and customer knowledge. However, we have discovered that in many cases channel management is an underused skill in a company’s routine working. In addition, the cost-return ratio of investing in the channel is often higher compared to other marketing tools such as heavy-discounting, ubiquitous advertising and confusing proliferation of product/service options.

URconnect India has identified three challanges that arise for the best in class channel management.

  • Channel-mix optimization – target channel performance and portfolio
  • Channel-development –development of partners
  • Channel-based CRM –growing market share together with partners

URconnect India have expansive experience in optimizing channel management. In particular, we offer support in following areas:

  • Assessing the current performance of the channel portfolio (benchmarking, P&Ls)
  • Developing a full-scale distribution strategy and preparing for implementation
  • Developing and managing the implementation of single-channel performance improvements

Of course, every market is different and no two operators are the same. For this reason, we usually begin with a interactive session and take inputs from your experts in the local markets to assess the current situation of your channel portfolio. On the basis of which we identify your "pain points".

Determining Distribution Intensity

Many producers of consumer goods use the producer to wholesaler to retailer to customer method of distribution because it allows them exposure to the wide networks that wholesalers have already established. Simultaneously, most of the professional services available in the market are distributed from the provider directly to the consumer.

This difference in number of intermediaries utilized for distribution of Product/service depends on the target costomers, price and nature of product/service. URconnect India supports company's in identifying the right intensity needed for market coverage.

URconnect India | Business Distribution Channel

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