Channel marketing focuses on the distribution of products from the manufacturer to the consumer. It is part of the distribution (or “place”) component in the four P’s of the “marketing mix” – product, pricing, promotion, and place. Since most manufacturers and producers don’t sell directly to their end user, they use a marketing channel to distribute their products, whether it’s a vending machine, department store, or a trade show. While channel marketing is usually applied to products, it can also be used to market ideas and services.
Marketing channels help organizations expand their reach and their revenue. However, each marketing channel will offer a different combination of coverage and performance, and so they may be used in combination. Marketing channels may include traditional distribution models — which include producers, wholesalers and retailers — or variants that cut out one or two components. For examples, companies like Dell and Avon avoid wholesalers and retailers by using their own warehouses and salespeople to sell to consumers. Examples of marketing channels include:
- Internet direct
- Catalogue direct
- Sales team
- Value-added reseller
- Retail sales agent
- Manufacturer’s representative
In practice, companies often use a mix of marketing channels, such as internet sales and an on-the-ground team.
Every marketing channel includes at least one person or organization who serves as an intermediary. Each of these intermediaries performs a function, provides a value, and expects some kind of economic return. The values provided by these intermediaries include:
- Collecting and sharing marketing information about customers and competitors
- Developing marketing communications
- Negotiating price and other terms of transactions
- Storing and moving products
- Transforming ownership titles from one person or organization to another
- Taking on the financial risk of the channel, such as bad debt
The choice of marketing channel is one of the most critical an organization can make, and affects all other forms of the marketing mix. Once a company has committed to a distribution model, it may be hard to change. The choice of channel is based on various factors related to the company’s product and the way it will be used, including size, perishability, and whether or not the product needs to be demonstrated before purchase. Customer desires and preferences also determine the marketing channel. For instance, companies selling rare or high-value products may be able to limit the number of distribution outlets, producers of inexpensive products – like potato chips – will need many points of distribution to make a profit.
Distribution types include:
- Intensive distribution – products are sold at the majority of retail outlets
- Selective distribution – the producer relies on a few intermediaries, such as specialist retailers, to carry their product.
- Exclusive distribution – the producer relies on very few retailers (common with luxury brands)
Marketers need to help their organization choose the most appropriate marketing channel, train and motivate the intermediaries, and monitor the channel’s performance. Over time, they may need to modify some of their channels or choose a new mix. They also need to work to prevent “channel conflict”, which occurs when one intermediary – say, a wholesaler – makes moves that threaten another part of the channel, such as a retailer.
While the Bureau of Labor Statistics does not track data for channel marketing as a specific role, the agency does provide the following employment information about marketing managers:
- 2011 median pay: $55.78 per hour, $116,010 annually
- Education: 84% have a bachelor’s degree,
- Number of Jobs, 2010: 178,000 employees
- Projected job growth rate 2010-20: 10% to 19% (average)