A sales channel is about where you’re going to sell and how you’re going to sell. In fact, it is about where you’re consumer is willing to purchase your product, where the consumer expects the product to be available, what is the consumer decision making process regarding your category and product, and what is your positioning in the market. All the channel decisions should go hand in hand with Segmentation, Positioning, Pricing and other elements of the Mix.
For example, let us consider the purchase process of Toothbrush. Most consumers even today don’t know exactly which variant of the toothbrush they use, and many of them don’t really bother about the product much. The consumer may know that he uses an Oral-B (mother brand), but may not recollect the brand of the toothbrush. A consumer generally doesn’t remember a brand and ask for that particular brand at the retail store. Mostly the retailer displays or the consumer browses through the toothbrushes available and the consumer may recollect the brand, or the advertisement, or like the in-store promotions and product design for those toothbrushes and one of these elements of advertisement recall, product design, etc. may make the consumer consider and choose a particular toothbrush. So, in such categories, there is a lot of dependence on you’re presence in the store as the consumer remembers you only when you’re present in the store. There are lot of categories ranging from deodorants and refrigerators to laptops and anti-viruses. It depends a lot on your availability in the stores and consumers choose among what is available. So, channel becomes a crucial part of marketing strategy which is where to sell and how to sell. The channel and distribution management comprise the Place element in the Marketing Mix.
Under channel management, the company deals with external organizations(channel members or partners) to achieve its desired marketing goals and profitability. There are different types of channel partners like C&F Agents, Distributors, Retailers, OEMs, Value-Added Re-sellers (VARs), Brokers, etc. Each of the channel members business goals will differ in their expectations of profitability, sales, ROI, long-term prospects,etc. The right channel strategy will help bring coherence and build value to the customer, channel members and the company. So, a strong channel network has become a key component in corporate strategy.
As discussed, there are many factors that influence channel management, but following are the broad factors that influence a channel design or strategy:
1. Understanding of the Target Group, Target Segments, the consumer needs and the consumer behaviour
2. Understanding of the Marketing Mix and the product features, brand persona, positioning, pricing, etc.
3. Understanding of the retailers needs and behaviour
4. Channel goals and the functions to be performed by the channel
5. Legal Issues
6. Reach required
Refer IBM Route to Market Strategy for an understanding of how effective channel management helped IBM.