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Marketing is nothing more than the art of being in the right place at the right time. Marketing is the art of being in front of the user at the moment when he is thinking about the product you are buying. So you just need to be present, and present it at the right time. And, what is marketing channel? Let us find out in the article below.
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What is marketing channel?
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The amateur view of marketing is flooding the media space with a bunch of commercials to get as many people as possible to see the message. But not all products are suitable for this kind of marketing because a marketing campaign would be too expensive compared to invested.
First, B2B companies cannot successfully advertise through mass media, and this form of marketing is also not suitable for precise products that exist in a small niche.
Bombardment of advertisements has no effect, because marketing has no effect if you have presented the advertisement to a customer who is not thinking about your product at that point. It is very difficult to persuade the buyer, and we are already talking about a completely different aspect of the sale. We will hold on to the customer who is motivated to buy a particular product, has a problem that the product needs to solve, and it is up to you to be in front of his eyes at that point with an offer that cannot be rejected.
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In fact, it’s very easy to find a marketing channel that will lead you to the ultimate consumer. Think the other way around. Where will your user look for the product? Will they search online? In the store? In the ad? Will he passively wait to see a good commercial on TV?
There are many concrete ways to then achieve this communication with the user, but the principle is always the same – the advertiser should be displayed to the user where he expects to see it. Let’s not forget that the user has a problem that he wants to solve by purchasing a product, in which case your advertised helps him. If you’re just showing it for no reason, then that commercial is a nuisance.
To understand what a marketing channel is, we need to understand other concepts about the channel:
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Channel
You have good products, the price is good, even you have bags of money to promote the product, but you do not have a good channel to bring the product to customers – Channel is a fairly important marketing mix factor. Especially for products in the fast-food industry. Coca Cola, Pepsi, Unilever and P&G are only seen across the surface of their entire operations, i.e. brand and media. Meanwhile, channel governance for these companies is also very elaborate, very efficient and very worth learning.
From a customer perspective, the channel provided is the means through which customers receive and pay for the goods and services they seek. From a supplier’s perspective, the supply channel is the means by which suppliers can provide goods and services to their customers.
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Value chain :
Value chain looks at the marketing channel from a value perspective, it is a series of activities of the components involved in creating value for customers (tangible and invisible value) and re-collecting value for themselves. From a customer perspective, the value chain is where customers receive and pay for the values they seek.
Thus, the presence of marketing channels is clear. It helps to transfer products from manufacturers to consumers. It increases the efficiency of the supply process. The channel offers customers multiple choices in the same product type, or offers bundled products. Channels are formed to balance between those in great demand and those with little need in quantity. Channels are also formed to meet the different needs of different customer groups (different segments). And finally, the channel is formed to meet the very dynamic and increasingly complex needs of the market.
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What are Marketing channels?
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A marketing channel is a collection of individuals and organizations (independent and dependent) involved in creating, stimulating demand and satisfying demand through the provision of products and services.
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The American Marketing Association defines marketing channels as “a structure formed by organizations within the company and agents, distributors, wholesalers, and retailers outside the company through which goods, products, or services are traded.” “Technically, a channel is a group of businesses that exchange ownership of a product or service from the initial owner to the final owner.” In China, some scholars define marketing channels as “the way for products to enter the consumer field from the field of production in the process of transfer of ownership.” “From the above two definitions, it can be found that when people look at marketing channels, they are usually linked to the transfer of ownership of goods, that is, to the flow of goods.”
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Marketing channel
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The nature and importance of marketing channels
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A marketing channel or distribution channel consists of a series of organizations that, with the assistance of those organizations, make a product or service available to consumers or business users.
Manufacturers often leave part of their sales to channel partners because they are more efficient in delivering products in the target market. With their experience, expertise and scale of operations, middlemen can often do things that many manufacturers cannot do on their own.
From an economic system point of view, the role of marketing intermediaries is to convert the product classification developed by the manufacturer into the classification that consumers need. Marketing channel members perform many key functions, and in delivering products and services to consumers, channel members add value by eliminating gaps in time, space, and so on.
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Channel selection guidelines
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Each company has its own requirements in the channel selection policy. Usually, the company controls channel policies according to the following criteria:
– Channel strategic planning process
– Price by channel
– Measuring the effectiveness of the channel
– Policies for non-traditional channels
– Select and acquire distributors
– Managing distributors and measuring distributor’s effectiveness
– Customer shift
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Channel management model
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It is a process consisting of steps to manage distribution channels to create value to meet customer needs, along with meeting the needs of participating components in the channel.
Market diagram
The channel is part of the market, in order to evaluate and choose an optimal channel strategy, the marketer needs to master the market chart that he or she participates in with its scale, value and characteristics of movement.
Purchasing decision-making unit
The purchasing decision-making unit (DMU) of the consumer market (B2C) differs completely from the purchase unit of the organizational market (B2B). Analyzing the components of the buyer is extremely important so that marketing can be impacted by the tools in the marketing mix.
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Value chain
The analysis of the value chain helps us know what values customers are looking for, from which we can plan the appropriate and effective channel strategy.
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Channel design
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Channel design requires analyzing consumer needs, setting channel goals, identifying and evaluating key channel alternatives.
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a: Analyze consumer demand
Marketing channels are part of the customer value delivery system. Each channel member and channel hierarchy adds value to the customer. Therefore, the first step in the design of a marketing channel is to find out what the target customer wants from the channel.
Businesses and their channel members may not have the resources and technology they need to deliver all the ideal services. Enterprises should not only balance the needs of customers with the feasibility and associated costs of providing services, but also balance the needs of customers with their price preferences.
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b: Set channel goals
An enterprise’s channel objectives are often influenced by the nature of the enterprise, products, marketing intermediaries, competitors, and the environment. For example, the size and financial position of a business determines which marketing functions it can perform and which must be handed over to a marketing intermediary.
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c: Identify alternative channel scenarios
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> type of broker
Using multiple types of intermediaries in the same channel has both advantages and disadvantages. For example, companies use resellers and value-added intermediaries as complements their channels so that they can reach many, different types of consumers.
However, the new channels will make management and control more difficult. Direct or indirect channels will compete with each other because of common customers. This can lead to potential conflicts.
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> Channel Conflicts
Businesses can design different forms of distribution channels to make it easier for consumers to access the services of their products. Every level of marketing intermediary that can do something to bring the product and its ownership closer to the consumer represents a channel hierarchy.
Marketing channels are made up of companies that are partners for the common good.
Channel members coordinate their actions with each other to achieve the overall objectives of the channel. However, short-term benefits are often used as a guide for action. There are often disputes over who does what and what rewards they deserve. This difference of opinion about goals, roles, and rewards often leads to channel conflicts.
Horizontal conflicts occur between enterprises at the same channel level. For example, dealers in the same city complain to each other, the other side of the responsibility through low prices or advertising outside the contract distribution area to “grab” their own business.
Vertical conflicts occur within the same channel and between enterprises at different levels, and are more common in reality. For example, manufacturers have authorized large retailers to distribute on top of their original independent distributors, so that the original small independent distributors have to compete directly with the most marketable retailers in the country. Such a channel strategy caused a fierce channel conflict, and ultimately because of vicious competition and some channels must not give up the brand and make enterprises in the revenue of a big discount.
However, some channel conflicts can also produce healthy competition conducive to channel development. Without this healthy competition, channels may lose their activity and innovation. Enterprises should properly manage channel relationships to ensure that they are within their control.
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> Channel members’ responsibilities
Manufacturers and intermediaries need to agree on the terms of the partnership and the responsibilities of each channel member, including price policies, terms of sale, regional privileges, and specific services to be followed by all parties. Manufacturers should provide middlemen with price lists and fair discount policies, and must also delineate the area of operations of each channel member. Pay special attention to this when arranging new dealers.
The clothes and responsibilities of channel members should be carefully defined in writing, especially for franchising and exclusive distribution channels.
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> Evaluation of the main channel program
Companies have identified several viable channel options in the hope of selecting one that best meets their long-term goals. Each programme should then be evaluated in accordance with criteria of economy, controllability and adaptability.
When using economic criteria, companies need to compare possible sales, costs, and profitability across channel scenarios. How much money each channel solution requires and how much it pays off.
Controllability is the use of intermediaries, which usually means ceding control over the marketing of some products to them, and the intermediate chamber of commerce demands more control.
Adaptability criteria are long-term cooperation between channel members, but companies want to be flexible in adapting channel strategies to changes in the environment.
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Popular channel types
– Live channel
– Distribution channel
– Specialized channels
– Electronic channels
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Rate and select a channel
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This step focuses on three main jobs:
– Evaluating channel participants
– Evaluating the effectiveness of the channel
– Select channel
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Based on the above analysis, the marketer designs the most optimal marketing channel for himself, comparing the advantages and defects of existing channels. And this is the basis for choosing a channel model or creating a new channel.
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Marketing channel management
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The management of marketing channels is mainly to solve two problems:
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1. Build the right marketing channels
There are many problems to consider when constructing marketing channels, and enterprises should choose the appropriate marketing channels based on the characteristics of consumers, the nature of products, the state of the enterprise itself and the market environment. For example, whether to use indirect channels or direct channels? What levels of channels do indirect channels use? Is it intensive distribution, selective distribution or exclusive distribution? Which type of retailer should you choose if you want to sell through a retailer?
Channel selection is the core content of marketing channel decision-making. In fact, different marketing channels can be used for the same category of products, such as REVLON and AVON are well-known manufacturers of and sale of cosmetics. Despite their very different marketing channel strategies, they have all been successful. REVLON chooses indirect channels of traditional consumer goods, through more wholesalers and retailers, and advertises its products in large numbers, while AVON has to use its own sales team to promote its products directly to consumers, but the sales performance is also very good, and only choose a relatively less number of advertising methods.
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2. The cooperation of marketing channel members
Channel cooperation is a joint effort by channel members to achieve their own or everyone’s goals. In channel cooperation, the attitude of all parties should be win-win, rather than opposing each other and treating others as obstacles to their own interests. The main forms of channel cooperation are:
(1) Joint promotion, including co-advertising, samples, joint sales visits, or rebates.
(2) Joint inventory management and support.
(3) To provide specialized products. It can enhance channel cohesion and reduce the comparison of prices between consumers when they buy.
(4) Information sharing. Including manufacturers, wholesalers and retailers, channel members to share market research, competitive situation, channel dynamics and other information.
(5) Training. Includes wholesalers and retailers participating in manufacturers’ sales training and product training activities.
(6) Sales area protection. Manufacturers can significantly enhance channel cooperation by identifying exclusive sales areas for wholesalers and retailers.
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Building value solutions for channel participants
We all know that the success of a channel does not depend on only one member, so a successful channel of partners participating in the channel must be coordinated in a split way. It is quite clear that the marketer needs to pay attention to the channel partners (we often call distribution partners). Value solutions help systemize and detail the benefits and values of each partner participating in the channel.
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Price strategy in the channel
This section calculates the price strategy for each channel, the price strategy across different channels.
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Distributor administration
Finally, one step is also extremely important, deciding the success of a channel, which is channel partner administration (distributor). It shares the principles of partner selection to the distributor management strategy and the process of working with distributors to ensure the effectiveness of the marketing channel.
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Development trend of channel organization
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The change of technology and the rapid development of direct and network marketing have a profound impact on the characteristics and design of marketing channels. One of the main trends is “disintermediation”.
Disintermediation means that manufacturing or service enterprises abandon middlemen, face the final consumer directly, or replace traditional channel intermediaries with new channel intermediaries.
Disintermediation is both an opportunity and a challenge for producers and middlemen. Channel innovators who find new ways to add value to their channels can turn their backs on traditional middlemen. Traditional middlemen must continue to innovate to avoid being abandoned.
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In the Internet age, people’s access to information and channels, buying habits have changed, therefore, enterprises need to be based on meeting consumer demand, to provide customers with accurate and convenient goods and services channels, and constantly expand to meet the convenience of consumer demand for new ways. Build a sound service system, from the pre-sale to after-sales, all aspects to provide comprehensive services.
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