Manufacturers can market their products by using three primary channel strategies: direct, distribution and retail. Those channel strategies can be used as the sole method of controlling the flow of products into consumers' hands, or they can be used together. Care should be taken to avoid channel conflict if the strategies are used in combination with each other.
Manufacturers that choose a direct channel strategy are selling their products themselves, without the use of a partner or "middleman." Business-to-business deals are often handled in a direct manner. For example, a name-brand computer manufacturer might sell a large order of personal computers (PCs) directly to a major corporation because the size of the order is so significant.
A distribution strategy is most efficient for many companies because it allows them to focus on their core competencies of making the product while not having to be concerned with getting it into individual customers' hands. In the previous example, the computer maker could partner with a value-added reseller (VAR), which would take delivery of the order from the PC maker and then install the machines. The advantage is that the manufacturer makes the sale but does not have to handle customer service issues or implementation. The middleman or VAR must be compensated for its work, however, which cuts into the manufacturer's profits. Manufacturers therefore must determine the cost benefits of distribution versus direct channel strategies.
Choosing to sell products in the retail market is a type of distribution strategy. For example, a paper supplier might sell goods directly to an office superstore for resale to the end customer. The superstore is distributing the product for the manufacturer to an end customer. In this instance, the paper supplier would not sell directly to the end customers. Retail channel strategies typically are characterized by storefronts, either physical buildings or online.
Some businesses choose to sell through a hybrid model, combining channel strategies. For example, some software companies will sell products directly to end users, and they also will sell through information technology consultants. In such cases, leads and territories must be closely monitored to avoid overlapping of sales prospects.
Typically, the way companies define their channel strategies helps develop their marketing plans. Whether a firm chooses to sell products via a direct, distribution or retail model will affect its choice of marketing strategies. For example, a guerrilla marketing strategy typically works well for an agile company that has a retail strategy looking to make a big splash with a small budget. Such campaigns typically put the company's brand "in the face of" the targeted consumer. A company selling through distribution, however, might choose a marketing strategy that employs "spiffs," which are bonuses awarded to a partner after a sale.