What is Channel Marketing?
Channel marketing involves the specific route by which products get from the manufacturer to the end user. This could involve a distributor, wholesaler, or retailer, but not usually direct sales. In the context of channel marketing, the term marketing refers as much to the logistics bringing the product or service to the market — that is, the customer — as it does to promotion and advertising in the more traditional sense.
A marketing channel is any setup by which there is an intermediary between the manufacturer and the customer. This thus sets up a chain that can be as simple as manufacturer > retailer > customer, or it can be more complicated. The concept of channel marketing covers all the decisions and options that are made in setting up such a chain.
There are multiple reasons a manufacturer would want to use channel marketing. Some are purely logistical: The demand for a product may be so high that a manufacturer cannot produce enough units to meet the demand without running into logistical problems such as storage before distribution. Selling to wholesalers can allow the company to get the products out of its factories quickly after production.
In some cases an intermediary such as a distributor can offer marketing advantages that aren't available to the manufacturer. Sometimes this can be economies of scale, such as a magazine distributor that can act more efficiently in pitching multiple titles to newsstand owners than a single publisher could manage. In other cases it can involve expert knowledge of a particular audience. This can be on a large scale, such as a specialist distributor marketing a product overseas. It can also be on a tiny scale, such as an agent for a cosmetics company selling products to friends, family, and coworkers, thus benefiting from an existing relationship.
There are also financial consequences to channel marketing. Each link in the chain will want to take a proportion of the end sale price. A manufacturer needs to consider two factors in negotiating this proportion. The first is what cost savings it gains by using an intermediary. The second is how much overall sales revenue will rise as a result of the intermediary.
Another potential issue is conflict between different channels, or different parts of a channel. One example would be a manufacturer that used a distributor but also sold direct to some clients. The manufacturer would usually be able to offer a lower price because it doesn't have to share the proceeds. This could cause problems if the distributor feels it is being undercut.
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