Chapter Thirty Three

Market – Channels

What is a sales channel? It’s a route to market for a product or set of products. It can range from your website to a sophisticated sales force. The sale itself must be supported with the right marketing, process, and optimization strategy. Selecting the right channel is critical for any business — and products often fail because the company chose the wrong route to market.
    There are four types of marketing channels. A channel might be a retail store, a web site, a mail order catalog, or direct personal communications by a letter, email or text message. LL Bean is an example of a company that sells through many channels. They sell via a Website, Mail Order Catalog, Retail stores and Outlet stores.
    Selling from a bus
    Selling from a bus
  • Direct selling; the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.
  • Selling through intermediaries via a third party that offers intermediation services between two trading parties. Where intermediaries such as wholesalers and retailers are utilized to make a product available to the customer is called an indirect channel.
  • Under Armour Retail Store - Chicago
  • Dual distribution; marketing arrangements by which the manufacturer or wholesalers use more than one channel simultaneously to reach the end user. They may sell directly to the end users as well as sell to other companies for resale. Under Amour sells through their own retail store and through other retailers.
  • Reverse channels; This one goes in the reverse direction and may go — from consumer to intermediary to the beneficiary. Think of making money from the resale of a product or recycling. An example is One Kings Lane.Reference source: Boundless .

 

“Marketing channels, such as distributors, wholesalers, and retailers, provide your business with three kinds of functions: buying products for resale to customers, distributing products to customers and supporting sales to customers through financing and other services. The channel functions supplement your own direct sales operations and extend your market coverage to a wider group of customers.” Reference – Chron
Transactional Functions
Your channel partners offer you essential transactional functions. They buy products from you and sell them to their own customers, increasing the total revenue from your product range. At the same time, they minimize your transaction costs. You only deal with a channel partner; they deal with a large number of customers. They also take the risk of holding inventory on your behalf, reducing your stockholding costs and your risk of holding unwanted inventory.
Added Value
In specific markets, channel partners add value to a transaction. They may increase the value of a product, for example, by customizing it for customers in specific industries -- a process that could prove expensive for your business. Channel partners can also add value by grouping related products and services into packaged solutions that enable customers to obtain all their needs from a single source. Distributors that add value enhance your reputation by meeting customers’ needs effectively.
Logistical Functions
Distributors and wholesalers provide an important logistical function in your channel to market. Some channel partners take responsibility for the physical distribution of products to your customers. They store the products and provide transport to fulfill customers’ orders. Other partners may take bulk deliveries from your company and split them into the smaller quantities that customers order. By taking on this function, they reduce the burden on your logistics operations.
Facilitating Functions
Channel partners provide a range of services that enable and support sales of your products. They use their sales force to deal with customers, negotiate sales and provide customer service. The sales force also gathers market intelligence, which can help you to market products more effectively. In some cases, channel partners may provide credit and other forms of financing to make it easier for customers to buy.
Support
If your products are complex and require support, you can allocate responsibility to your channel partners. They can set up service operations that can install, maintain, service and repair your products in their territories. This support reduces the workload for your service teams and ensures that customers can obtain prompt, local support when they need it.
You sell it, they ship it. Amazon has created one of the most advanced fulfillment networks in the world, and your business can benefit from their expertise. Offering by Amazon to manage your delivery With this offer 3rd-party retailers pay Amazon to store their products in Amazon's warehouses, and pay Amazon a commission on sales; Amazon takes care of the delivery (which means they are included in Prime). This is a great deal for all involved: the merchants get access to Amazon's massive and growing customer base, while Amazon gets to dramatically expand its selection without bearing any additional inventory costs. The problem for the retailer will be to have their product noticed.
When designing a distribution strategy, one should never begin with the sales channel itself. A properly designed sales channel is a function of the product that you have built and the target — i.e., customers or market — that you wish to pursue. Ben Horowitz, a partner at Andreessen Horowitz, provides advice on how to select the right sales channel for your product. Ben Horowitz - Distribution

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