In this social media and eCommerce age, attracting attention to your online business is easier than ever. By optimizing content marketing to improve brand awareness, you can get it recognized by your target audience on a variety of different platforms.
However, business owners also need to make sure that their products reach the consumers. That’s why a thoroughly planned channel strategy is vital for steady business growth, and you might need an e-commerce development service once you have reached your target growth.
This article will share everything you need to know about channel strategy, including its definition and essential elements for building one. Let’s get started.
What Is a Marketing Channel Strategy?
A channel strategy refers to a product or service journey through a chain of intermediaries, starting from the moment the product or service is created to the point it reaches the customer.
One company’s channel strategy will differ from the other, depending on the business size, target market, and product variation.
For example, an eCommerce website and inbound marketing strategy can support local brands and small businesses’ growth. On the contrary, larger companies will require more varied channel partners, including wholesale distributors and retailers.
In addition, optimizing the marketing mix is also a good idea to support a business’ channel strategy. The framework covers the four p’s of marketing – price, product, promotion, and place. As it covers the influence of the target market’s purchasing decisions, formulating the marketing mix strategically is a necessary step.
Why Is a Channel Strategy Important?
Apart from managing the placement of the products and services, an excellent channel strategy also brings numerous other benefits. Here are the five reasons why building an effective channel strategy is vital for your business growth:
- Manages the overall supply chain. This process includes taking care of raw materials, producing the goods, and managing the flow from the manufacturer to the end-user. By planning the supply chain management thoroughly, a company can reduce inventory costs and improve product availability.
- Organizes product distribution. When talking about the distribution flow, you’re looking at a business chain, which may start from the supplier to distributor, then to manufacturer, to retailer, and finally, the end customer. Thus, channel management helps determine the channel type and distribution flow to ensure a smooth process between the channel members.
- Ensures punctual product delivery. An effective distribution channel strategy removes the distance barriers between companies and customers. In the case of retail marketing, goods are distributed across the nation. As a result, channel distribution helps businesses to reach far and wide while maintaining timely operations.
- Provides market information. The long list of channel partners becomes a medium for acquiring market-related knowledge, including product demands, price expectations, and competition. This enables marketers to make more informed decisions for future strategies.
- Allows financial assistance. In common practice, middlemen buy in bulk from producers in quantities that align with the market demand. While the producers get timely payment, intermediaries get sales assurance. In other words, a distribution network manages the fund’s movement for the organizations involved.
Keep in mind that a business doesn’t just revolve around generating sales and building revenue. Sometimes, it also involves dozens of distributors to ensure a company’s products reach its customers.
That said, don’t forget to include intensive research of the distribution approach when building a channel strategy.
6 Types of Distribution Channels
Now that you’ve learned the channel strategy’s basic concept, let’s see the six most popular marketing channels.
A direct distribution channel lets customers buy directly from the product manufacturers. Thus, if you want to cut the middleman costs, conducting a direct marketing campaign can be the perfect solution.
One of the best perks of this distribution channel strategy is that manufacturers can build closer relationships with their customer base. In addition, it also helps generate more profit.
However, a direct channel strategy can be a little challenging to conduct on a large scale. This is because manufacturers need to take care not only of the production process but also the marketing plan, product delivery, and return and refund policy.
Retail sales refer to businesses that sell products and services directly to consumers for their own use. Meaning, the end-users of the sold goods and services are the buyers themselves.
Retailers get their goods from distributors, vendors, or wholesalers. Typically, a retail store only handles items in small quantities. The three major product categories of this channel strategy include food, hardlines, and soft goods.
In terms of transactions, retailers can take advantage of different sales channels, including social media marketing, eCommerce websites, brick-and-mortar stores, and direct sales.
Wholesalers are the business intermediaries or the middlemen between manufacturers and retailers. They are firms and companies that buy products in bulk from manufacturers, vendors, or farmers and resell them to the following channel link, including retail establishments.
The three types of wholesalers are merchants, brokers, and sales forces.
- Merchant wholesalers. These are the traditional wholesalers. They’re the ones who engage with manufacturers to buy items in bulk and distribute them in smaller quantities to retailers.
- Brokers. Also called agents, these are the people who arrange the product purchase between a merchant wholesaler and a retailer. That said, brokers don’t take ownership of the product they’re marketing. By setting up and generating sales for the wholesaler, an agent will earn a handsome fee.
- The manufacturer’s sales force. Wholesalers can also come from the manufacturer’s marketing team and sales support. The separate sales force is responsible for distributing goods at the wholesale level. Thus, they’re often referred to as the manufacturer’s representatives.
With the advancement of the internet, every business owner can promote their products and services online. By building an eCommerce website, one has a higher chance to stand out from the competition.
Essentially, a website store is a series of internet pages that serve as a virtual brick-and-mortar shop. Some of its characteristics include the Cart icon, call-to-actions, product categories, product pages, and checkout pages.
Whether you’re starting a new company or have been running one for a while, building a website store can be an excellent way to boost your business’ growth. On top of that, manufacturers can also take advantage of this channel strategy to use direct marketing.
Apart from improving a business’s online presence, it can also open up new revenue streams. For that, marketers can conduct digital marketing, including social media and content marketing campaigns.
An online marketplace, like Amazon and Etsy, is a great channel to find a manufacturer or a wholesaler and sell the products under your shop’s name. Or, if you’re the manufacturer yourself, you can also take advantage of this type of channel to market your goods to your potential customers.
A marketplace is already a well-established place to sell your goods. Amazon, for example, has over 200 million unique visitors each month. That said, you won’t have to worry about building a solid customer base or maintaining an excellent customer experience. The marketplace has pretty much done the job for you.
One of the challenges of selling at online marketplaces is that you’re looking at lower profit margins. This is because you’re competing with hundreds of other businesses that sell the same or similar items as yours. Thus, you have to choose between acquiring more consumers and higher profit margins.
Value-added resellers (VAR) are individuals or companies that acquire their goods from other businesses and customize them to offer more competitive advantages.
VAR can be easily found in the IT industry, especially with software vendors. Typically, the resellers will offer related services with the tools their customers purchase. Some of the services include installation, troubleshooting, and consultation.
In some cases, VARs are also seen as sales partners. By promoting a manufacturer’s product and helping consumers understand the product better, value-added resellers help the vendors find the product’s pros and cons for further improvement.
5 Key Elements for an Effective Channel Strategy
Throughout the previous segment, you’ve discovered the six types of channels. With the many options available, you won’t have to worry about finding a channel strategy that can cater to your business needs, no matter how big it is.
In this section, I’ll share five easy steps to building an effective channel distribution strategy.
1. Identify the Appropriate Channel for Your Business
To have a strong channel strategy, think about the best way your products and services can get to your customers.
Suppose you want to sell directly to the end consumers. In that case, you need to create a customer persona. Include the target audience’s age, gender, occupation, income, interests, and pain points to determine the most effective direct marketing strategy. This is to help you ensure an excellent shopping experience.
On the other hand, if you need wholesalers and retailers in order to build your brand, you need to plan and structure the distribution network. Only then will you be ready for the next step.
2. Find the Reliable Sales Channel Partners
Based on your business’s required distribution channels, determine the right vendor and distributor to suit your sales strategy. For that, research your selected partner’s profile before making an agreement.
Here’s a list of a few crucial factors to consider:
- Reputable experience. Check the company reviews, rankings, and financial history to see if it’s reliable. Additionally, explore the company website to gain more information about the business, making sure it’s legit.
- Excellent customer satisfaction. This key indicator affects your sales in the long term. If your consumers aren’t happy with their purchase, you’ll suffer from a high churn rate. Meanwhile, generating new leads is much more difficult than retaining existing customers. Therefore, choose your partners wisely to keep your business healthy.
- Strong sales force. When comparing one channel to another, don’t forget to analyze their marketing expertise level. This is to help you decide if training is needed. If you don’t have the resources to hold proper training, go with a distributor that already has a sophisticated sales strategy.
- Continuous improvement. As channel strategies let marketers obtain market information easily, commitment to consistently deliver the highest product or service quality should be prioritized.
3. Optimize the Channel Strategies
Once you’ve decided on your channel partners, it’s time to discuss the consumer sales strategy.
When it comes to multi-channel marketing, communication is critical. Thus, it’s vital to build an excellent relationship at each level of your channels. Identify the key pain points and the possible solutions to determine the best strategy for your campaign.
Additionally, you can also discuss the marketing collateral you need to reach your target audiences and grow your sales. Some of the best tools are blog posts, case studies, and social media content.
4. Develop Success Indicators
Keeping track of how your sales perform in each channel link allows you to communicate with your underperforming partners and improve their performance.
This is where your company’s key performance indicators (KPIs) come into play. The term covers all measurable values that demonstrate a marketing campaign’s effectiveness.
Here are some of the KPIs to measure when using channel strategies:
- Order lead time. Streamline your product movement so that you get a clear insight into how effective the delivery process is. Apart from that, it also helps you minimize incomplete deliveries and maintain an excellent consumer shopping experience.
- Perfect order rate. This KPI is measured by multiplying the percentage of orders delivered on time, completed orders, damage-free orders, and accurate documentation orders by 100%.
- Lost sales. This indicator looks at the number of customers who decided to turn away from your service. If your lost sales record is high, evaluate your marketing mix to keep your business afloat.
5. Evaluate and Adapt
Since collaborating with channel intermediaries can be tricky, continually evaluate your process and plan ahead for further improvement.
Besides analyzing your marketing performance channels based on your success indicators, consumer satisfaction surveys can complement your data. Therefore, you can make more informed decisions for the betterment of your marketing campaign strategy.
In essence, channel strategy takes care of your product delivery. That’s why businesses of any size need to plan their distribution flow thoroughly to ensure their goods and services get to their target market efficiently.
Throughout this article, you’ve learned the six types of channels and how to build an effective strategy. If you still have something in mind, don’t hesitate to leave a comment. Good luck with your new business!