What is Channel Management?

Channel management is the process of developing and executing marketing plans and sales strategies to grow your business through third-party channels. This involves working with intermediaries such as distributors, resellers, retailers, and other partners to help you reach new markets and drive sales. It also entails managing these relationships to ensure that everyone works together efficiently and effectively to meet your business goals. If executed well, channel management can be a key driver of your company's growth. It can help you reach new markets, tap into new customer segments, and boost sales.

Significance of Channel Management in an Organization

1. Communicating successfully with customers

Specific channels established or hired by companies during the channel management process help them communicate effectively with their target customers. This way they can determine customer needs and demand for specific products by customers. They can also gather customer feedback more easily.

2. Information Sharing

The different channels of distribution assist a company in providing information about its products and services to the customers. Information plays a crucial role for customers in making every purchase decision. Channels such as online retail stores provide detailed information about products such as product features, return policy, and customer reviews that customers can use to make an informed decision. Therefore, it is significant for companies to build or connect with channels that perform this function.

3. Gathering Information

Companies can also gather beneficial information about their launched products and services through marketing channels such as wholesalers, retailers, agents, and their own distribution centers. The information regarding the market demand for the products guides a company in planning its production activities. Retailers nowadays communicate about the demand for a manufacturer's products on a real-time basis so that the manufacturer can keep those products ready for dispatch that are most demanded.

4. Promoting the Products and Services

Channel management helps a company in building awareness about its products among the target customers. The channels employed by the company act as its sales pioneers who continuously promote its products among customers and increase the chances of purchase actions. The company can manage its promotions by training channel members and sharing information about the promotional deals that can be provided to the customers.

Types of Channel Management Strategies

There are four common types of channel management strategies:

1. Direct Marketing

In direct marketing, the company offers its products or services directly to the target audience through means such as physical stores, door-to-door sales, catalogs, or television commercials. Under this technique, product information and sales pitches are delivered to customers through direct communication channels.

2. Indirect Marketing

In indirect marketing, the company uses intermediaries to sell its products or services to consumers. These intermediaries involve retailers, wholesalers, or distributors. This strategy adds cost to the consumers and leads to delays in delivery. This strategy reduced the startup cost to the manufacturer needed to operate a business.

3. Selective Marketing

In selective marketing, the company carefully chooses the channels through which it will market its products or services. In this strategy, companies select the most appropriate channel to deliver their products. Companies also select a geographical area where they want to provide their products and services.

4. Intensive Marketing

In intensive marketing, the company uses a large number and variety of channels to reach as many consumers as possible. Such a distribution channel is used when a company wants to provide its products to different geographical locations.

Limitations or Challenges in Channel Management

1. Increment in Sales Cost

Here, if a company deals in one channel of distribution, e.g., wholesaler, then the company’s cost is to give service to that one wholesaler. If a company provides online sales, then it needs to purchase software to promote the brand and hire a suitable salesperson to take care of all concerning orders.

2. Lack of Control

There is a lack of control if a greater number of people promote a company’s brand for sales. For example, retailers and wholesalers are much more concerned about the incentives or remuneration benefits rather than selling goods effectively to customers.

3. Involvement of the Third Party

Sometimes, the involvement of a third party also harms the workforce in channel management as word-of-mouth issues may arise.

Common Mistakes

It is important to be strategic when choosing which channels to apply. Students generally get confused between channel management and logistics management and mistakenly perceive them as similar concepts. Channel management is more focused on developing strategies related to business growth through third-party channels. On the other hand, logistics management deals with a product's supply chain from its production to delivery. It is important for them to have a clear understanding of both concepts.

Context and Applications

Channel management is a fundamental topic in marketing and is important for the following courses of study:

• Bachelor of Business Administration (General)
• Master of Business Administration (Marketing)
• Diploma in Sales & Marketing

Related Concepts

While studying channel management, it is important to read the following topics to understand the concept better:

• Effective ways to manage distribution channels
• Managing channel conflicts
• Channel levels

Practice Problems

1. Which channel management strategy involves mediators to sell products or services?

1. Direct marketing
2. Selective marketing
3. Indirect marketing
4. Intensive marketing

Answer: c

Explanation: Indirect marketing is a type of channel management strategy that focuses on selling products or services with the help of a mediator instead of direct selling.

2. Before the distribution of products, companies should consider researching _______.

1. Advertisement
2. Customer feedback
3. Product deficiencies
4. Effective channels

Answer: d

Explanation: To effectively provide products to customers, companies need to research effective channels to distribute products easily and quickly.

3. Channel of management is widely used in which of the following?

1. Promotion
2. Sales and marketing
3. Product
4. Plan

Answer: b

Explanation: In sales and marketing, channel management plays a very important role as information on products and services are delivered from various sources to promote them effectively to customers.

4. Channel management develops marketing strategies.

1. False
2. True

Answer: b

Explanation: Yes, channel management develops marketing strategies. This is because, without strategies, the distribution of products and services is not possible.

5. In channel management, media plays an effective role to convey messages to ________.

1. Target customers
2. Loyal customers
3. Potential customers
4. Local customers

Answer: b

Explanation: Print media is an important source for spreading information to the general people. In print media, information is delivered to the audience (target customers) through magazines, newspapers, or posters.