Most manufacturers of products use marketing intermediaries to sell their products to the consumers. The marketing intermediaries make up a marketing channel (distribution channel or a trade channel). The marketing channel overcomes the time, place, and possession gaps that separate gods and services from those who need or want them. A normal way of functioning for a company is to procure raw materials, use its expertise in creating the product and then distribute to the customer. Companies have to convert this supply chain into a value network as to develop and maintain partnership with different stakeholders.
Core competency for a company lies in developing a product which satisfies a particular need of the market. A company if it decides to sell a product on its own than it is diverting from main line business resulting in operational difficulties. Marketing channel is ears and eyes of companies in the market. They provide companies with valuable information of customers, competitors and other players in the market. Dell’s computer exclusively uses direct marketing (the Internet and express mail service) in reaching customers are different of marketing channel depending upon the number intermediaries like retailer, wholesaler and distributor. Channels are also used by companies providing services; for example, hospital and fire station have to strategically locate for people to reach without considerable efforts.
In designing marketing channel companies analyze customer needs and preference for a given product. Further marketing channel should fall in line with overall objectives of the company in cost and desired output level. Companies then need to explore various marketing channels like direct marketing, tele-marketing, direct mail, etc. to find the right fit to reach the customer. Each channel short listed has to be evaluated on operational, cost effective and flexibility criteria. Once the channel is designed, companies look forward to selecting partners with characteristics, which have a positive impact for the product. Channel members need to get the right amount of training as to full understand their role with respect to customer and product. Companies need to develop a mechanism as to monitor functioning of marketing channels on criteria based on total customer satisfaction. After reviewing marketing channel companies should modify them to improve functioning and productivity.
Companies are looking forward to innovating business functioning as to stand up to the competition and changing market scenario. This has seen rise different types of marketing channel. In a vertical marketing channel, the traditional producer-wholesaler-retailer becomes one functional unit. This can be achieved through franchise or single ownership. In horizontal marketing channel two or more un-related agencies combine to exploit the market opportunities, for example, banks in super markets. In multi-channel marketing systems, companies use different marketing channels to reach different customer base or segment.
In vertical channel conflicts are between members of same channel. In horizontal channel conflicts are between similar service providers in a different channel. In multi-channel conflict arise when a different channel serves the same market. The first step in conflict resolution is to identify the cause for the conflict. Next step is to manage the conflict. This can be done by setting up clear mandate for each member and their role in the overall objective of the company. Further, joint membership, diplomacy and exchange of team members are other ways in resolving conflicts.
Companies need to design and manage marketing channels in such a way that they are always able to deliver value to customer.