What are marketing channels? A marketing channel actually consists of the individuals, organizations, and events needed to move the ownership of products from the initial point of manufacturing to the final point of retail sale. Essentially, it is the pathway by which goods get from their initial production facilities to the consumer, the user; and is often referred to as a distribution channel. Marketing channels play a crucial role in marketing strategy because they connect buyers to sellers. Also, in some cases, marketing channels become a channel through which goods can cross borders and sell to other countries.
In today's world, there are numerous marketing channels available. However, there are only a limited number of products that are suitable for cross-border selling. Additionally, when a product is put out for sale across international borders, it usually requires extensive research and marketing to make it feasible. For example, it would be unwise to sell lipstick made in the U.S.A. to consumers in Japan.
Therefore, two types of distribution or marketing channels dominate the scene – direct selling and indirect selling. Direct selling encompasses organizations or individuals who set up shops and engage customers to sell goods directly to them. Examples of direct selling companies are Home Depot, Sears, and Walmart. On the other hand, indirect selling occurs when products are sold through middlemen such as banks, wholesalers, and retailers. Examples of indirect selling companies are franchisors, manufacturers, and consultants.
Direct marketing channels generally involve sales and the giving of information and education about products and services. They provide information and education to potential customers. Consumers interact with sales agents or brokers directly and evaluate and buy goods or services. There are advantages and disadvantages to both direct and indirect marketing channels. The main advantage of direct marketing is that it provides immediate actionable information.
However, the disadvantages of marketing channels include loss of control and vulnerability to third parties. The most vulnerable channel is the retailer. Retailers must be careful when choosing marketing channels because they have to be closely aligned with the brand name of the producer. In addition, consumers are more likely to reject a product if it does not fit well with the image promoted by the manufacturer.
The second category of marketing channels is intermediary distribution. Intermediary distribution involves the sale of a product between the manufacturer and the retailer at a price higher than what the manufacturer would charge for the same product. Some examples of intermediary distribution include wholesaling and retailing.
Reverse channels refer to sellers that take possession of goods but do not store, process, and distribute them. They function like the distribution intermediaries. Common examples of reverse marketing channels are shops, supermarkets, bookstores, and other retail outlets. Usually, these goods are sold in bulk or packaged with similar goods in order to make a bigger profit. A popular example is tourism, where goods such as hotel rooms, bed and breakfast accommodation, and cruise tickets are distributed through agents instead of being stored in warehouses or sold directly by wholesalers.
Marketing channels have to follow the rules of the market. Marketing channels provide opportunities for manufacturers to improve market share and drive growth in value of their brands. Other factors include consumers, who have an effect on the market share and profitability of a brand. As a manufacturer, you have to think about both the manufacturer and consumers when it comes to your business. You can use marketing intermediaries and third party distribution channels to make your products available to consumers at the right price.
When it comes to retailers, there are four key takeaways that help them determine which marketing channels to adopt. One is brand positioning. The other three include pricing, selling techniques and quality. Retailers can improve their selling techniques by improving their inventory management and lowering their product prices.
The fourth key takeaway for retailers is pricing. In today's economy, it is important for manufacturers to cut costs and stay competitive. By using direct selling and distribution channels, they can reduce their fixed costs and improve their profitability. On the other hand, direct selling intermediaries and third party distribution channels can help them lower prices.
Retailers also need to understand and assess the benefits and drawbacks of short term marketing channels. One of the common mistakes that manufacturers make is focusing on short-term sales to increase their sales. On the contrary, short term channels can help a manufacturer by saving costs. There are many factors that contribute to each company's decision, but these four primary factors are essential in every business strategy.