A channel marketing is any player or combination of players who work together in order to easily and speedily bring any good or service to end consumers.
Some of the main reasons why manufacturers and marketing firms use intermediaries are:
- Lesser transactions. Inventory management and control, especially in case of perishable items. Diversified risk. Easier transportation. Central warehousing.
Another very important function performed by such channels is information gathering, analysis and sharing. Since the use of marketing channels increases the number of players working for the same company, all of them can use their position in the market to father market intelligence.
Some functions performed by various marketing intermediaries are:
1. Transactional: Functions which include buying, selling and risk taking. The risk arises from stock which may perish, may not be sold due to preferences or may become obsolete.
2. Logistics: Beyond transportation, logistical functions also include assorting based on requests, storing and sorting into product types or lot sizes as required.
3. Facilitating: Some of the most important functions as they focus on quality control. These include financing, grading after inspection and testing and market research. The grading function requires assigning quality grades to products and the research function is necessary to provide al; pertinent information to various stakeholders. Types
There are a number of types of marketing channels which producers can use. The distinction arises from function which an intermediary is required to perform, which may range from legal to logistic in nature.
Some types of intermediaries being used these days are as follow;
1. Wholesalers: Wholesalers are usually big firms with cohesive networks of logistics, warehouses and ties to retailers. They trade in bulk and have the added responsibility of providing stock to small firms as per need. Their warehousing and transportation facilities can be used by manufacturers to increase both space and time utility for consumers.
2. Independent Intermediaries: These do business with many different manufacturers but are not owned.
The two types are:
- Merchant Wholesalers: Merchant wholesalers sell to both retailers and Business to Business (B2B) customers. The biggest distinction of these intermediaries is the fact that they take both ownership and title of goods, thereby assuming more risk. They may also perform marketing activities on their own.
- Merchandise Agents/Brokers: They perform their services in exchange for commission and may be retained for long term or on a case to case basis. They take owner ship but not the legal title of the goods.
3. Manufacturer Owned Intermediaries: as the name shows, this is an arrangement where channels are owned by the manufactures, including logistics, sale outlets and warehouses, along with channel marketing activities. This is done in order to maintain complete control over the goods, although it requires a larger network and more investment.
The two broad strategies which may be used when using channel marketing are as follow:
1. Broadcast: This strategy involves the use of all channels at once. It would mean that a manufacturer is pushing out his goods through the use of wholesalers, independents intermediaries etc simultaneously. While this is effective in ensuring market reach and customer satisfaction, it requires a vaster logistics network and more marketing.
2. Focused distribution: This method is driven by consumer needs and focuses on delivering goods where and when consumers want them.
Some choices which might be used by manufacturers are;
- Direct: In direct distribution, manufacturers are responsible for getting the products to consumers, taking care of logistics and on time delivery. This is happening in the case of manufacturer owned intermediaries such as Mary Kay Cosmetics, although such manufacturers are still in the minority.
- Mixed: This happens when at least two channels are being used. The multiple channels not only ensure customer satisfaction as regards getting the product on time but also enable the manufacturer to reach a larger geographical area.