What Is Channel Management?
Definition and 10 Strategies
Channel management strategies are
often a good way for businesses to reach their customers, increase their sales
and reduce the cost of marketing and distributing their products and services.
Successful channel management allows companies to attract more customers,
optimize their return on investment and form profitable relationships with
partners. Learning about channel management can help you choose the right
strategies for your business.
In this article, we define channel
management, explain its importance and cover the 10 different channel
management strategies that you can use in your business.
What is channel management?
Channel management refers to the
different methods of communication businesses use to promote and distribute
their products and services to the public market. In advertising, businesses
use channel management to publicize marketing campaigns through mediums like TV
commercials, social and digital media advertisements, radio programs and print
media, such as newspapers and magazines. These platforms make up the channels
that companies use to communicate their products to their target market.
In addition to channel management
for marketing, companies use channel management for product distribution.
Product distribution refers to the processes by which a business delivers its
products and services to its customers. In terms of channel management,
organizations establish partnerships with third-party companies like agents,
vendors, manufacturers, wholesalers and retailers, which make products
available for public purchase. The channel management needs of a company depend
on its size and structure. A business that sells products directly to its
customers may not have any channels to manage, but a business with extensive
marketing needs and distribution chains may have many.
Why is channel management important?
Channel management is important for
connecting with customers, supporting third-party partners and managing
vendors. Good channel management involves careful planning that helps you track
how your channels contribute to your business goals. When companies manage
their channels effectively, they ensure they deliver the products customers
want, when they're most in demand, while optimizing their profits and
developing positive relationships with their partners. Although channel
management requires extensive planning and can become more complicated for
businesses that work with many channels, it's an essential part of improving
your business strategies and reaching your target markets.
10 common channel management
strategies
There are many types of channel
management that each focus on a different area of channel development and
maintenance. Here are some common channel management strategies:
1. Channel architecture development
Channel architecture is the
framework for your channels. It comprises the channel structure your business
uses to transfer your products from the producer to your customers. For
example, your channel architecture may begin with the manufacturer, who delivers
the product to a wholesaler, who sells products to retailers, who then provide
the product to customers.
A channel architecture can also be
as simple as a direct business-to-customer structure. For companies that
manufacture or produce their own products and services and don't require the
services of a third-party partner, a simple channel architecture may be
effective. The channel architecture of a business ultimately depends on its
size and needs.
2. Channel strategy
Channel strategy is your action plan
for implementing channels. It includes your plans for sales and distribution
along with your plans to expand your market. For example, you can have a
channel strategy that details the steps you plan to take to improve your
digital marketing outreach. Another example might be developing a strategy to
include a partnership program that increases value for your resellers.
3. Sales management
Sales management is your plan to
manage your sales and partners. For example, sales management can include planning
incentives to encourage customer engagement and promote sales. It can also
include performance management, which means analyzing how well the outputs of a
process meet your intended goals. For example, if your goal is to increase
online sales by 25% by the end of the quarter, performance management is the
strategy you use to track your progress toward that goal. Monitoring your
performance can help you adjust your strategy as needed to improve your
progress toward achieving your objectives.
4. Channel conflict
Channel conflict occurs when
competition arises between two of your affiliates in a way that is
counterproductive or unfair. For example, if your e-commerce site undercuts the
profits of a physical retailer that sells your products, the retailer may
identify a conflict in your channel management structure. This conflict can
harm your reputation and relationships with partners, so it's important to use
careful planning to manage your channels and prevent conflict.
If a conflict occurs, reassess your
channel architecture and strategy to determine the cause of the conflict and
adjust your strategy. You may need to negotiate with your partners to develop a
plan that better meets the best interests of all stakeholders.
5. Relationship management
Relationship management refers to
your plan to establish, develop and maintain relationships with third-party
partners over time. Managing relationships with vendors, agents, retailers,
wholesalers and manufacturers takes careful planning. For each partner,
businesses establish a relationship that mutually benefits the parties
involved. To maintain positive working relationships, organizations need to
understand the goals of their partners, their own business goals and how to
develop a system that promotes progress for all parties toward their
objectives. They also need to devise plans that have the flexibility to
accommodate changes in business objectives.
6. Brand experience
Businesses need a strong brand
experience plan to produce a consistent brand voice across diverse channels. A
company's brand is essential to its identity and how the public perceives them.
Consistent branding communicates the company's values to its target customers,
and when customer values align with those promoted by a business's brand, they
may be more likely to engage with that business.
For example, a company that promotes
beauty products may emphasize how their products promote confidence in their
customers. The methods the business uses to communicate this message may differ
when selling products online and in person. Since online distributors rarely
interact directly with customers in the same way that a salesperson at a retail
store might, the company may implement more visual advertisements that show
people feeling confident when using their products. For their in-store
marketing, they might train salespeople to provide free samples and use
affirming statements that build their customer's confidence when interacting
with product samples.
7. Pricing
Businesses can use pricing as part
of their channel management strategy. To use this management strategy,
businesses consider where and how customers purchase products. The location and
method of purchase can influence the price businesses set because customers
purchasing through different channels may have different prices they're willing
to pay. For example, a business may market a product as a luxury item and sell
it for a higher price through a retailer located in a wealthy area because
customers shopping in those areas are more likely to pay a higher price for a
product.
8. Sales and operations planning
Sales and operations planning means
anticipating the demand for your products and services and increasing
production to meet those demands. For example, some products may be more
in-demand during the holiday season. Businesses track the demand for their
products throughout the year and create detailed plans to start or increase
production for seasonal items in time for distribution. Companies do thorough
research and create in-depth models to predict product demands so they can
optimize sales each season.
9. Revenue management
Managing revenue means using
techniques that optimize the revenue you earn through your available inventory.
An example of revenue management is discounting seasonal items near the end of
the season to encourage sales, reduce your inventory of less in-demand products
and increase your inventory of more in-demand items that you can sell at full
price. This strategy optimizes the profits gained from the available inventory.
For example, a clothing retailer may
discount bathing suits at the end of the summer. These discounts may encourage
customers to purchase the remaining bathing suit inventory so the retailer has
more space to display fall and winter clothing items.
10. Distribution
Managing the distribution of your products through each channel means optimizing your delivery logistics. For example, if you distribute products directly to customers who order through your online store and also distribute products to customers using a physical retailer, the logistics used for distributing products through these channels may differ. You may need to plan options for mass distributing wholesale products and different options for directly delivering products to customers. By creating different distribution plans for each channel, you can improve the efficiency and cost-effectiveness of your deliveries.