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IF View - Issue No. 24

HOW
HEALTHY
ARE
YOUR
MARKETING
CHANNELS?

Issue No 24

Marketing Channel Strategy Consultants
USA - EUROPE - AUSTRALIA - BRAZIL - HONG KONG
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Introduction

Deregulation, tariff reductions, increasing competition, and lower inflation are causing companies to re-examine every aspect of their businesses.

Organisation structures have been flattened, processes have been re-engineered and manufacturing has been optimised to increase quality and reduce costs.

The next area of focus is marketing channels:

That is, how goods and services are distributed to end users and what channel partners (resellers) or directly owned outlets are doing on behalf of the manufacturers or service providers they represent, or those who employ them.

What is a Marketing Channel Health Check?

A Marketing Channel Health Check examines the state of health of the relationships in a company’s distribution channels and identifies issues to be addressed.  A Marketing Channel Health Check evaluates whether an organisation’s distribution system is working efficiently and effectively and for the benefit of all parties involved.

What typical issues arise from a Marketing Channel Health Check?

·         Did channels just evolve?

Many channel partners are selected during a company’s early growth phase to achieve rapid market coverage.  If the company’s products or services are now established in the market, would other or different channel partners be more effective?

·         Who is in control?

As products (or services) mature, the market becomes familiar with them and they become increasingly generic as competitors enter the market.  Volume becomes important for profit maintenance.  Retailers, channel partners and resellers expected to deliver volume, can then put pressure on suppliers to meet their requirements, shifting the power in the relationship from supplier to channel partner. 

·         Is there channel conflict?

Can the end consumer play one channel against the other for the best price or service?

·         Are all performance objectives met?

All organisations have business and financial objectives.  Where indirect channels are used, a supplier sacrifices a level of control for greater flexibility, market coverage and financial return.  Did the expected result occur?

·         Do channel partners meet customer needs?

Today’s customer is much more knowledgeable, demanding and aware of the high level of service being provided by competitors and providers of products and services in other industries.  Are the supplier’s channel partners up to the challenge?

·         Have channel partners’ expectations been met?

Indirect channels are operated by independent business people who have invested in a business and often paid an initial fee, or made some other significant investment.  Has the supplier met its channel partners’ needs?  Have the supplier’s promises been kept?  Are there things the supplier does that hinder its channel partners’ effectiveness?

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What does a Marketing Channel Health Check involve?

·         Background Research

The company’s channel management structure, marketing plans and agreements are some of the aspects reviewed to ascertain the marketing channel program’s original goals, objectives and expectations.

·         Interviews and Surveys – In depth interviews with key company staff

Interviews establish the company’s overall perception of its channel partners, channel partner performance, channel partner needs and issues that may be limiting channel partner success.  In addition, an understanding is gained as to how well the company serves its channels.

Channel partner interviews and surveys

Channel partners are asked:

- How well is the company living up to the promises it made in the original partner agreement and in its stated objectives?

- How important are the key aspects of the company/channel partner relationship and how well does the company perform on each?

- Does the legal agreement add value to the channel partners’ businesses?  Do channel partners want to maintain their relationship with their supplier?

 

Further interviews with selected channel partners are next used to explore issues raised by the survey.

 

Competitor interviews

- How is the company perceived?

- What are its strengths and weaknesses?

- How do competitors view the market place?

- What trends are challenging competitors?

- How do competitors structure their marketing channels to meet their customer needs in light of these trends?

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·         Key issues

Interviews and surveys identify key issues in areas including management, training, advertising, internal communications and financial health of the company and its channel partners.  Results are then compared with marketing channel best practice.

·         Strategy Development

Alternative strategies are identified and evaluated to determine the optimum strategy for areas such as channel profitability, management structure, value of the relationship to channel partners and the quality and performance of individual channel partners.

·         Recommendations

Detailed recommendations can cover issues such as improvements to channel management, compliance with channel partner agreements, regular performance reviews, marketing and promotion, benchmarking and goal setting, which are then turned into and implement able plan.

 

Best practice channels exhibit:

  • High profits for a supplier and its channel partners
  • Customer focus and ownership by channel partners
  • Satisfied end users
  • High channel partner commitment
  • Efficient supporting business processes
  • Long, stable channel partner relationships
  • High quality channel partners
  • Excellent channel feed back

Why use an external organisation to conduct a Marketing Channel Health Check?

Companies are capable of maintaining their health on a daily basis.  However, a balanced outside view of a company’s marketing channel strategy objectively helps it to independently assess its marketing channel situation and take corrective action.  Corporate management must know what needs to happen to make its marketing channel run as efficiently and effectively as possible.

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