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IF View - Issue No. 28

MARKETING
CHANNEL
ISSUES

Issue No 28

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

All businesses want to raise profits Ė mostly shooting for the same goals: 

  • Sell more
  • Cut costs
  • Work smarter

However, while most companies know their costs and results of sales, few know how to effectively get more out of their marketing channels.  In fact, marketing channels are often overlooked in an efficiency drive because they are external.

Most supplier-reseller systems are far less sophisticated than modern manufacturing and inventory control techniques.  Yet, independent resellers (channel partners) have a large impact on how a supplierís products or services are positioned and sold.  There are great opportunities for firms to differentiate themselves through effective marketing channel management because their competitors often have little channel focus.

Some critical marketing channel issues are detailed below:

SOME COMMON ISSUES

Motivating and Controlling Resellers

Many companies migrate distribution from a direct sales force to distributors or dealers in order to reduce selling costs.  Often suppliers find that they have little control over how their channel partners position and sell their products.  Channel partners frequently sell competing products.  They arenít always loyal or developmental.  Customer service can suffer as channel partners chase the best margins for short term gain.

Alternatives to Direct Sales

Many products require personal selling.  Some businesses canít afford a direct sales force and are concerned about their lack of control over independent resellers.  These companies need cost-effective distribution that maintains company control of the sales process.

Managing Multiple Channels

To reach various market segments, some firms distribute products through dealers, distributors and through their own direct sales forces.  Often, these channels compete AGAINST each other for the same customers.  The resultant channel conflict causes a decline in customer satisfaction or loss of repeat sales.  Restructuring distribution without losing a companyís best channel partners and market coverage is a major challenge.

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  Some channel conflict is inevitable to achieve optimum coverage

Restructuring Company-owned Outlets

Maintaining company-owned, full-service brand networks is expensive.  To contain costs, it is often possible to reduce branch numbers to consolidating branches while maintaining market coverage.  Branch performance can also be improved by restructuring their ownership to inject a stronger profit-orientation for branch managers.

SOME COMMON CONSTRAINTS

No experience with Channel Partners

Many organisations donít have experience in dealing with resellers.  They have always sold direct and donít have the internal expertise to develop alternative marketing channels.

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No Cross Industry Knowledge

While many managers know a great deal about distribution in their own industries and countries, they often lack knowledge of distribution techniques in other industries and countries Ė knowledge with could help them.

Lack of Perspective

A managerís basic function is ďto get out the daily wash.Ē  As managers often focus on today only they donít have the time to investigate how they might improve their marketing channels.

SOME SOLUTIONS

A successful marketing channel strategy requires: 

  • A specific definition of the role (or value add) of each member in the distribution chain
  • An understanding of channel p0artnersí operations and the factors which influence their business success.
  • A mutually profitable legal and commercial channel partner relationship
  • A management philosophy incorporating the discipline to make difficult strategic decisions coupled with the flexibility to adopt channel innovations.

Today, with lower marketing costs, shorter product life cycles and decreasing product differentiation many businesses need to seek competitive advantage through non-product related business activities.

Competitive advantage in the new millennium will not be the exclusive domain of product innovators and technology leaders.  It will also come to those companies that develop and maintain the most successful marketing channel strategies.

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