Channel Partnering
Channel partners can potentially fulfill needs along an organization’s value chain by enhancing the efficiency of distribution and/or access to new markets.
LEARNING OBJECTIVES
Recognize the value channel partners can add via co-branding, distribution and/or efficiency
KEY TAKEAWAYS
Key Points
- Channel partnerships are strategic collaborations between organizations that can potentially provide reciprocal value for both organizations.
- Channel partners can add value through fulfilling certain needs along a value-chain, as well as providing unique access to an established market or brand.
- Co-branding is the opportunity for channel partners to represent both of their brands on a given product. In these situations, both organizations can benefit from the brand equity of the other.
- Value-added resellers are another example of a channel partnership. Value-added resellers not only resell the product or service, but also add a unique benefit for potential consumers. This justifies the mark up.
- Overall, the management of channel partnership relationships as well as the acquisition of new partners is critical to success in most industries in the modern economy.
Key Terms
- co-branding: The combination of two or more well-known brands for marketing purposes, to strengthen one another’s preference or purchase intentions, or to reach a broader audience.
Channel Partners
As organizations build relationships across various channels within the industries in which they operate, the importance of partners within those channels can be a central concern. A channel partner is simply a company that works in collaboration with a organization in a way that assists the sale, distribution, storage, and/or production process.
As a result of the varying roles a channel partner can play, it’s useful to understand the value chain, co-branding, value-added resellers and the general distribution of marketing channels for a given product or service.
The Value Chain
Channel partners will fulfill some need along an organization’s value chain. A value chain simply visualizes the process a product or service will go through, from the initial sourcing of raw materials, product design, manufacturing, marketing, selling, paying, distributing and delivering customer support for existing customers. There are a number of critical inputs along the value chain, and most organizations are not equipped to fulfill each role. As a result, channel partners can fulfill a number of key responsibilities in marketing, sales, distribution, storage and customer support.
Value Chain: Porter’s value chain is a useful way to visualize where various channel partners may be in the overall organizational process.
This could be in the form of vertical integration, where a company creates an alliance with an organization that assists in some aspect of the production process (through strategic alliances, such as partnerships, joint ventures, mergers and acquisitions). Whether a formal alliance is established or not, managing the relationships between the organization and the various channel partners along the value chain is an important aspect of controlling costs, communicating to consumers, and building a reliable production channel.
Co-branding
Another useful idea in channel partnerships is the concept of co-branding. To understand co-branding, the easiest thing to do is consider a few examples. Right now, you’re likely reading this on a device. It may be a laptop, where the laptop manufacturer (let’s say Dell, for the sake of discussion) may be co-branded with Intel (for your processor). You’re smartphone may be a Sony, with a built in Google Android OS. This is another example of co-branding.
The idea is fairly simple. Various organizations function better together, and in many situations they may both have strong brands. In these situations, both companies can list their brand on a given product, allowing each organization in the channel partnership to gain access to a new, loyal targeted customer base (i.e. that of their partner).
Value-added Resellers
Another strong example of a channel partner is a reseller, which should in some way add value in the process. For example, consider the sale of a new tablet with internet connection. More often than not, an individual will go to a mobile device carrier outlet to browse for new devices. When purchasing a tablet from a reseller that also offers mobile data services, a consumer will receive a SIM card that is a value add to the initial tablet. This SIM card will provide data on the go, a nice additional benefit for the user. This reseller is taking a product, adding value to that product, and reselling at a higher price.
Conclusion
Channel partnerships are, in conclusion, essentially a strategic alliance or contract between organizations that enable a producer of a given product or service to access markets and provide value to consumers through collaboration. These collaborations should add value during the distribution process, whether that value is simply access to retail space, shipping resources, digital marketplaces, established brands, or other more specialized examples.
Maintaining a strong relationship with various channel partners, and identifying opportunities in the competitive environment for new partnerships, is a central facet of a modern marketer’s responsibilities. Channel marketing should be at the forefront of most marketing strategies in the digital era, as distribution and simply being noticed by consumers can be greatly enhanced through strategic partnership selection.
Channel Integration
The integration of marketing channels to varying degrees is known either as multi-channel or omni-channel retailing.
LEARNING OBJECTIVES
Describe omni-channel marketing as it relates to the retail industry
KEY TAKEAWAYS
Key Points
- Omni- channel retailing is concentrated on a seamless approach to the consumer experience through all available shopping channels, like mobile internet devices, computers, bricks-and-mortar, television, catalog, and so on.
- The omni-channel consumer wants to use all channels simultaneously, and retailers using an omni-channel approach will track customers across all channels, not just one or two.
- With omni-channel retailing, marketing is made more efficient with offers that are relative to a specific consumer determined by purchase patterns, social network affinities, website visits, loyalty programs, and other data mining techniques.
- A consistent and convenient brand exposure from an omni-channel retailer will create better top of mind awareness from consumers.
Key Terms
- e-commerce: Commercial activity conducted via the Internet.
- retailing: selling goods directly to the consumer
Channel Integration
The integration of marketing channels involves a process known as multi-channel retailing. Multi-channel retailing is the merging of retail operations in such a manner that enables the transacting of a customer via many connected channels. Channels include: retail stores, online stores, mobile stores, mobile app stores, telephone sales, and any other method of transacting with a customer. Multi-channel retailing is said to be dictated by systems and processes, when in fact it is the customer that dictates the route they take to transact. Systems and processes within retail simply facilitate the customer journey to transact and be served. The pioneers of multi-channel retail built their businesses from a customer centric perspective and served the customer via many channels long before the term multi-channel was used.
Omni-channel retailing is very similar to, and an evolution of, multi-channel retailing. Omni-channel retailing is concentrated more on a seamless approach to the consumer experience through all available shopping channels like mobile internet devices, computers, bricks-and-mortar, television, catalog, and so on. The omni-channel consumer wants to use all channels simultaneously and retailers using an omni-channel approach will track customers across all channels, not just one or two. Omni-channel retailing with the connected consumer uses all shopping channels from the same database of products, prices, promotions, etc. Instead of perceiving a variety of touch-points as part of the same brand, omni-channel retailers let consumers experience the brand, not a channel within a brand. Merchandise and promotions are not channel specific, but rather consistent across all retail channels. The brick-and-mortar stores become an extension of the supply chain in which purchases may be made in the store, but are researched through other channels of communication. With omni-channel retailing, marketing is made more efficient with offers that are relative to a specific consumer determined by purchase patterns, social network affinities, website visits, loyalty programs, and other data mining techniques.
Omni-Channel Retailing: Omni-channel retailing requires constant integration across all marketing channels.
A move to omni-channel retailing can create a more knowledgeable consumer, so store employees need to be more knowledgeable about merchandise carried and production processes. Omni-channel retailers carry merchandise that is customer-centric and is not specific to any channel(s). Research has shown that omni-channel shoppers spend up to 15% to 30% more than multi-channel shoppers and exhibit strong brand loyalty, often influencing others to patronize a brand. Real-time data may be necessary when moving towards an omni-channel approach. As socially connected consumers move from one channel to another, they expect their stopping point to be bookmarked, allowing them to return through a different channel to finish browsing or purchasing where they left off. A consistent and convenient brand exposure from an omni-channel retailer will create better top of mind awareness from consumers.
Preparing for an omni-channel presence will require a heavy investment of both time and money. Communications between the IT department, marketing department, and sales staff will need to be as smooth as possible with little confusion about goals and strategies. A clear and thorough understanding of the customer, or target market, is required to be able to make appropriate decisions about channel integration and usability. Because brick-and-mortar sales influenced by online search are four times higher than total e-commerce sales, omni-channel retailers need to be informative, personable, always connected, and allow channel transparency.