Marketing Channel Relationships

Competitive Priorities in Marketing Channels

A marketing channel is a set of practices necessary to transfer the ownership of goods from producer to consumer.

Competitive Priorities In Marketing Channels

One of the ways companies gain a competitive advantage in the market is through successful incorporation and management of marketing channels. A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods from production to consumption. This process typically consists of all the institutions and marketing activities involved in the promotion and distribution of goods. Management teams must evaluate competitive pressures to assess whether their marketing strategies are effective and profitable, or ineffective and costly to the organization. Sales remains the most popular way to measure performance.

Competition: Rebates and higher profit margins are tactics used by brands to gain favor with channel intermediaries and preference on store shelves.

When developing, implementing and measuring the effectiveness of marketing channels, businesses should consider:

• The link from producers to buyers
• Sales, advertising and promotion performance
• The company’s pricing strategy
• Product strategy through branding, policies, willingness to stock
• The Impact the attitudes of channel intermediaries have on the product
• Competition from other intermediaries and other product lines

All of these factors influence the positioning of products against their competitors in the marketplace.

Role and Design in the Marketing Mix

Distribution–one of the primary elements in the marketing mix –is key in determining how and when to respond to competitive pressures in the promotion of goods and services. An alternative term is distribution channel or ‘route-to-market’. It is a path or pipeline through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor).

A marketing channel can be short, extending directly from the vendor to the consumer; or may include several interconnected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers. For example, merchants are intermediaries that buy and resell products. Agents and brokers are intermediaries that act on behalf of the producer but do not take title to the products. Each intermediary receives the item at one pricing point, and moves it to the next highest pricing point until it reaches the final buyer. This grouping of organizations is often referred to as the supply chain of a company.

Choosing Marketing Channels

Cost, flexibility and quick adaptation to changing markets and demand are usually the top factors sellers consider when assess and choosing distribution channels. The types vary and heavily depend on product category and target market. These distribution types include:

• Intensive distribution – this channel allows the producer’s products to be stocked in major, mainstream outlets. This strategy is common for basic supplies, snack foods, magazines and soft drink beverages.
• Selective distribution – producers rely on a few intermediaries to carry their product. This strategy is commonly observed for more specialized goods that are carried through specialist dealers. For example, brands of craft tools, or large appliances would fall into this marketing channel.
• Exclusive distribution – producers select only very few intermediaries. Exclusive distribution is often characterized by exclusive dealing where the reseller carries only that producer’s products at the exclusion of other products. This strategy is typical of luxury goods retailers.

Managing and Motivating Marketing Channels

During the marketing planning stage, marketers must choose and incorporate the most suitable channels for the firm’s products, as well as select appropriate channel members or intermediaries. Ensuring these intermediaries are trained and motivated to sell the firm’s products is crucial to a brand’s competitive strategy; i.e., its accessibility and availability to buyers. Monitoring the channel’s performance over time and modifying the channel to enhance performance is also imperative for organizations looking to remain competitive in the market. Promotional tactics are often used by companies use to motivate channel intermediaries to stock their brand over other products. These techniques include higher profit margins, special deals, premiums and allowances for advertising or display on store shelves.