Selecting Marketing Channels
Strategic selection of marketing channels can impact an organization’s brand, profitability, and overall scale of operations for a given line of products or services.
LEARNING OBJECTIVES
Identify a number of key considerations when selecting marketing channels
KEY TAKEAWAYS
Key Points
- Marketing channels represent the relationship between a producer and the user, usually in the form of a strategic alliance such as a retailer.
- When selecting which marketing channels to pursue, it’s useful to understand an organization’s target users and their preferences. For example, if it is a technology friendly market it’s important to create digital storefronts.
- Some channels will be more costly than others. Considering the overall margins, desired volume, and opportunity costs can give organizations strong strategic reasons to use or not use some channels.
- For organizations that rely heavily on brand, it can be important to select corresponding partner channels. For example, a high end fashion item would want to carefully select channels to maintain brand equity.
- Localization can be enhanced via strategic channel selection. Entering new markets through local retailers can give exposure and localization to a new market.
The Value of Channels
Before selecting which marketing channels are ideal for a given organization, it’s important to understand the underlying role of channels in marketing strategy. Channels influence:
- The relationship between the producer and the buyers.
- The firm’s pricing strategy.
- The overall product strategy through branding, policies, and willingness to stock.
By selecting the optimal channels, organizations create strategic alliances between the firm and the providers. This has a number of implications, including how a user group will perceive the organization’s brand and how they will be treated when interacting with that brand in a given channel situation (such as a retail outlet ). With this in mind, there are a few key considerations organizations will want to keep in mind when selecting channels.
Channel Selection
Consumer Preferences
First and foremost, the consumer’s habits and behaviors determine channel strategy more than anything else. If all of an organization’s consumers love to shop at Walmart, then it may be a smart idea to begin stocking Walmart shelves with products. If consumers have a strong desire to find a given good in a given channel, organizations should strive to make that happen (as long as the opportunity costs down exceed the potential benefits).
Another good example of consumer preferences would be digital storefronts. If a record label manages a few bands, and almost all of those fans are on Spotify, it may be practical to begin using this digital distribution system. If a movie studio knows that the majority of their demographic rents films via iTunes, they may want to create a strategic alliance with Apple.
Cost
Some channels will be more costly than others. Low cost goods function best at low cost retail outlets. Better yet, directly selling eliminates organizations between the user and the producer, and therefore can be even lower cost (albeit, shipping, storing and other logistics must be considered). Wholesalers are willing to buy large shipments of goods, but usually at a significant discount. In many cases, the overall revenue maximizing curve will be a useful tool in determining the optimal volume at the optimal price for a firm to satiate a given market demand.
Brand
Organizations create strategic alliances to build channels for consumers, and these alliances will reflect on the overall branding initiatives of both partners. If an online retailers stocks a certain type of item, users of that online retailer will equate the two brands together. This can have an impact on how those consumers view both companies.
For example, A premium coffee machine manufacturer may not want to be stocked at a discount retailer, as it will lower the brand’s power in the eyes of the consumer. A high end good being sold on a low-cost distribution channel can cannibalize sales and reduce profitability through offering a price point the producer doesn’t believe matches the quality of the produced good.
Localization
In the current global economy, it is also useful to localize and enter new markets through effective marketing channel selections. A producer of household goods, for example, like laundry detergent could just as easily sell their goods in Europe as in the United States. The question for accomplishing this task is which retailers to work with, and how to localize the brand to be recognized and understood by foreign consumers. Strategic channel selection can greatly improve an organization’s ability to accomplish this goal.
Digital Channels: The modern organization is drowning in potential channels from a digital perspective.