A marketing channel network (also called a retail channel) is the group of entities, people, and activities required to move the ownership of products from the early point of production, usually in the manufacturer’s factory, to the final point of sale, commonly in the retail outlet. It’s the means by which products are delivered to the consumer, the buyer; and is sometimes referred to as a distribution channel. Depending on the product, it may be controlled by the manufacturer, the sales person, or by a third-party organization. In some cases, like with food products, a marketing and distribution process is carried out exclusively by the manufacturer. The concept has a close association with distribution and marketing because the two require the same strategic and tactical decision-making processes for effective performance and optimal returns on investment.
Marketing channels can include direct marketing (DMAIC), promotional, electronic, and internet marketing. Direct marketing channels represent the direct communication between a product and a customer, whereas promotional marketing channels involve an indirect communication between the producer and potential consumers. Electronic and internet marketing refers to strategies and techniques for generating consumer awareness of products, services, and promotions through the mediums most accessible to targeted audiences. These marketing channels often include the distribution of information about new products, promotions, and events. They also typically include payment for goods or services, either directly or indirectly.
Distribution and marketing channels can be grouped according to their nature of function. General distribution channels include retail stores, retail sales agents, wholesalers, manufacturers, brokers, and warehouses. These intermediaries are intermediaries between buyers and sellers. They provide valuable inputs in the market to buyers before they decide to buy. For example, retailers locate products on the shelves of wholesalers. In order to facilitate the sale of a particular good, the retailer passes on information about its features and uses to wholesalers.
The term “reverse channel” refers to a type of marketing channels that do not pass messages directly from one business to another, but rather, provide information about the same product to both buyers and sellers. Reverse channels usually form a network by which sellers provide information to buyers. Examples of reverse channels include media buying and advertising. Media buying refers to a system by which sellers sell and buy advertisements in a magazine, newspaper, or other publications.
The terms direct and indirect marketing channels are used interchangeably; however, in this context, “direct” refers to a marketing channel where the producer of a product acts as the sender of messages. Indirect marketing channels involve a third party, such as a manufacturer, who acts as a mediator between the producer and the customer. An example of an indirect marketing channel is a manufacturer who distributes products to retailers. An indirect marketing channel generally involves an investment by a third party.
There are marketing channels available to every type of product or service. For example, there are advertising and marketing channels for television, radio, and other print media. A manufacturer can distribute pamphlets or sample products to prospective customers. A wholesaler can promote his products to consumers in a catalog or newsletter. A retailer can display his products for sale at his place of business or on a website.
Some types of marketing channels are commonly known. These include: franchising, importation, forwarding, importation of finished goods, grantor-reseller relationships, and contract manufacturing. Franchises are arrangements by which a franchisor, or international operator, finances the development of a specific number of outlet stores on behalf of a distributor or manufacturer. Importation refers to bringing goods into the country from a foreign country. Forwarding involves bringing freight from a foreign country to bring goods into the country.
A number of indirect channels exist to promote goods. Examples include wholesale distribution, direct selling, and membership clubs. Direct selling is a system of distributing retail goods directly to consumers through retailers or trade shows. Membership clubs, such as the American Association of Retired Persons (AARP) have become popular ways to promote services, such as senior day care and Alzheimer’s disease programs. Dual distribution combines the features of direct selling and membership clubs to form an effective marketing channel.
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