‘Marketing channel’ refers to the ways in which products move from the manufacturer to the distributor to the end user; also called ‘distribution channels’. The number and efficiency of a company’s marketing channel can have a strong impact on the company’s success. If a company does not have enough channels through which they market their goods, or if the channels are inefficient, it can hurt the profits. Some companies do not use marketing channels, and they are called direct marketing companies. These companies sell the product directly from the manufacturer to the end user. This of course reduces costs for marketing and distribution, but it can be difficult for a manufacturer to locate its customers when using this approach. However, the internet has reduced this problem somewhat and has given rise to more direct selling.

 

The most common way to conduct business is still to send the products to a distributor or a retail outlet first and then to the end users from there. The distributor or retail outlet can be referred to as marketing channels. Usually the more steps in the marketing channels, the higher the end costs are to the consumer. This phenomenon occurs because each of the people involved in the channel, or each of the “middle men”, must be paid a premium or a fee. 

 

The strategy must include a full overview of all marketing channels and a description of each channel’s role. Many companies use different kind of marketing channel mappings, to increase the overview. The overview must give answers to questions like ‘What services are offered by which channels?’, ‘How does each competitive situation look for each channel – are there opportunities in other places within the market and why/why not?’, ‘Do we have the right mix of channels?’

 

The strategic overview must also consider the financial aspects, answering questions like ‘What percentages of sales are in each channel?’, ‘What are the margins in each channel for the company?’, ‘What are the margins in each channel for the agent?’ 

 

Furthermore, the strategic plan must consist of a macro environmental part, in which external macro variables are evaluated, such as political/legal, economic, socio-cultural and technological variables that might be affecting the different channels going forward. Finally, the plan should contain a solid judgment of future channel trends in order to stay on top of the competition. 

 

One of the more common issues companies are facing when orchestrating the channel mix is how to handle channel conflicts. Since most manufacturers sell through several channels simultaneously, channels sometimes find themselves competing to reach the same set of customers. When this happens, channel conflict is virtually guaranteed. Such conflict almost invariably finds its way back to the manufacturer. This can also be termed as a situation whereby a producer or supplier bypasses the normal channel of distribution and sells directly to the end user. Selling over the internet, while maintaining a physical distribution network, is an example of channel conflict.

 

While excessive channel conflict can cause destructive behaviour, the solution is not in simply eliminating all channel conflict, but includes:

- optimising market coverage and

- managing conflict constructively

 

It is necessary to determine whether the decline in channel performance is:

- a result of conflict with other channels

- destructive to overall profitability

 

In these circumstances, strategies to manage channel conflict include:

1) Designing the channel structure to reflect the products/services being sold, customers' needs, locations, customers' buying behaviour and the profitability of each transaction;

2) Establishing mutually agreeable and aligned business goals with the channel partners;

3) Effective communications - take every opportunity to communicate with channel partners, e.g. include channel partners in business planning events;

4) Segment customers and align channels according to their ability to meet specific customer segment needs;

5) Encourage specialisation among channel partners, and create customer segment specific cam-paigns and align these with specific channels;

6) Clearly define channel roles and responsibilities, and use pricing solutions, rebates and incen-tives to encourage a desired performance;

7) Develop specific channel products or offers which are not available to all channels;

8) Check behavioural performance through role audits and regularly monitor channels for early warning signs of damaging behaviour;

9) Ensure that partner agreements are clear and exercise your rights when necessary. 

 

When reading about marketing channel strategy today the rise of social networks and sophisticated digital marketing platforms is a hot topic and has somewhat rewritten the channel marketing strategy rules. The opportunities and number of marketing channels are many and are increasing. However, it is important to prioritise them, and not wanting to do it all, and then ending up not really doing any one of them. 

 

Many of the new digital platforms are more cost-effective than the physical platforms. However, companies must be aware that costs for measuring results and analysing data will increase, since this is possible at a very targeted and detailed level when using digital platforms, and hence results can make the company more competitive. So these are some of the ’new’ things to consider.

 

While your company may be excited by the opportunity to establish distribution channels in the Chinese market, it may also be daunted by determining how to actually achieve this goal.

 

Here are a few guiding steps needed to effectively develop and manage distribution for your products in China given by consultants (e.g. US-Pacific Rim International, Inc.), who have been working with a variety of international enterprises in China on this topic.

 

Determine Demand. Conducting initial market research to understand the demand for your product in the market is essential for evaluating if it is feasible for the company to enter China. While the appeal of the Chinese market may be strong, assessing the needs of the market, understanding competing brands’ strategies, and possessing a unique product are important considerations for initial market research.

 

Learn Legal and Regulatory Requirements. Since some industries are not fully open to foreign companies in China; during initial research, you should also determine if foreign companies are permitted to operate in your industry. In addition, your company should next learn what, if any, certifications are required before your products can be sold in China. These applications should be started immediately since they can often be time consuming procedures.

 

Identify End-Users. One thing to keep in mind is that many of China’s largest industrial companies are State-Owned Enterprises (SOEs) and thus under the control of the Chinese government. If your company’s potential end-users are SOEs you should keep in mind that they often operate according the characteristics of a government agency rather than those of a private company.

 

Identify Key Players and Distributors. Once you have identified the market for your product in China you will need to identify who the key players and potential distributors are in your industry. 

 

Develop Marketing Materials and Strategy. At the same time that you begin to identify key players and distributors in your field, you will need to develop marketing materials and a strategy of how to engage with the industry players you have identified. When developing marketing materials such as brochures and websites, make sure that you have them written in simplified Chinese characters. Another thing to take into consideration is that Chinese company brochures and websites often have a different format than those in the West. During this time, your company should also develop a pricing structure, sales terms and an agency contract. Having these ready to present to potential distributors when you meet with them will accelerate the sales process.

 

Establish a Local Sales Team. In order to achieve sales it will be important to have a local sales team which can guide you through China’s unique business culture in the negotiation process. A local sales team can provide your company with the local know-how needed to complete business deals.

 

Meet with and Qualify Distributors. Once you have identified key distributors in your industry, developed a marketing strategy and built a sales team, it will be necessary to visit potential distributors in person. By meeting them you will have the opportunity to both market your company and confirm that the distributor is qualified. By visiting you will also be given the opportunity to see their operations first-hand, learn their business model, and understand their strengths and weaknesses. Based on this information, your company can make necessary adjustments in its business plan so that it matches with the needs of the potential customer. At this time, it would also be helpful to check with local government agencies to verify the quality and reliability of the company.

 

Achieve Sales. Now that your company has identified qualified distributors, you can enter the next stage of the sales negotiation process. You should be willing to devote time to develop a close relationship with your potential customer during this time in both formal business settings and more informal occasions. In general, this time commitment means that business deals can take three to five times longer to complete in China than they do in the West.

 

Manage the Relationship. Even after you have completed sales with a distributor in China it will be necessary to manage the distributor to ensure long-term sales. Having a local presence is also essential for this process. You will need staff on the ground that will be able to communicate regularly with the distributor, provide technical and marketing support, and continue to develop both a formal and informal business relationship between your two companies.