Magazine article Ivey Business Journal Online

Channel Vision: Getting Your Channels Right

Magazine article Ivey Business Journal Online

Channel Vision: Getting Your Channels Right

Article excerpt

Marketers have never been more challenged to find the right mix of channels. Seeing the choices clearly will make that challenge less daunting. This author has sound advice for developing clear channel vision.

Very few areas of business have undergone as much complex change as marketing channels. Products and services that once found their way to markets through one channel, have moved into a multi-channel environment, often in the extreme. For example, greeting cards, once sold only in specialty card or gift retailers, are today also sold in grocery, drug, department, variety, discount and convenience chains. Cards can also be found in secondary sellers such as bookstores, record/ music stores, florists, newsmagazine outlets, airport shops, Web sites - in fact, you name it. And for products sold both in the business-to-business and consumer markets, such as a personal computer, or cellular phone, there can often be more than a dozen important channels. Even controlled channel players such as Eddie Bauer have 3 channels -- their stores, their catalogues and their Web site. These circumstances make it essential that executives develop better mental maps, the better to see which are the most sensible channel structures for their respective business, and how these channels could form a coherent network and optimize channel alignments. In this article, I will suggest what managers can do to develop those clear mental maps.

Channel breadth of vision

The first key in developing channel vision is to consider how broad your network needs to be to span different customer segments. When cellular phone service was considered a specialty service used only by real estate agents, construction contractors, and sales forces, the phones required a far narrower band of channels than they do today, when the fastest growing segment is teenagers. Firms also need to consider whether their target customers are likely to use more than one type of channel when making a buying decision. A great many customers show multi-channel patronage behaviour for the identical product, and so it becomes essential to expand channel choices. This is especially the case for products or services that can be a destination purchase or an impulse buy, such as a compact disk, pet food, a picture frame or stationary supplies. The combination of micro-market segmentation and channels crossing over into new markets (for them), such as an automotive distributor chasing industrial accounts, forces suppliers to broaden their channel breadth vision and consider widening their networks.

A channel-mix vision

Once a firm gets a handle on how broad its ideal network ought to be (vs. where it is currently) it needs to think through which channels will be primary and which will be secondary. This conditions the channel investment strategy, since supports are finite and must ensure that the primary channels receive priority, and that secondary channels are not ignored. These secondary players may simply need a lower-cost resourcing support strategy, such as telesales assistance vs. in-person reps making personal calls. Peripheral channels may get less in-depth training, less frequent merchandising promotions, or lower levels of market development funds more in keeping with their role as supplemental channels. In essence, companies must consider differently structured business models by channel -- whether independent/ arm's length or controlled, such as a bank with 4 channels-branches, ATMs, phone banking or Webbanking. Part of the assessment process in looking at a potential mix requires a firm to consider the functionality of its channels, since some will be full service, some limited service, and some, such as electronic channels, almost completely self service. The care and feeding levels for such varied channels requires great creativity so that each channel gets the supports it needs without eroding the profitability of other parts of the channel matrix. …

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