Channel marketing is often confused with marketing channels. Although we use marketing channels to promote products, channel marketing is different from channels such as email and social media used to increase reach and engagement.
What is channel marketing? This article will share more about what channel marketing is, the different types of channel marketing partners, and channel marketing relationships.
What is channel marketing?
Channel marketing is the distribution of products or services from the manufacturer to the consumer. In marketing – we have four components involved, namely product, price, promotion, and place. Channel marketing is part of the distribution, that is, the place component.
Most manufacturers don’t directly sell products to their end customers, so they use a marketing channel to distribute their products. This distribution channel can be a retail store or a trade show. Channel marketing is not restricted to products alone; it can be applied to ideas and services.
In channel marketing, there are several organizations, people, and activities involved in distributing goods from manufacturers to customers. If any third party is involved in bringing your products or services to market, you are using channel marketing. Channel marketing can work for large and small businesses across multiple industries.
Although a company can use its channels, such as its sales representatives and website, to promote its products, it will also rely on resellers, affiliates, dealers, agents, and other distribution partners to sell its products. These partners are channel partners.
The critical benefit of channel marketing is that your channel partners will have their audience and reach, so it would be possible for your company to tap into your channel partner’s audience. It is also efficient and cost-effective because you don’t have to hire so many employees who promote your product and achieve the same effect through your channel partners. Another benefit is that the audience of your channel partners trusts them, and it will be easier to gain the goodwill and customer trust of their audience when you promote your product through the channel partner.
What are the different types of channel marketing partners?
These are the most common types of partnerships in business.
1. Reseller Partnerships
Resellers buy the products from the manufacturer and sell them to the customer for a marked-up price. Resellers can also add value by combining related products or by repackaging. Resellers usually are registered businesses, or they are individuals who buy and sell goods and services and generate revenue for each sales transaction.
Resellers have to adjust the price of products to make their profit margins, and the selling price is usually not far off from the manufacturer’s suggested retail price. The reselling business model is not only for in-store retailers. Online retailers use it to sell products.
Resellers can remove your branding and sell it as their product which helps them promote their brand. For example, Amazon resellers buy products and resell them on Amazon.
2. Affiliate Partnerships
Affiliates are content creators who create content and add links to your product in their blogs. When the blogs get organic traffic and sales are made, they get a commission, and you get traffic to your website and additional sales.
3. Alliance Partnerships
Alliance partnerships are related businesses that share customers with your company, and they can help spread awareness and sell your products in exchange for a percentage of sales revenue.
4. Referral Partnerships
Referrals are partners who refer customers to your business in exchange for a percentage commission on sales revenue.
What are the different types of channel marketing relationships?
Channel marketing relationships can include reselling, affiliate, and referral partnerships. The different types of channel marketing relationships are
1. Manufacturer to Customer
In this relationship, the manufacturer creates the products and sells them directly to the customers. Since there are no intermediaries in this channel, called a zero-level channel, the markups are reduced, and the profit margins are suitable for the manufacturer. The price is lower for the customer. This relationship typically uses direct marketing channels such as selling in person, telephone, internet, and email. Companies such as Tupperware and Aquaguard use direct marketing to sell products.
2. Manufacturer to Retailer to Customer
As retailers have grown in size and have considerable purchasing power, manufacturers supply directly to retailers rather than wholesalers. As a result, retailers such as Walmart can negotiate lower prices with the manufacturer and pass on the low prices to the consumer.
3. Manufacturer to Wholesaler to Customer
This channel is used to distribute industrial products used for further production. The buyers may be businesses, the government, etc. This channel is usually used for selling industrial products.
4. Manufacturer to Wholesaler to Retailer to Customer
This channel is usually used for selling consumer products. It is used for smaller retailers that don’t have much purchasing power and have limited orders. When the demand is elastic, many similar products are available, and the market for the goods is highly competitive. Wholesalers buy in bulk from manufacturers and sell in smaller quantities to retailers.
5. Manufacturer to Sole Agent to Wholesaler to Retailer to Customer
This channel is used when the manufacturer wants to focus on production rather than marketing. The entire goods produced are delivered to a sole agent who distributes to wholesalers who then distribute to retailers, and the goods are then sold to the customer. The agent receives a commission on sales from the wholesaler. This channel is usually used to distribute products in a particular geographic area, and the manufacturer may appoint several sole agents for different geographical regions.