Definition: Channel management is a marketing management activity that involves handling the different streams employed by a company to sell its products or services. It can be defined as the set of strategies utilized by a company to administrate its different distribution channels.
What Does Channel Management Mean?
Channels are different branches used by companies to take its products to the public market. On the other hand, from and advertising perspective, channels are also the different means employed to communicate a given marketing campaign, as is the case for newspapers, TV, digital media and social networks, among others. From a product distribution angle, the company can administrate how its products and services reach its target customers by establishing alliances and partnerships with different other companies or individuals. The most common channels are agents, wholesalers and retailers. Companies can classify its distribution process depending on how many players are between the manufacturer and the consumer. These different stages are called levels.
For example a zero level strategy means the company sells directly to the customer. This means that there are no channels to manage, except perhaps the sales platform employed by the company, which is normally an e-commerce website. On the other hand, the way the company manages these channels will affect the final price paid by consumers, since each level of the chain will add a profit to the product or service.
Example
Label Shoes Co. is company that manufactures trendy shoes for women. They have been in business for 5 years and since the company started they have only sold shoes through its website label.com. Recently, a big company called Studio 29, which sells shoes through more than 500 stores located in different places across the country, offered Label to sign an exclusive distribution agreement where Studio 29 will serve as the only physical retailer for the brand.
The Board of Directors of the company is discussing the incorporation of this new distribution channel in order to expand operations, production and revenues. Since they were already discussing a way to increase revenues without losing the brand’s identity (which is mostly online-based), this proposal sounded like the perfect fit. Label Shoes agreed to Studio 29 proposal and they will start selling its shoes in a few weeks.
