Marketing Channels

Choosing the right marketing channel  is a decision of potentially high cost savings and improved customer satisfaction. Marketing channel alternatives vary from direct selling to using one or more intermediary levels, such as wholesalers or retailers .

Source: Kotler, Philip, Principles of Marketing, Prentice Hall, 15th Edition, 2013

The marketing channel decision depends first on the needs of the customers and then the company assesses its objectives and constraints regarding the most appropriate channel. The company then identifies the best channel option and decides the number of intermediaries this option will require and the responsibility of each level.

Companies can choose the best marketing channel for their customers, but some of those customers can require a different marketing to be reached. That is why companies can choose to implement a multichannel distribution system, in which the company sets up two or more marketing channels to reach its different customers. Nike for example sells its products through several different channels of distribution. The sportswear company is able to reach its customers on its own website, on online shops such as Amazon.com, in its own Nike shops or through other retailers such as Sports Authority, and its marketing strategy stands coherent despite the marketing channel used.

But let’s go back to single channels. In the case of a traditional Producer-Retailer-Consumer distribution channel, companies can decide to implement a vertical marketing system (VMS). In this structure, producers, wholesalers, and retailers are often the same company or one channel member or has so much power that they all cooperate. In-N-Out is one of those companies. My teammates have shown me (see Sources) that the burger company its private butchers, its own warehouses and its own truck line. Hence the food we find in the restaurant has been handles by In-N-Out since the very beginning, and that factor is a real asset for this family-run company.

Another marketing channel is the horizontal marketing system. In this structure, two or more companies cooperate at one level of the marketing channel to make the most of a new marketing opportunity together. My first thought would go toward all the Starbucks cafes located inside retail stores such as Target, or even within luxury hotels such as the Marriott.

All those marketing channel strategies have been proven as efficient for the companies that have implemented them, but firms have to choose the right one or the right combination to be the most effective and build the strongest relationships with the right customers at the right place.