Marketing has been around almost as long as we’ve been selling things. And all along, we’ve looked for new, creative ways to sell our goods and services, including finding someone else to market and sell what we produce. Today, we call this channel marketing. It’s a flexible, popular marketing model used by companies to boost sales and revenue, expand brand awareness and customer reach, access new markets, and grow their business. Below we define channel marketing, the benefits, and common types, and outline how to develop a successful channel marketing strategy.
What is channel marketing?
Fundamentally, channel marketing is the practice of manufacturers and producers partnering with third parties as intermediaries to distribute and sell their products and services to customers, whether individual consumers or businesses. The process may entail using one or multiple channels, which we’ll touch on later in this guide. Although the model is often used by larger companies that offer several products to a broad market base in multiple sales regions, channel marketing also applies to smaller businesses. For example, a company that produces artisanal pickles can increase customer reach by partnering with specialty gourmet shops that will sell the pickles in their stores and online.
What are the benefits of channel marketing?
While some of the advantages are obvious, such as selling in more places, channel marketing benefits reach beyond this. Below are five examples of the most common ones.
1. Reaches customers with the intent to buy. A sale isn’t going to occur unless you make customers aware of your product who are likely to buy it. When artisanal pickles are sold through gourmet food shops, continuing the example above, the product is placed in front of customers who likely have a high intent to purchase specialty food products. To expand its reach to a potentially larger group of target customers, the pickle maker could partner with upscale, regional grocery store chains that carry artisanal products along with national brands.
2. Provides cost savings. Lowering the cost per acquisition (the aggregate cost to acquire a paying customer) can increase return on investment (ROI). Channel marketing can lower your CPA because channel partners are doing consumer-facing advertising and marketing for you. Of course, there are costs associated with channel marketing that impact ROI. Still, the pool of potential channel partners you need to market to will be much smaller than the serviceable obtainable market (SOM).
3. Increases brand recognition. New and existing brands vie for the same audience’s attention in our modern marketplace. Establishing brand recognition where customers recognize your brand and differentiate it from competing brands can be challenging. Still, it’s essential because, ultimately, brand recognition leads to brand awareness, where the public recalls information and general impressions about your brand. This usually results in higher sales.
Using artisanal pickles as an example again, let’s say the pickle maker is launching a new brand in the growing artisanal food product market. Partnering with gourmet food shops with well-honed brand awareness and recall helps sell the pickles because customers trust the channel partner to carry tasty, quality products. As consumers buy the pickles, brand awareness is created for the pickle brand. So, when a consumer sees the same jar of pickles in an upscale regional grocery store and recalls the brand with positive impressions, they may choose to buy those pickles over others in the store.
4. Provides more in-depth information about your customers. In many cases, channel partners are closer to your market and customers that buy your product than you are. In this case, channels should provide more detailed information to you about your target market and the customer experience than you could glean on your own.
Let’s say the gourmet shops that sell your pickles have an engaged customer base that readily provides candid feedback on the products the shop carries. The shops should give this information to you, so you can better understand how to make your product more appealing and boost sales. For instance, if you continually receive feedback from your channel partners that their customers would love a spicier version of your pickles, you may decide to enhance your product line with hot and spicy pickles.
5. Builds customer trust. The power of trust carries more clout than ever in today’s market that bombards buyers with many options. If you had a choice between two similar products with similar prices, one from an unknown brand and one from a brand you trust, which one would you choose? Reputable channel partners with a well-trusted brand automatically lend trust to your product in their customers’ minds. It’s trusted by association. Over time, this trust by association will blossom, and your brand will garner its trust.
What are the common types of marketing channels?
Channel marketing is a versatile model with different variations, but four general types efficiently and effectively bridge the gap between a product or service producer and its users. If you aren’t sure which model would work best for your company, consider using top independent talent to assist with this process.
1. Direct selling. This age-old concept is big business today. The Direct Selling Association, in a recent industry overview, indicates direct selling in the United States represented $35.2 billion in sales in 2019. Modern direct selling is the marketing and sale of products or services directly to consumers, typically outside of a fixed retail establishment. Methods include the party plan model (e.g., in-home or virtual parties), over the internet via tools like private chats, through one-on-one demos that can be live or virtual, and personal contact arrangements, i.e., face-to-face meetings between a sales representative and the customer. The advantages of direct selling include the ability to target customers most likely with an intent to buy and create brand recognition within your target market more quickly in a more cost-effective manner.
2. Indirect selling. The practice of selling goods and services through a third-party versus company personnel is another time-tested model. Indirect sales channels include resellers, wholesalers, dealers, third-party distributors, affiliates, and various forms of retail. The model may be used in conjunction with your company’s direct sales efforts or as an alternative. Online affiliates are a good example of indirect selling, where you provide banners and other ad tools to affiliates that promote your product or service through their websites and other marketing methods. When a sale occurs, you pay the affiliate a commission.
Advantages of indirect selling include increased speed to market, improved sales and revenue, and lower operational overhead, to name a few.
3. Dual distribution. Goods and services can make their way to consumers through more than one channel at a time. Companies that sell services or goods via direct selling, for instance, may also choose to sell to the consumer through a retailer.
A good example of the use of dual distribution is when you launch into a new market. Let’s say you manufacture portable laptop chargers, have good brand recognition, and have established brand trust in the United States. If you want to open a new market in Canada where your brand awareness is low to nonexistent, establishing a channel partnership with a Canadian-based computer and electronics retail store will be more efficient and less costly than if you were to attempt to penetrate the market directly.
Another example is using channel partners to sell your product or service into a new vertical market, where the partners are more in tune with that market’s specialized needs than you are.
4. Reverse channels. The traditional channel marketing path starts with the manufacturer or producer and then travels through various channels to the customer. Reverse channels also called backward channels, are where goods flow from the consumer to intermediaries to a producer. It can be in the form of product resale as well as recycling and repurposing products.
Especially in our “green” age, where a growing number of buyers value reusing, repurposing, and refurbishing products versus always buying new, establishing reverse channels makes sense for many products. For example, a cell phone provider that sells used products to a refurbisher that resells the refurbished product to a target market not only improves overall product reach but can influence users to buy your brand when they need something new.
How to develop a successful channel marketing strategy
As you start your channel marketing journey, you’ll need to determine which type of channel marketing model will best meet your business goals and objectives and which marketing channels are right for your company and its products or services. Not every marketing channel will work for your business. If you don’t have the staff or your current product marketing team doesn’t have channel marketing skills, consider hiring top marketing professionals at Upwork.com.
Below are seven essential items to consider when developing your channel marketing strategy and selecting the best marketing channels.
1. Develop your marketing strategy
Even the best ideas can fail without a coherent strategy. This may seem obvious but start by developing your marketing strategy or revisit an existing strategy to see how, where, when, and why channel marketing will fit in. Define the attributes you prefer in a channel partner. Separate the must-haves from what’s nice to have, and what attributes will most likely get customers to see your message and convert them to a sale. Make sure you identify how a channel partner must engage with consumers at every stage of their purchasing journey, from awareness to purchase intent to taking action.
2. Know how your target market(s) prefers to shop
This knowledge will enable you to determine if channel marketing will work well with your target audience or not. If you’re uncertain, conduct stakeholder interviews or focus groups to gain understanding. Sure, these efforts take time and cost money, but it’s vital to understand your audience before making a significant shift in your marketing strategy.
3. Assess the time and resources you have for channel marketing
It’s essential to determine the amount of time and resources it will take to identify potential channel partners, influence them, go through the contract process, and then manage, nurture, and engage them as an ongoing process. Also, ask, “What do I have to offer a new partner?” and determine what makes investing in a partnership with you worthwhile. Can you provide adequate support? Your prospective channel partner will want to know the details. You need to be ready with answers.
4. Define the market size and the geographic locations you intend to serve
Do this, then look for marketing channels that cover the desired geographic areas and can accommodate the volume of customers you’re estimating.
5. Adopt a customer-first mindset
A successful channel marketing strategy never loses sight of what the customers’ wants and needs are. Know your customer’s mindset and the type of customer experience they seek. Today’s customers usually expect a personalized, connected customer experience. Look for reputable channel partners that are well perceived by customers, provide the right customer experience, and convey the brand image you want to project.
6. Determine which channels are most advantageous to your company
Know your company’s needs, know their company and its practices and reputation, and understand why the relationship will work or not. Before you spend time on a channel partner, determine if it’s financially stable and if they have the right resources to sell your type of product. Next, decide if its business practices and requirements are favorable from your perspective. Channel partners have their agendas. Are they in line with your needs and expectations? Do they demand exclusive rights to sell your product or service? Will this work for you?
7. Research the marketing channels used by your competitors
You can choose similar marketing channels because they should have a built-in market for the products you sell or look for different channels to cut down on competition.
Next steps
Channel marketing can be a valuable addition to your marketing strategy that expands brand awareness, sales, and revenue, but it comes with a few requirements. Successful channel marketing relies on a well-thought-out plan, knowing how to choose the right channel partners, and having the time and resources to support and nurture partner relationships. Chances are you have a product marketing team that covers a broad scope of marketing activities, but channel marketing is different from product marketing. It requires a different knowledge base and skill set.
