Monday, January 16, 2012

Channel Marketing

“Horizontal, vertical or multi - your clients want it. Are you giving it to them?”

Regardless of the type of business you manage, you are already using some form of marketing channel. The question is, “are you doing it as effectively and profitably as possible?”

What is a channel?
In the broadest sense, a marketing channel is a process for making a product or service available to a specific group of potential customers. A channel can be simple or complex. It can be organized in a horizontal, vertical, or a combination. If you are providing your services directly to clients you are operating the simplest, and most common, channel - a direct-marketing channel. You may not feel the need for more ways to reach your clients. But they may need more ways to reach you! The two most common channel arrangements are known as horizontal and vertical.

Horizontal marketing channels
Horizontal channels are formed when two or more unrelated providers put their resources together to capture a market opportunity. An example of horizontal channel marketing is H&R Block offering tax preparation inside department stores such as Sears, Roebuck & Co. Another might be a software developer and an accounting firm teaming up to provide custom products for clients that neither could provide alone.

Vertical marketing channels
Vertical channels exist when members in a marketing channel cooperate to maximize the gain of the entire channel rather than just their portion of it. One H&R Block channel uses offices to extend its customer base at lowered costs. In fact, of Block’s 8,923 offices, 45% were operated by franchisees.

How do you decide on a channel strategy?
You can use as many channels as possible to reach clients. But beware. A trap that many firms fall into is when a firm tries to be, “Everything to Everyone Everywhere.” Don’t try to provide the same level-of-service options through every channel. Instead first assess your client’s needs and adopt only those channels and services that provide value to clients, complement each other, and contribute to profitability. A service firm may develop a channel strategy where one channel is used to deliver the service (in person tax preparation or other services), another channel to dispense general advice and information (on-line contact information, tax organizers, forms, deduction guidelines or product reviews) and yet another to offer customers general and/or specific advice and information (telephone).

The Internet as a Channel
Today innovations in technology and the Internet are allowing large and small businesses to evolve from static “bricks and mortar” operations to dynamic “bricks and clicks” enterprises. One of the most important considerations in utilizing the internet as a key component of a channel strategy is that consumers, empowered by richer and greater amounts of information accessible online, increasingly drive and control the exchange process. This demands greater focus on resources and support for the development of this channel strategy, responding to its more fluid nature

How do you decide which channel is best?
Given the number of marketing channel options, how do you decide which is best for your practice? In Marketing Management, Philip Kotler suggests three channel evaluation criteria.

Economic – Each channel type will produce different sales results for different costs. As a result, some channels will provide a higher return on investment for a low volume of sales and other channels will provide a higher return on investment for a high volume of sales.
Control – With an in-house sales force there is more control over skills, training, and marketing approach than with a contract sales force.
Adaptive – In periods where the marketing environment changes rapidly, marketing channels must be able to adapt equally rapidly to these conditions. Compare the adaptive ability of the content on a web page to that in a brochure.

Marketing channels are an important part of any marketing plan. However, the appropriate channel type and combination of channels for your practice depends on your clients’ needs, your objectives for the channel, and the resources you make available to manage these channels.

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