Module 4

Distribution of goods takes place by means of channels, and the intermediaries are the independent groups or
organizations within the channel that make the product available for consumption.
There are four main types of intermediary: agents, wholesalers, distributors, and retailers.
A firm may have as many intermediaries in its distribution channel as it chooses. It can even have no
intermediaries at all, if it practices direct marketing.
distribution intermediaries: Independent groups or individuals that provide the channel for a company’s
product to reach the end user.

Intermediaries Functions

Intermediaries, also known as distribution intermediaries, marketing intermediaries, or middlemen, are an

extremely crucial element of a company’s product distribution channel. Without intermediaries, it would be
close to impossible for the business to function at all. This is because intermediares are external groups,
individuals, or businesses that make it possible for the company to deliver their products to the end user. For
example, merchants are intermediaries that buy and resell products.

There are four generally recognized broad groups of intermediaries: agents, wholesalers, distributors, and
retailers.

Agents/Brokers

Agents or brokers are individuals or companies that act as an extension of the manufacturing company. Their
main job is to represent the producer to the final user in selling a product. Thus, while they do not own the
product directly, they take possession of the product in the distribution process. They make their profits through
fees or commissions.

Wholesalers

Unlike agents, wholesalers take title to the goods and services that they are intermediaries for. They are
independently owned, and they own the products that they sell. Wholesalers do not work with small numbers of
product: they buy in bulk, and store the products in their own warehouses and storage places until it is time to
resell them. Wholesalers rarely sell to the final user; rather, they sell the products to other intermediaries such
as retailers, for a higher price than they paid. Thus, they do not operate on a commission system, as agents do.

Distributors

Distributors function similarly to wholesalers in that they take ownership of the product, store it, and sell it off at
a profit to retailers or other intermediaries. However, the key difference is that distributors ally themselves to
complementary products. For example, distributors of Coca Cola will not distribute Pepsi products, and vice
versa. In this way, they can maintain a closer relationship with their suppliers than wholesalers do.
Retailers

Retailers come in a variety of shapes and sizes: from the corner grocery store, to large chains like Wal-Mart
and Target. Whatever their size, retailers purchase products from market intermediaries and sell them directly
to the end user for a profit.

Channel Design

A firm can have any number of intermediaries in its channels. A “level zero” channel has no intermediaries at
all, which is typical of direct marketing. A “level one” channel has a single intermediary, usually from the
manufacturer to the retailer to the consumer.

Role Of Marketing Intermediaries In The Marketing Process

The marketing intermediaries include distributors, agents, wholesalers, retailers etc. The role of
intermediaries becomes very important in distribution of goods or services in marketing process. Their
role can be mentioned as follows:

1. Search For Potential Buyers

Marketing intermediaries search for prospective buyers of the goods or services.

2. Title Of Ownership
The role of intermediaries becomes very important in marketing process. They make producers free
from worry about sale of their products by taking ownership of the product.

3. Communication Link
Marketing intermediaries establish communication link between firms and market, viz producer and
consumers.

4. Wide Range Of Product

Marketing intermediaries collect different goods or services from different producers and supply them
to the consumers.

5. Economy
Marketing Intermediaries purchase huge amount of products at a time and supply to different
customers. This minimizes distribution cost. As a result, the goods or services become comparatively
cheap in price.

6. Feedback
Marketing intermediaries can receive regular reactions and experience of consumers about the
products. Then they give information to the producers about the reactions and experience of the
consumers. This gives chance to the producers to make necessary improvement in the quality of the
product.
Selecting Channel Members
For some producers this is easy; for others it’s a pain in the ass.
Anyway, in order to select them, producers should determine what characteristics distinguish
the better intermediaries (years in business, other lines carried, solvency, reputation, etc.)

Designing a channel of distribution

Channel objectives will be determined by
the organisation’s positioning strategy. The "place"
element of the marketing mix must be consistent with the remaining marketing tools used by the
marketing manager to gain a sustainable competitive advantage. Three options can be identified
•intensive distribution : Generally used for FMCGs and other relatively low-priced or impulse purchases.
•exclusive distribution : Here, distribution may be limited to a small number of intermediaries who gain
better margins and exclusivity.
• selective distribution : This represents a compromise between intensive and selective distribution.
The manufacturer is looking for adequate market coverage, but still hopes to select supportive dealers.

There are a number of key influences on channel selection strategies:

• buyer behaviour (what do customers expect inn terms of location and assortment etc.?),
• producer’s needs (an important constraint is the resources that are available to the manufacturer to
bring the product to market. Some companies will lack the finances to recruit and reward a sales force
and so will use a wholesaler instead.
• product type (e.g. fresh produce that is highly perishable requires fairly short channels)
• competition (e.g. if competitors have exclusive deals with certain intermediaries, then the support of
other channel members with similar marketplace penetration may be sought)

A systematic process for design of a channel is important. An "end-user" analysis will result in the
creation of an "ideal" channel system which offers a multi-channel format catering for the service level
demands of each customer segment. This should be evaluated in terms of the
company’s objectives and its positioning relative to the competition. A constraints analysis is
needed to identify limits which have to be built into any proposed channel structure.

Managers can choose from among three generic marketing channels:

•direct marketing : This involves reaching customers via communications media such as telesales, mail
shots, catalogues or advertisements with tear-off reply slips.
•sales force : Here a company might build its own team of salespeople, or perhaps hire an independent
contract sales force.
•channel intermediary : alternative channels used in order to reach industrial (organisational)
customers. In general, these channels are shorter than those for consumer goods. In the case of
services, it is not possible to "own" a service and their delivery cannot be easily separated from the
service provider. These factors, and the inability to hold an "inventory" of unsold services, means that
the role of channel intermediary can be very different for services compared to goods. Companies in
both consumer and business-to-business markets use a variety of channels to distribute their products.
Motivating Channel Members
Constant training, supervision & encouragement. Producers can draw on the following types of
power to elicit cooperation:

 Coercive power. Manufacturer threatens to withdraw a resource or terminate a

relationship if intermediaries fail to cooperate. Produces resentment.
 Reward power. Manufacturer offers intermediaries extra benefits for performing specific
acts.
 Legitimate power. Manufacturer requests a behavior that is warranted by the contract.
 Expert power. Manufacturer has special knowledge that the intermediaries value.
 Referent power. Intermediaries are proud to be identified with the manufacturer.

Motivating intermediaries
It is frequently necessary to motivate channel members. This is so because of the differing needs of
intermediaries and producers: these needs do not necessarily coincide (e.g., a manufacturer may seek
exclusive distribution of its products at high prices, whereas a retailer may be pursuing a strategy of
market penetration through budget pricing of a wide range of goods). The situation is further
complicated by the fact that intermediaries and producers often have different perceptions about their
own roles in the supply chain. Doyle suggests two levels of motivator: promotional and partnership.

Promotional channel motivators are usually short-term inducements to support the supplier’s goods
(e.g. trade discounts for large order volumes or providing point-of-sale display materials).

Partnership motivators, on the other hand, seek to build a longer-term relationship between suppliers
and channel participants (e.g. through sharing of market research information and providing training to
a distributor’s sales staff).

Evaluation and control of intermediaries

Evaluation of channel performance is necessary to decide which intermediaries to retain and which to
motivate, or even, where necessary, to discard. Criteria for evaluation are obviously similar to those
used in the initial selection decision (see above). Once the relationship between organisations has been
established, criteria can include: the sales volume and value of the producer’s goods that are generated
through the intermediary’s outlets, the profitability of servicing that intermediary, the stock levels the
intermediary is prepared to hold, the quality of customer service offered, feedback provided about the
marketplace and the intermediary’s attitude to inter-channel co-operation. However, the scope for
evaluation maybe severely limited if power lies with the channel member rather than the producer.

DISTRIBUTION ANALYSIS AND MANAGEMENT

A strong focus should be placed by marketing departments on relationship management with channel
participants. A possible way forward for manufacturers is Category Management. This is described by
Harlow (1995) as "joint strategic planning with retailers to build total category sales and profit for
mutual benefit" and is based on the fact that the retailer wishes to maximise the profits from an overall
category rather than from a specific brand. A category is seen as a group of products all satisfying the
same consumer need, e.g. toothpaste as opposed to, say, Crest. Category management is an advance on
the "push" policies of trade marketing(i.e. to the retailer) and provides "pull" by sharing the ownership
of brand strategy with the intermediary. Partnerships between producers and intermediaries are also
evident in the Efficient Consumer Response (ECR) initiative. ECR involves members of the total supply
chain working together to respond to customers’ purchasing patterns, thereby ensuring the right
products are delivered to store shelves on time. There are three types of vertical marketing system:
corporate, administered and contractual. The first of these, corporate, is actually increasingly rare since
many organizations either cannot afford to, nor wish to, invest in fixed assets or skills where they do not
have a competitive advantage (Doyle 1998). Administered systems arise when participants are
financially independent but are effectively controlled by the most powerful channel member.
In contractual systems channel members’ rights and obligations are defined by legal agreements. These
can include collaborative agreements such as the voluntary chains discussed earlier in this Chapter,
where separate firms share resources and agree to joint purchasing initiatives, and franchise
arrangements.

Franchising Systems
In a franchise system a seller (the franchisor) gives an intermediary (the franchisee) specific services
(such as marketing support) and rights to market the seller’s product or service within an agreed
territory. In return, the franchisee agrees to follow certain procedures and not to buy from unauthorized
sellers. The franchisor also typically offers assistance in management and staff training, merchandising
and operating systems. This support is usually provided in exchange for a specified fee or royalties on
sales from the franchisee. Examples of businesses which are predominantly franchised include
McDonald’s, Body Shop, Benetton, Tie Rack and Pronuptia.

Franchising offers both manufacturer/ retailers and entrepreneurial intermediaries the opportunity to
undertake relatively rapid market development at relatively low risk. Consequently, for many
internationally operating companies, franchising has become the cornerstone of their global expansion
activity. Having said this, problems in controlling standards amongst individual franchisees can occur,
e.g. the failure of some of The Body Shop’s outlets in France. When this takes place, the image of the
franchisor can be seriously dented.

Global Retailing
The growth of channel intermediaries across national boundaries. Pelligrini suggests that retail
companies have three options for growth: vertical integration, retail diversification and
internationalization. Retailing has often been slow to expand globally because of the high level of
investment needed to set up in another country, especially when this involves organic growth or risky
acquisitions, e.g. the failure of Marks & Spencer to turn around the fortunes of the Brooks Brothers
menswear chain in the US. Nevertheless, due to the limited possibilities for growth in national markets,
many of the more dynamic retailers have increasingly internationalized their operations.
Channel Dynamics

Channel Power
Strong channel partners often wield what’s called channel power and are referred to as channel
leaders, or channel captains. In the past, big manufacturers like Procter & Gamble and Dell
were often channel captains. But that is changing. More often today, big retailers like Walmart
and Target are commanding more channel power. They have millions of customers and are
bombarded with products wholesalers and manufacturers want them to sell. As a result, these
retailers increasingly are able to call the shots. In other words, they get what they want.
Category killers are in a similar position. Consumers like you are gaining marketing channel
power, too. Regardless of what one manufacturer produces or what a local retailer has available,
you can use the Internet to find whatever product you want at the best price available and have
it delivered when, where, and how you want.

Channel Conflict
A dispute among channel members is called a channel conflict. Channel conflicts are common.
Part of the reason for this is that each channel member has its own goals, which are unlike those
of any other channel member. The relationship among them is not unlike the relationship
between you and your boss (assuming you have a job). Both of you want to serve your
organization’s customers well. However, your goals are different. Your boss might want you to
work on the weekend, but you might not want to because you need to study for a Monday test.
All channel members want to have low inventory levels but immediate access to more products.
Who should bear the cost of holding the inventory? What if consumers don’t purchase the
products? Can they be returned to other channel members, or is the organization in possession
of the products responsible for disposing of them? Channel members try to spell out details such
as these in their contracts.

No matter how “airtight” their contracts are, there will still be points of contention among
channel members. Channel members are constantly asking their partners, “What have you done
(or not done) for me lately?” Wholesalers and retailers frequently lament that the manufacturers
they work with aren’t doing more to promote their products—for example, distributing coupons
for them, running TV ads, and so forth—so they will move off store shelves more quickly.
Meanwhile, manufacturers want to know why wholesalers aren’t selling their products faster
and why retailers are placing them at the bottom of shelves where they are hard to see. Apple
opened its own retail stores around the country, in part because it didn’t like how its products
were being displayed and sold in other companies’ stores.

Channel conflicts can also occur when manufacturers sell their products online. When they do,
wholesalers and retailers often feel like they are competing for the same customers when they
shouldn’t have to. Likewise, manufacturers often feel slighted when retailers dedicate more shelf
space to their own store brands. Store brands are products retailers produce themselves or pay
manufacturers to produce for them. Dr. Thunder is Walmart’s store-brand equivalent of Dr.
Pepper, for example. Because a retailer doesn’t have to promote its store brands to get them on
its own shelves like a “regular” manufacturer would, store brands are often priced more cheaply.
And some retailers sell their store brands to other retailers, creating competition for
manufacturers.
Vertical versus Horizontal Conflict
The conflicts we’ve described so far are examples of vertical conflict. A vertical conflict is conflict
that occurs between two different types of members in a channel—say, a manufacturer, an agent,
a wholesaler, or a retailer. By contrast, a horizontal conflict is conflict that occurs between
organizations of the same type—say, two manufacturers that each want a powerful wholesaler to
carry only its products.
Horizontal conflict can be healthy because it’s competition driven. But it can create problems,
too. In 2005, Walmart experienced a horizontal conflict among its landline telephone suppliers.
The suppliers were in the middle of a price war and cutting the prices to all the retail stores they
sold to. Walmart wasn’t selling any additional phones due to the price cuts. It was just selling
them for less and making less of a profit on them (Hitt, et. al., 2009).

Channel leaders like Walmart usually have a great deal of say when it comes to how channel
conflicts are handled, which is to say that they usually get what they want. But even the most
powerful channel leaders strive for cooperation. A manufacturer with channel power still needs
good retailers to sell its products; a retailer with channel power still needs good suppliers from
which to buy products. One member of a channel can’t squeeze all the profits out of the other
channel members and still hope to function well. Moreover, because each of the channel
partners is responsible for promoting a product through its channel, to some extent they are all
in the same boat. Each one of them has a vested interest in promoting the product, and the
success or failure of any one of them can affect that of the others.

Flash back to Walmart and how it managed to solve the conflict among its telephone suppliers:
Because the different brands of landline telephones were so similar, Walmart decided it could
consolidate and use fewer suppliers. It then divided its phone products into market segments—
inexpensive phones with basic functions, midpriced phones with more features, and high-priced
phones with many features. The suppliers chosen were asked to provide products for one of the
three segments. This gave Walmart’s customers the variety they sought. And because the
suppliers selected were able to sell more phones and compete for different types of customers,
they stopped undercutting each other’s prices (Hitt, et. al., 2009).

One type of horizontal conflict that is much more difficult to manage is dumping, or the practice
of selling a large quantity of goods at a price too low to be economically justifiable in another
country. Typically, dumping can be made possible by government subsidies that allow the
company to compete on the basis of price against other international competitors who have to
operate without government support, but dumping can also occur due to other factors. One goal
of dumping is to drive competitors out of a market, then raise the price. Chinese garlic
producers were accused of this practice in the early 2000s, and when garlic prices soared due to
problems in China, other countries’ producers were unable to ramp back up to cover the
demand. U.S. catfish farmers have recently accused China of the same strategy in that market.
While there are global economic agreements that prohibit dumping and specify penalties when
it occurs, the process can take so long to right the situation that producers have already left the
business.

Achieving Channel Cooperation Ethically

What if you’re not Walmart or a channel member with a great deal of power? How do you build
relationships with channel partners and get them to cooperate with you? One way is by
emphasizing the benefits of working with your firm. For example, if you are a seller whose
product and brand name are in demand, you want to point out how being one of its “authorized
sellers” can boost a retailer’s store traffic and revenues.
Oftentimes companies produce informational materials and case studies showing their partners
how they can help boost their sales volumes and profits. Channel partners also want to feel
assured that the products coming through the pipeline are genuine and not knockoffs and that
there will be a steady supply of them. Your goal is to show your channel partners that you
understand issues such as these and help them generate business.

Sometimes the shoe is on the other foot—retailers have to convince the makers of products to do
business with them instead of the other way around. Beauty.com, an online retailer, is an
example. Selling perfumes and cosmetics online can be difficult because people want to be able
to smell and feel the products like they can at a department store. But Beauty.com has been able
to convince the makers of more than two hundred upscale cosmetic brands that selling their
products on its Web site is a great deal and can increase their revenues. To reassure sellers that
shoppers can get personalized service, Beauty.com offers the site’s visitors free samples of
products and the ability to chat live online with skin and hair care consultants (Evans, 2007).

Producing marketing and promotional materials their channel partners can use for sales
purposes can also facilitate cooperation among companies. In-store displays, brochures,
banners, photos for Web sites, and advertisements the partners can customize with their own
logos and company information are examples. Look at the banner in. Although it looks like it
was made by the grocery store displaying it, it wasn’t. It was produced by Boar’s Head, a meat
supplier, for the grocer and others like it.

Educating your channel members’ sales representatives is an extremely important part of

facilitating cooperation, especially when you’re launching a new product. The reps need to be
provided with training and marketing materials in advance of the launch so their activities are
coordinated with yours. Microsoft is a company that does a good job of training its partners.
Before launching operating systems such as Windows XP and Vista, Microsoft provides
thousands of its partners with sales and technical training .
1

In addition, companies run sales contests to encourage their channel partners’ sales forces to
sell what they have to offer. Offering your channel partners certain monetary incentives, such as
discounts for selling your product, can help, too.

What shouldn’t you do when it comes to your channel partners? Take them for granted, says
John Addison, the author of the book Revenue Rocket: New Strategies for Selling with
Partners. Addison suggests creating a dialogue with them via one-on-one discussions and
surveys and developing “partner advisory councils” to better understand their needs.
You also don’t want to “stuff the channel,” says Addison. Stuffing the channel occurs when, in
order to meet its sales numbers, a company offers its channel partn ers deep discounts and
unlimited returns to buy a lot of a product. The problem is that such a strategy can lead to a
buildup of inventory that gets steeply discounted and dumped on the market and sometimes on
gray markets. This can affect people’s perceptions of the product and its brand name. And what
happens to any unsold inventory? It gets returned back up in the channel in the next accounting
period, taking a toll on the “stuffers’” sales numbers.

Lastly, you don’t want to risk breaking the law or engage in unfair business practices when
dealing with your channel partners . We have already discussed confidentiality issues. Another
1

issue channel partners sometimes encounter relates to resale price maintenance agreements.
A resale price maintenance agreement is an agreement whereby a producer of a product restricts
the price a retailer can charge for it.
The producers of upscale products often want retailers to sign resale price maintenance
agreements because they don’t want the retailers to deeply discount their products. Doing so
would “cheapen” their brands, producers believe. Producers also contend that resale price
maintenance agreements prevent price wars from breaking out among their retailers, which can
lead to the deterioration of prices for all of a channel’s members.

Both large companies and small retail outlets have found themselves in court as a result of price
maintenance agreements. Although the U.S. Supreme Court hasn’t ruled that all price
maintenance agreements are illegal, some states have outlawed them on the grounds that they
stifle competition. In some countries, such as the United Kingdom, they are banned altogether.
The safest bet for a manufacturer is to provide a “suggested retail price” to its channel partners.

Channel Integration: Vertical and Horizontal Marketing Systems

Another way to foster cooperation in a channel is to establish a vertical marketing system. In
a vertical marketing system, channel members formally agree to closely cooperate with one
another. (You have probably heard the saying, “If you can’t beat ’em, join ’em.”) A vertical
marketing system can also be created by one channel member taking over the functions of
another member; this is a form of disintermediation known as vertical integration.
Procter & Gamble (P&G) has traditionally been a manufacturer of household products, not a
retailer of them. But the company’s long-term strategy is to compete in every personal-care
channel, including salons, where the men’s business is underdeveloped. In 2009, P&G
purchased The Art of Shaving, a seller of pricey men’s shaving products located in upscale
shopping malls. P&G also runs retail boutiques around the globe that sell its prestigious SK-II
skin-care line (Neff, 2009).

Vertical integration can be forward, or downstream, as in the case of P&G just

described. Backward integration occurs when a company moves upstream in the supply chain—
that is, toward the beginning. An example occurred when Walmart bought McLane, a grocery
warehousing and distribution company. As much as physical facilities, Walmart also wanted
McLane’s operating knowledge in order to improve its own logistics.
Franchises are another type of vertical marketing system. They are used not only to lessen
channel conflicts but also to penetrate markets. Recall that a franchise gives a person or group
the right to market a company’s goods or services within a certain territory or location
(Daszkowski, 2009). McDonald’s sells meat, bread, ice cream, and other products to its
franchises, along with the right to own and operate the stores. And each of the owners of the
stores signs a contract with McDonald’s agreeing to do business in a certain way.

By contrast, in a conventional marketing system the channel members have no affiliation with
one another. All the members operate independently. If the sale or the purchase of a product
seems like a good deal at the time, an organization pursues it. But there is no expectation among
the channel members that they have to work with one another in the future.
A horizontal marketing system is one in which two companies at the same channel level—say,
two manufacturers, two wholesalers, or two retailers—agree to cooperate with another to sell
their products or to make the most of their marketing opportunities, and is sometimes
called horizontal integration. The Internet phone service Skype and the mobile-phone maker
Nokia created a horizontal marketing system by teaming up to put Skype’s service on Nokia’s
phones. Skype hopes it will reach a new market (mobile phone users) this way. And Nokia hopes
to sell its phones to people who like to use Skype on their personal computers (PCs) .2

Similarly, Via Technologies, a computer-chip maker that competes with Intel, has teamed up
with a number of Chinese companies with no PC-manufacturing experience to produce $200
netbooks. Via Technologies predicts that the new, cheaper netbooks the Chinese companies sell
will quickly capture 20 percent of the market (Hill, 2009). Of course, the more of them that are
sold, the more computer chips Via Technologies sells.

Multi-channel marketing is the implementation of a single strategy across multiple channels or

platforms, thus maximizing opportunities to interact with prospective customers. A channel
might be email, a print ad, a retail location, a website, a promotional event, a mobile app, SMS
messaging, a product’s package, or word-of-mouth.

The goal of multi-channel is to give consumers a choice, and allow them buy when and where
they want to.

Simple, right? Not really. In fact, at Emarsys, we think “multi-channel marketing” is actually
somewhat limiting. To help break down multi-channel marketing and provide more clarity
around the term and the industry, we’ve outlined below the perceived benefits, challenges
Perceived Benefits of Multi-Channel Marketing

There are a number of perceived benefits to multi-channel marketing, but as any

marketer knows, there’s always more to the story:

Increased Awareness. The multi-channel approach is about casting the widest net to get the
maximum customer engagement. However, the multi-channel approach only accounts for
number of touch points, versus trying to give customers the best holistic experience throughout
all touch points.

Consistent Messaging. One benefit of multi-channel marketing is the allure of a consistent brand
message. It’s a challenge facing all companies, and one many are still trying to figure out. While
a multi-channel strategy can help ensure your brand has a consistent message, multi-channel
marketing itself usually results in siloed departments pushing their own messaging on their own
channels.

Channel Preference. Reach your customers on their preferred channel. Sounds perfect, right?
Yes and no. For companies with a longer buying cycle, you need to hit potential customers more
than once, and that means targeting them with the right message, in the right place, at the right
time within their journey. Multi-channel marketing may allow you to reach customers on the
channel of their choice, but it doesn’t necessarily move them along to purchase.

More Data. More touch points means more data. However, since a multi-channel approach
merely aims to get the word out via the maximum possible number of channels, the data
provides more information about the channel itself than the actual customer (think email
subject lines vs. customer behavior across channels).

Challenges of Multi-Channel Marketing

Tablet, notebook and newspaper Every marketing strategy has its own set of challenges. It’s why
we have jobs, right? The same applies for multi-channel marketing:

Marketing vs. Strategy. The biggest issue with the term multi-channel marketing is that it
doesn’t necessarily account for strategy. When people think about multi-channel, they simply
think about the different mediums used to reach their customers. A multi-channel strategy, on
the other hand, considers how customers move and interact across the various platforms. It may
seem like semantics but it’s an important difference.

More Touch points = More Complexity. Creating a multi-channel strategy means having a
cohesive message across a number of channels, and a continuous evolution of that message as
more data is gathered per customer. This often means new tools or data platforms are needed,
someone has to be able to understand the data, and all departments have to be constantly
aligned.

Time & Resources. Just as new tools or software are needed, more time and resources are
required to truly build a successful multi-channel marketing strategy. Something not all
companies have or are prepared for.

Attribution. Who gets the credit for leads and revenue? The email marketing team, the social
media team, the search team? Multi-channel marketing without the strategy and right
attribution model can lead to confusion, and make it hard for the marketing team to make
informed decisions on budgeting and resources.

How to Create a Successful Multi-Channel Marketing Strategy

Business people shooting video tutorial Creating a successful multi-channel marketing strategy
is no easy feat, but there are certain considerations that come into play and some ways to get
started:

Integrate Marketing Departments. As mentioned previously, to run a truly successful multi-

channel program, departments must be aligned. Break down existing silos to create an
integrated marketing team.

Understand Your Buyer. To create a multi-channel strategy, you first must understand your
buyer. Create personas, talk to actual customers, and create tests on the various platforms,
testing messaging, timing, sequences, and more.

Establish a Multi-Channel Platform. The goal of your program should inevitably be to create a
single customer view that constantly evolves based on data and campaign testing. To do this,
you will need to have a platform that consolidates data and allows you to create 1-to1 marketing
programs based on said data.

Create a Unified Experience. Multi-channel marketing can’t just be about getting your message
out there in as many places as possible. Give customers a unified and personalized experience
across your various marketing channels. We know it takes work, but it’ll be worth it in the end.
Multi-channel Marketing vs. Omnichannel Marketing

While multi-channel certainly has its benefits, it is only part of the picture. Yes, multi-channel
makes it possible to interact with more prospective customers and at an increased frequency,
however, brands must have a strategy to unite the customer experience across these various
channels. Enter: omnichannel.

As noted above, multi-channel tends to refer to the simple distribution of messages across as
many channels as possible, while omnichannel refers to the strategic establishment of a holistic
customer experience.

We break down omnichannel as follows:

Omnichannel marketing is a multi-channel sales approach that provides the customer with an
integrated shopping experience. The customer can be shopping online from a desktop or mobile
device, via phone, or in a brick-and-mortar store, and the experience will be seamless.

Omnichannel marketing focuses on the customers first. It watches their engagement with the
brand, uses data to make informed (and often automated) decisions, and optimizes campaigns
as they go.

Want more information? Check out our post 4 Important Differences Between Multi-Channel &
Omnichannel Marketing.
The Channel Conflict arises when the channel partners such as manufacturer, wholesaler,
distributor, retailer, etc. compete against each other for the common sale with the same brand.
In other words, there is a conflict among the channel partners when one prevents the other from
achieving its objective. It results in a huge loss for all the partners in the channel.
Usually this situation occurs when a producer or supplier bypasses the normal channel of distribution
and sells directly to the end user. Selling over the internet while maintaining a physical distribution
network is an example of channel conflict.

1. Vertical Channel Conflict: This type of conflict arises between the different levels in the same
channel.
E.g. The conflict between the manufacturer and the wholesaler regarding price, quantity,
marketing activities, etc.
2. Horizontal Channel Conflict: This type of conflict arises between the same level in the same
channel.
E.g. The conflict between two retailers of the same manufacturer faces disparity in terms of
sales target, area coverage, promotional schemes, etc.
3. Multichannel Conflict: This type of conflict arises between the different market channels
participating in the common sale for the same brand.
E.g. If a manufacturer uses two market channels, first is the official website through which the
 products and services are sold. The second channel is the traditional channel i.e. through
wholesaler and retailer. If the product is available at a much lower price on a website than is
available with the retailer, the multichannel conflict arises.

Causes of Channel Conflict

• Goal incompatibility:
Different partners in the channel of distribution have different goals that may or may not coincide with
each other and thus result in conflict.
E.g. The manufacturer wants to achieve the larger market share by adopting the market penetration
strategy i.e. offering a product at low price and making the profits in the long run, whereas the dealer
wants to sell the product at a high cost i.e. market skimming strategy and earn huge profits in the short
run.
• Ambiguous Roles:
The channel partners may not have a clear picture of their role i.e. what they are supposed to do, which
market to cater, what pricing strategy is to be adopted, etc.
E.g. The manufacturer may sell its products through its direct sales force in the same area where the
authorized dealer is supposed to sell; this may result in the conflict.
• Different Perceptions:
The channel partners may have different perceptions about the market conditions that hampers the
business as a whole thereby leading to the conflict.
E.g. The manufacturer is optimistic about the change in the price of the product whereas the dealer
feels the negative impact of price change on the customers.
• Intermediaries Dependence on Manufacturers:
The intermediaries such as the wholesaler, distributor, retailer, etc. carry the process of distribution of
goods and services for the manufacturer. And if the manufacturer makes any change in the price,
product, marketing activity the same has to be implemented with an immediate effect thereby
reflecting the huge dependence of intermediaries on the manufacturer.
E.g. If the manufacturer changes the promotional scheme of a product with the intention to cut the cost,
the retailer may find it difficult to sell the product without any promotional scheme and hence the
conflict arises.
• Communication Barriers:
This is one of the major reasons that lead to the conflict among the channel partners. If any partner is
not communicated about any changes on time will hamper the distribution process and will result in
disparity.
E.g. If retailer urgently requires the stock and the wholesaler didn’t inform him about the availability of
time may lead to the conflict between the two.

Managing the Channel Conflict

• Strategic Justification
Justifying that different channels serve different segments and dot need to compete.
 • Dual Compensation
Paying existing channels to sell through new channels

• Super-ordinate Goals:
The channel partners must decide a single goal in terms of either increased market share, survival, profit
maximization, high quality, customer satisfaction, etc. with the intention to avoid conflicts.
• Exchanging employees:
one of the best ways to escape channel conflict is to swap employees between different levels i.e. two
or more persons can shift to a dealer level from the manufacturer level and from wholesale level to the
retailer level on a temporary basis. By doing so, everyone understands the role and operations of each
other thereby reducing the role ambiguities.
• Trade associations:
Another way to overcome the channel conflict is to form the association between the channel partners.
This can be done through joint membership among the intermediaries. Every channel partner works as
one entity and works unanimously.
• Co-optation:
Under this, any leader or an expert in another organization is included in the advisory committee, board
of directors, or grievance redressal committees to reduce the conflicts through their expert opinions.
• Diplomacy, Mediation and Arbitration:
when the conflict becomes critical then partners have to resort to one of these methods.
In Diplomacy, the partners in the conflict send one person from each side to resolve the conflict.
In Mediation, the third person is involved who tries to resolve the conflict through his skills of
conciliation.
In Arbitration, when both the parties agree to present their arguments to the arbitrator and agree to his
decision.
• Legal recource:
When the conflict becomes crucial and cannot be resolved through any above mentioned ways, the
channel partners may decide to file a lawsuit.
Thus, it is a fundamental responsibility of every organization to maintain harmonious relations with its
channel partners as the conflict between these may result in huge losses for each involved in the
channel including the manufacturing company.
Legally law always safeguards the interests of the weaker partner in any dispute. The company dealers
and distributors have protection under the law. While the company and its channel partners may want
to go the legal way only as a last resort.
Please Note:
• Use of exclusive dealers by company is not permitted. The company cannot bind the distributor
from doing any business of his choice.
• Similarly, the company cannot formally designate the ‘territory’ to be covered by a contracted
channel member. This protects both the company (who can appoint more dealers in the same
area) and the channel member who can sell beyond his ‘designated’ territory.
• Full Line forcing is not legally permitted. The company cannot force the dealer or a retailer that
if he wants a popular product, he has to also buy a slow moving product.
• Termination of contracted distributors for poor performance is not easy even when it is
mentioned in the contract/agreement. The cause has to be clearly established. Non
performance cannot be easily proved if the dealer challenges the target and the target setting
process itself.