There are basically four types of marketing channels:
- Direct selling;
- Selling through intermediaries;
- Dual distribution; and
- Reverse channels.
Essentially, a channel might be a retail store, a website, a mail-order catalog, or direct personal communications by a letter, email or text message. Here’s a bit of information about each one.
Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.
Modern direct selling includes sales made through the party plan, one-on-one demonstrations, personal contact arrangements as well as internet sales.
A textbook definition is: “The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs. ”
Industry representative, the World Federation of Direct Selling Associations (WFDSA), reports that its 59 regional member associations accounted for more than US$114 Billion in retail sales in 2007, through the activities of more than 62 million independent sales representatives.
The United States Direct Selling Association (DSA) reported that in 2000, 55% of adult Americans had at some time purchased goods or services from a direct selling representative and 20% reported that they were currently(6%) or had been in the past(14%) a direct selling representative.
According to the WFDSA, consumers benefit from direct selling because of the convenience and service benefits it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. In contrast to franchising, the cost for an individual to start an independent direct selling business is typically very low, with little or no required inventory or cash commitments to begin.
Most direct selling associations, including the Bundesverband Direktvertrieb Deutschland, the direct selling association of Germany, and the WFDSA and DSA require their members to abide by a code of conduct towards a fair partnership both with customers and salespeople. Most national direct selling associations are represented in the World Federation of Direct Selling Associations (WFDSA).
Direct selling is different from direct marketing in that it is about individual sales agents reaching and dealing directly with clients while direct marketing is about business organizations seeking a relationship with their customers without going through an agent/consultant or retail outlet.
Direct selling often, but not always, uses multi-level marketing (a salesperson is paid for selling and for sales made by people they recruit or sponsor) rather than single-level marketing (salesperson is paid only for the sales they make themselves).
Selling Through Intermediaries
A marketing channel where intermediaries such as wholesalers and retailers are utilized to make a product available to the customer is called an indirect channel.
The most indirect channel you can use (Producer/manufacturer –> agent –> wholesaler –> retailer –> consumer) is used when there are many small manufacturers and many small retailers and an agent is used to helping coordinate a large supply of the product.
Dual Distribution- the simultaneous use of distribution channels
Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or wholesalers uses more than one channel simultaneously to reach the end-user. They may sell directly to the end-users as well as sell to other companies for resale. Using two or more channels to attract the same target market can sometimes lead to channel conflict.
An example of dual distribution is business format franchising, where the franchisors, license the operation of some of its units to franchisees while simultaneously owning and operating some units themselves.
Recycling is an example of a reverse marketing channel.
If you’ve read about the other three channels, you would have noticed that they have one thing in common — the flow. Each one flows from producer to intermediary (if there is one) to consumer.
Technology, however, has made another flow possible. This one goes in the reverse direction and may go — from consumer to intermediary to the beneficiary. Think of making money from the resale of a product or recycling.
There is another distinction between reverse channels and the more traditional ones — the introduction of a beneficiary. In a reverse flow, you won’t find a producer. You’ll only find a User or a Beneficiary.
Selecting Marketing Channels strategy
Strategic selection of marketing channels can impact an organization’s brand, profitability, and the overall scale of operations for a given line of products or services
General distribution strategies.
- Intensive Distribution: As many outlets as possible. The goal of the intensive distribution is to penetrate as much of the market as possible. it refers to a marketing channel characterised by many outlets distributing products across different areas. It is commonly used when a new product has been launched to the market and the business wants the product to go viral in different areas. Mohammed Entreprises and Bakhresa Food Products of Tanzania use this distribution strategy by making sure their products are available in as many outlets as possible.
- Selective Distribution: this is the form of distribution channel where there are few distribution outlets. That is Select outlets in specific locations. This is often based on a particular good and its fit within a store. Doing this allows manufacturers to pick a price point that targets a specific market of consumers, therefore providing a more/encourage customized shopping experience. Selective distribution caps the number of locations in a particular area. But also the stage with which the product is in a product lifecycle determines which distribution channel to use. If the product is in the introductory or decline stage selective distribution can be used. Examples of distributors could be medicine and army material distributors. These are highly selected due to the degree of risk associated with the product.
- Exclusive Distribution: Limited outlets. This can mean anything from luxury brands that are exclusive to special collections available only in particular locations or stores. This method helps maintain a brand’s image and product exclusivity. Come to think of it, franchises use this distribution channel strategy well. The nature of the product or service necessitates the use of this channel. Some examples of companies that enact exclusive distribution would be high-end designers like Channel or even an automotive company like Ferrari, franchises like steers, Woolworth, IKEA, etc, in service industries examples are banks like CRDB and NMB of Tanzania and hotels
Also, the stage with which the product is in a product lifecycle determines which distribution channel to use.
Distribution strategy in Product life cycle
- Introduction- Build selective distribution
- Growth- Build intensive distribution
- Maturity- Build more intensive distribution
- Decline- Go selective: phase out unprofitable outlets