Establishing Channel Relationships

Since channel members must be convinced to handle a marketer’s product it makes sense to consider channel partner’s needs in the same way the marketer considers the final user’s needs. However, the needs of channel members are much different than those of the final customer. As we noted in the Business Buying Behavior Tutorial, resellers seek products of interest to the reseller’s customers but are also concerned with many other issues such as:

  • Delivery – Resellers want the product delivered on-time and in good condition in order to meet customer demand and avoid inventory out-of-stocks.
  • Profit Margin – Resellers are in business to make money so a key factor in their decision to handle a product is how much money they will make on each product sold. They expect that the difference (i.e., margin) between their cost for acquiring the product from a supplier and the price they charge to sell the product to their customers will be sufficient to meet their profit objectives.
  • Other Incentives – Besides profit margin, resellers may want other incentives to entice them especially if they are required to give extra effort selling the product. These incentives may be in the form of additional free products or even bonuses (e.g., bonus, free trips) for achieving sales goals.
  • Packaging – Resellers want to handle products as easily as possible and want their suppliers to ship and sell products in packages that fit within their system. For example, products may need to be a certain size or design in order to fit on a store’s shelf, or the shipping package must fit within the reseller’s warehouse or receiving dock space. Also, many resellers are now requiring marketers to consider adding identification tags to products (e.g., RFID tags) to allow for easier inventory tracking when the product is received and also when it is sold.
  • Training – Some products require the reseller to have strong knowledge of the product including demonstrating the product to customers. Marketers must consider offering training to resellers to insure the reseller has the knowledge to present the product accurately.
  • Promotional Help – Resellers often seek additional help from the product supplier to promote the product to customers. Such help may come in the form of funding for advertisements, point-of-purchase product materials, or in-store demonstrations.

We will continue our discussion of distribution decision in our next three tutorials as we discuss in greater detail the reseller network – retailers and wholesalers – and the processes involved in physically handling product flow through the channel.

Distribution Systems: Multi-Channel (Hybrid)