The Nature and Importance of Marketing Channels

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The Nature and Importance of Marketing Channels

Few producers sell their goods directly to the final users. Instead, most use intermediaries to bring their products to market. They try to forge a marketing channel (or distribution channel)—a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

A company’s channel decisions directly affect every other marketing decision. Pricing depends on whether the company works with national discount chains, uses high-quality specialty stores, or sells directly to consumers via the Web. The firm’s sales force and communications decisions depend on how much persuasion, training, motivation, and support its channel partners need. Whether a company develops or acquires certain new products may depend on how well those products fit the capabilities of its channel members. For example, Kodak initially sold its EasyShare printers only in Best Buy stores to take advantage of the retailer’s on-the-floor sales staff and their ability to educate buyers on the economics of paying higher initial prices but lower long-term ink costs.

Companies often pay too little attention to their distribution channels, sometimes with damaging results. In contrast, many companies have used imaginative distribution systems to gain a competitive advantage. FedEx’s creative and imposing distribution system made it a leader in express delivery. Enterprise revolutionized the car-rental business by setting up off-airport rental offices. And pioneered the sales of books and a wide range of other goods via the Internet.

Distribution channel decisions often involve long-term commitments to other firms. For example, companies such as Ford, HP, or McDonald’s can easily change their advertising, pricing, or promotion programs. They can scrap old products and introduce new ones as market tastes demand. But when they set up distribution...
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