Marketing with Multiple Channels

Posted in Marketing & Strategy Articles, Total Reads: 3409 , Published on 03 November 2011
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Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationship and create value for their customers and for themselves.

 

This internet era of world has opened so many options to the people. Talking towards marketing perspective, options available for consumer to buy as well as options available to seller to sell becomes much wider

Marketing is used to identify the customer, satisfy the customer, and keep the customer but the question arises that how do you do that?

When we try to sort out this, we can find that customer wants justification.

Justification of what and to whom?

Justification of customer’s cost or expenditure, which could be cash or non-cash (in terms of time and other expenses), which is provided by perceived benefits of product by customer usually called value for his money.

Now this value term becomes soul to the marketing phenomena, providing value to the customer involves 3 steps process-

  1. Value creation
  2. Value communication
  3. Value delivery

Channels are medium to serve the purpose of this process.

PRODUCTS WITH MULTIPLE CHANNELS

Today various types of channels are available for marketers, it can be categorized as conventional channels, which includes a chain among manufacturer, wholesaler, retailer and finally consumer and non-conventional channels which includes internet and technology driven channels like, online marketing, mobile/SMS marketing etc. Another kind of categorization is also possible in terms of direct and indirect marketing channels. Here the context is, a single product line is available through different channels. Having multiple channels opens the opportunity of cross selling, better utilization of resource, better customer service, and provides more option and reach to the customer. It also provides better margin and more revenue generation at financial point of view of the company.

CANNIBALIZATION AND COMPLEXITY

There are several problems arises due to multiple channels

Increasing cost of operation

Operating with multiple channels requires more manpower, time and resources so ultimately incurred high cost.

Channel conflict

This is a major problem with multiple channel, some times more than one channels approaches to the same customer that creates a problem of credibility among channels, which channel is being credited for that particular sales, this arises a kind of competition between channels and loose its charm towards support and integration of channels.

Management problems

Managing multiple channels parallel is always been a tedious task, more skill, manpower, is required. Sometime it appears complexity becomes so much to handle if it has not been observed earlier.

Price justification of products

Every channel has its own operational cost, that might create significant difference in price of same product, pricing of products should be same perceived by customer ,if it is not done then customer cheated himself and try to shift from one channel to other and at the end of the day company might land up with unpredictable demand and supply equation problem, some channels has high operational cost and also high sales generation, some others have low operating cost and low sales but these types of channels attracts higher margin for company perspective, so price structuring is required for each channel and communicated to end consumer successfully.

Minimum winning game

This evolution and growth of internet and communication technology has its own charm which provides lucrativeness to both marketer as well as consumer, so completion becomes more intense due to increase of number of players in the market, which has challenges the players to sustain and grow themselves in pressure of innovation, it can be a sustaining innovation or a disruptive innovation but the matter of fact that it is required to beat their competitor, as well observed in marketing “someone grows at expense of others”.

And finally adhere to continue with “let us keep the cannibals in the family”.

DOES IT ACCEPTABLE TO BYPASS THE EXISTING CHANNEL TO PROMOTE NEW ONE

As to sustain and grow in the market it is quite  difficult to decide whether to leave the existing channel and choose new one, keep existing channel and parallel development of new channel or just avoid the new one and keep focusing on existing one. Researchers has observed, sustaining innovation leads to keep the existing channel and develop new channel parallel to the existing one, but disruptive innovation leads just opposite view of earlier one. So, it is up to the company that how it categorized its innovation strategy.

PRODUCT BOUNDARIES AND CHANNEL LIMITATIONS

As above mentioned problems, here we consider what a company should do to avoid or resolve it:

Company should start figuring out to what extent it can create boundaries between products and between customers for each channel, like product1, product2 to 1st channel and product2 to 2nd channel, but problem occurs with channel leakage.

Leakage segmentation

To avoid leakage, company has to promote price convergence and to make it effective company should provide compensation for cost difference in terms of full-service, warranty etc.

CONCLUSION

Finally it comes to the point that, technology enabled era of the world required multiple channels to sustain and grow, although it has its benefits and shortcomings but if a company able to manage it and provide justifications then it gives expected results.

By making benchmarks for cost benefit tradeoff and develop an appropriate response, implementing some policies to curb the immediate rivalry and by providing incentives and compensation to all channels, not to counter attack towards the new channel are some key points a company has to consider to manage its negative impacts company can cope with the changing environment and perform better than its competitor if it manage multiple channel better than its competitors.

References;

Book: “Strategic management of technology and innovation” page 310 to 317 by A. Burgelman, M. Christensen and C. Wheel wright,

Book: “Transforming your go-to marketing strategy”, chapter 4 page 194 figure: Leaky segmentation

http://en.wikipedia.org/wiki/Marketing

 

This article has been authored by Umesh Arya from IIM Kozhikode



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