Understanding distribution channels

A distribution channel is a pathway that carries three things. The first is your product or service. Now they can travel in both directions, from you, the manufacturer, to the customer, and vice versa. Pathways also carry money and anything related to the transaction, which may include financing, negotiations, and perhaps contracting. And finally, the pathway carries information. You send information through the channel about your product, your prices, availability, and promotional messages about a new product. In the other direction flows information from your customer, especially about their beliefs and attitudes. Hey, you could learn vital information that would help you analyze your market to create your marketing strategy. Now to design a channel, you have to decide three things: the length, the breadth, and the depth. Length of channel means the number of intermediaries between you and the customer. You may want to sell direct, meaning the channel length is very short. Or you may need to go indirect and hire partners to ship, warehouse, and sell your product. Breadth of channel means the number of outlets of each type of partner. Exclusive distribution means you have just a few outlets selling your product. So, a high-end jewelry company like Tiffany’s has just a few outlets, whereas a company like Starbucks has thousands. Depth of channel means how much of the channel you own and control versus having a third party do it for you. Hey, channels are expensive, and you might not have the resources or skills to do all of it. So, you’ll usually have to hire others to help. It takes a lot of work and energy to train and motivate your channel partners to do what’s needed to put your strategy into motion. But if you do it right, you’ll have a well oiled machine to put more great products into the marketplace and earn new customers.