Today we will focus on three key attributes of channel partners: coverage, control and cost, from the perspective of a producer. In general, a producer will try to maximise both his coverage of the market and his control over the channel, while minimising his costs.The graphic to the left shows a set of trade-offs that producers face in determining how their products or services are distributed to consumers through various channel structures.
These trade-offs are useful in highlighting different ways to build a channel strategy. A producer who is intent on protecting his brand image may consider control to be the most important criteria, and therefore might prefer a direct sales strategy, although it comes with a high cost to build, reward and retain a top performing salesforce.
A producer with limited capital, but high coverage goals would likely consider paying agents or dealers a commission to sell on his behalf, although this implies less control over the selling process.
All channel partners do not provide the same functions or provide the same results. There are choices to be evaluated in defining an optimal channel strategy and many questions must be considered:
- How much coverage does the channel partners provide? Is it sufficient to achieve targets? Are multiple channels required?
- How much control can be exerted over the channel partners? Who are the leaders within the channel? How are they influenced? What is the level of loyalty in the channel?
- What is the cost of distributing through this type of channel partner? What functions are performed by the channel partners and what is the reward for performing these tasks?
There is not a unique channel strategy that will work for all producers. A number of factors will determine the optimal mix of channel partners in any particular case. Quantifying the relative importance of each factor, then scoring and ranking each strategy combination can help determine the optimal channel strategy.
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