Sales Excellence

Channel Strategies: Foundation and Benefits

What is a channel strategy?

A channel strategy refers to a vendor’s plan to move a product or service through a chain of commerce to the end customer. Channels serve two primary functions. The first is to sell a product or service to a customer, and the second is to deliver a customer experience. Companies can distribute their goods and services through direct or indirect channels. Here is how each of these types of channels operates:

Direct channel: In a direct channel, consumers buy a product or service directly from a company. For example, a consumer might purchase a product from a physical storefront or an e-commerce website.
Indirect channel: In an indirect channel, consumers purchase a product or service from an intermediary instead of directly from the company that produced it. For example, a consumer might buy a product from another large retailer that the company distributes their products to.

A complete channel strategy includes all the steps a vendor takes to connect with their target customers through various platforms or channels. The goal of each channel strategy can vary, depending on a company’s overarching marketing and sales objectives.

Benefits of channel strategies for distribution

While each channel strategy has its own unique advantages, there are some common benefits that all channel strategies share. A well-developed channel strategy can help you:

Improve the consumer experience: Developing an effective channel strategy can help companies determine where and how their consumers prefer to purchase their products. This knowledge can allow companies to provide a better overall consumer experience.
Expand into new markets: Companies often select which channels to integrate into their channel strategy based on which new markets they want to expand into. This can help companies reach a wider audience and increase sales.
Reduce costs: Many companies choose to use distribution channels to outsource pieces of the distribution process. This can help companies reduce their production and marketing costs by developing an effective channel strategy that compliments their in-house capabilities.
Increase sales: An effective channel strategy can help companies scale faster, acquire new customers and increase sales by giving them access to a larger target audience of potential consumers.

What is an omnichannel distribution strategy?

An omnichannel distribution strategy uses multiple distribution channels to offer customers several ways to purchase the same product from a company. For example, a company that produces cell phone cases might choose to sell their products online through an e-commerce website to allow consumers to purchase directly from them as well as wholesale to allow consumers to purchase their products from a large third-party retail outlet.

While using an omnichannel distribution strategy can help companies reach more consumers and increase sales, there are a few logistics that companies need to consider to ensure the consumer experience is seamless from one distribution channel to the next. The logistics companies should consider include the ability for consumers to:

Purchase a product online and pick it up at a physical store
Buy a product online and have it shipped directly to them
Purchase a product in-store and have it delivered to them
Have a product drop shipped from a warehouse or manufacturing center to a physical store
Buy a product online and return it to a physical store
Purchase a product online and return it online

Tips for creating a channel strategy

Identify your target audience

Start by identifying who your ideal consumers are by building a target audience. A target audience is the segment of the population that is the most likely to purchase your product.

Analyze your current audience to help you identify what key demographics, interests, beliefs and goals your consumers have in common. You might also consider what type of person may receive the most benefits from using your product.

Finally, research who your competitors’ consumers are to help you develop a well-rounded target audience. This can help you determine your consumers’ needs and wants to provide a better customer experience.

Determine what channels your consumers use

Determine what channels your ideal consumers use by identifying how they purchase products.

For example, a company that sells shoes might recognize that their consumers purchase their apparel items through retail outlets and e-commerce platforms.

While you may find that your consumers purchase products through multiple distribution channels, try to limit the number of channels you choose to use in the beginning. This can help you create a stronger channel strategy and build the foundation for future growth.

Analyze your in-house capabilities

Take the time to analyze your in-house capabilities by determining the size and skill sets of your workforce, your budget, your inventory storage space and your overall capabilities. This can help you identify what channel distribution strategy may offer you the most benefits.

For example, a company that produces laptops could choose to use the retail distribution method by opening their own physical store or e-commerce shop, but after analyzing their in-house capabilities, they might recognize that selling their products wholesale would reduce their inventory costs and increase their ability to reach consumers.

Define your business goals

Define your business goals to determine which channel strategy can help you reach them. You might consider whether you’re looking to gain more sales, acquire lifelong customers, generate brand awareness or increase your profit margins.

For example, selling your products directly to your consumers may give you more control over your brand and produce higher profit margins, while selling your products wholesale may help you increase brand awareness and sell your products to a larger audience.

Develop a customer journey map

Companies develop customer journey maps to understand the process customers go through before purchasing a product from them. A customer journey map typically begins with the first interaction a customer has with a brand and ends when they make a purchase.

To develop a customer journey map, consider what stages your customers go through based on your current distribution channels. Some stages you might include are the:

Initiation stage
Research stage
Decision stage
Purchase stage
Customer ideas
Customer actions
Customer touch points
Customer environment

Measure your progress

Develop a set of key performance indicators (KPIs) you can use to measure the success of each distribution channel. This can help you identify which channels perform the best.