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distribution channel – TechTarget

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A distribution channel is the network of individuals and organizations involved in getting a product or service from the producer to the customer. Distribution channels are also known as marketing channels or marketing distribution channels.
There are three types of distribution channels: direct, indirect and hybrid.
Intermediaries are used in indirect channels to distribute, sell and promote goods and services. Intermediaries may more commonly be referred to as middlemen. Examples of intermediaries include the following:
Each type of intermediary represents a channel with its own distinct characteristics. VARs, for example, are often local companies that sell horizontal products, such as office productivity apps or vertical IT products, such as healthcare services to businesses in their geographic region. VARs provide value beyond the original order fulfillment. They’re distinct from the manufacturer and customer, and help the product get to the customer with added value.
Systems integrators might be large, national companies that work on highly complex, multivendor IT projects. Consultants might not resell products but rather influence sales through product recommendations to customers.
A vendor develops a marketing strategy called a channel strategy, also known as a distribution channel strategy, to determine what types of intermediaries to target and how to optimize partner relationships to increase sales and improve distribution.
There are three main levels of distribution that describe which type of intermediary sells the company’s product and how involved the intermediaries are.
This applies to the indirect distribution method, because it involves intermediaries. Indirect product distribution strategies fall into three categories: intensive, selective and exclusive.
Distribution channel levels describe how close an intermediary is to the producer or vendor of a product. With each intermediary added, another level is added between the producer and the customer. If a clothing producer gives products to a retailer to sell to customers, there’s one level between the producer and customer. If the producer first gives the clothing to a wholesaler to then give to a retailer and then the customer, there are two levels between producer and consumer. Adding another level might involve placing an agent between producer and wholesaler, to help find the wholesaler.
The alcohol industry is a good example of a distribution channel with multiple levels. There are laws that require wineries to first sell their products to a wholesaler before selling to a retailer. Direct-to-consumer models like e-commerce are examples of low-level, short distribution channels. For example, customers can buy products directly from producers on Amazon.
As vendors grow the size and scope of their distribution network, dedicated resources are often needed to ensure the success of the partner program. Reporting to the heads of sales or marketing, partner enablement managers are focused on the success of the partner program.
Partner enablement includes the creation of co-branded sales and marketing material and the training of partners’ sales and marketing staff. The partner enablement manager facilitates communication and collaboration between the partners and assorted stakeholders and executives on the vendor side. The partner enablement manager also creates a partner certification program, which defines tiers of certification, along with the requirements to meet each tier.
The various channels of distribution play a critical role in a vendor’s go-to-market strategy. If successfully executed, any distribution channel model — whether focused entirely on one mode, such as direct sales, or embracing multiple outlets, such as multichannel distribution — can open or expand markets, exceed sales goals and grow a vendor’s bottom line.
Beyond boosting revenue, distribution channels can also broaden the portfolio of products and services available to customers. VAR, SI and MSP channel partners, for instance, often provide consulting, technology implementation services and post-sales support. They might also incorporate a vendor’s product into an integrated IT product.
The final customer is focused on whether a product or service meets its needs. The customer is often unaware or unconcerned about the intricacies of distribution channels.
Having a working go-to-market strategy with trustworthy distribution partners is important in supply chain management. Learn about the risks that come with the supply chain, and what companies can do to avoid falling behind.
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