¶ … channel management practices that have been developed via thorough research and analysis of the world's leading companies?
Channel management is a process that entails managing the relationship between a vendor and the third parties used by them to get goods and products into client's hands, while making sure that the post-sales services and support are still of high quality. A channel can be either a one- or two-tier relationship. In the one-tier relationship, a vendor is selling products directly to a reseller; in the two-tier relationship, a vendor is selling to the third parties indirectly through a distributor. Effective channel management can help to greatly increase revenue and profit margins for vendors through creating incentives for channel partners to promote or market their own branded services and support; it is also useful to be able to achieve the right overall pricing for the end users[footnoteRef:2]. [2:
KPMG. (2011). Leading practices in effective channel management. 1]
It has been noted that top companies utilize the following methods when it comes to developing channel management policies and strategies. First, top vendors create and align their channel strategies, sales, and vendor-centered post-sales services and support offerings with their corporate goals. This can entail defining the partnering approach; informal vs. formal partnerships; or multiple regional partners vs. A couple of international partnerships, with the first and the second tier relationships. It is in this stage of the process that vendors can decide if other channel partners will be mainly concentrated on sales or solutions. Second, vendors identify and define their sales model and its impact; this enables them to make sure that their goods and services are properly assigned to the proper channels. For example, whether a single or two-tiered relationship, the products have been allocated to the Original Equipment Manufacturer (OEM) or vendor distribution channels. Third, vendors can profit by creating and modeling specific and effective marketing and incentivizing programs (such as volume targets, special pricing, price protection, etc.) to achieve the desired behavior. This often involves drafting clear and well defined program terms and conditions, and claims and reporting verification and payment systems. Fourth, vendors design service and support programs to facilitate value-added distributors (VADs) and Value-added resellers (VARs) to sell their own brands of services or vendor-branded products and to provide after-sales services to the end-consumer[footnoteRef:3]. Lastly, effective and competitive vendors design and implement channel partners policies such as: [3:
Ibid 4]
Defining reporting verification requirements (e.g., POS)
Identifying and stating the channel segments (direct vs. indirect)
Programs and expectations targeting reduction of counterfeiting and gray marketing
Notifying through circulars and other modes of communication, the expectations of compliance to the related laws and regulations and the expected professional and ethical behavior
Defining periodic reviews to ensure compliance and to show the significance of having a level playing field for all the vendor's partners
Requiring submission of periodic reviews to efficiently monitor the quality of service and support [footnoteRef:4] [4:
Ibid ]
Discussion
Distribution channels represent the different companies and stakeholders involved in the movement of goods from the producer to the end consumer and are important market instruments. Manufacturers must take charge of both the flow of the product from production to consumption and the various relationships between companies at various stages of the process. There are many distribution channels activities including: inventory, order processing, transportation, warehousing, material handling, and also the activities employed to model and manage distribution channel partnerships. This includes the choosing and supervision of the distribution channel structure or model and its players[footnoteRef:5]. Distribution channels can at times become inefficient. For example, inefficiencies can arise: if the manufacturers and suppliers, or the distributors and manufacturers, are not in agreement with each other. They can also arise if they have conflicting interests and do not usually think along the lines of solving their shared problems. Proper and effective distribution channels enable a company to: determine redundancies and inefficiencies within the system; create relationships and partnerships; and obtain cost benefits and better customer satisfaction. Some of the components of a distribution channel may perform their functions more effectively than others; a good distribution channel meets the end-user's needs in the most efficient and effective approach possible. The objective of channel management is to supervise all the different distribution and logistic processes so as to effectively and efficiently provide value to the end-user[footnoteRef:6]. Distribution channels are essentially there to complete market exchanges. Activities such as assortments for clients in the quantity and variety they prefer, providing...
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