Why Channel Marketing Matters
Welcome to Part 2 of our five-part series about choosing the right technology for your channel marketing performance. Click here to read Part 1.
Every day, thousands of companies around the world sell their products and services through networks of regional or local outlets. These outlets may be company-owned branches or retail stores, or they may be related but independent channel partners such as franchisees, independent agents, dealers, or value-added re-sellers.
Channel-based selling is a major feature of the US business landscape. The stereotypical example of a channel structure is a franchise network. In 2012, there were over 700,000 franchised business establishments in the United States, and these establishments produced $769 billion in sales. While franchising is the classic example of channel-based selling, many kinds of companies sell through independent or quasi- independent channel partners. For example:
- Insurance companies that sell through independent agents?
- Financial services firms that sell through independent financial advisors and/or broker-dealers
- Technology companies that sell through value-added re-sellers?
- Manufacturing companies that sell through independent dealers, manufacturer’s representatives, or retail stores
Not only are indirect channel sales a large component of the overall economy, many companies rely on channel sales for a significant portion of their total company revenues. Obviously, franchisors usually obtain most of their revenues from the fees that are based on sales made by franchisees. However, many other types of companies also depend heavily on channel sales. For example, many technology companies derive more than half of their total revenues from sales made by channel partners.
Companies that obtain a large portion of their total revenues from channel sales are usually dependent on the marketing and sales capabilities of their channel partners. Most firms that sell through channel partners operate in a distributed marketing environment. Distributed marketing refers to a marketing model in which both a corporate marketing department and channel partners plan and execute marketing campaigns and programs.
The defining characteristic of a distributed marketing model is that the local marketing entities—i.e. channel partners—have autonomy when performing marketing functions. While the degree of autonomy can vary, many channel partners have complete (or nearly complete) marketing independence. As we’ll demonstrate in our white paper and future posts, this autonomy is one of the primary reasons that channel marketing operations are more difficult to manage.
Join us for Part 3 in this series next week as we look at what makes channel marketing difficult.
Download a FREE copy of our White Paper on this subject by clicking here.