Using Marketing Channels to Create Value for Customers

Sometimes when you buy a good or service, it passes straight from the producer to
you. But suppose every time you purchased something, you had to contact its
maker? For some offerings, such as a haircut, this would work. But what about the
products you purchase at the grocery store? You couldn’t begin to contact and buy
from all the makers of those products. It would be an incredibly inefficient way to
do business.
Fortunately, companies partner with one another, alleviating you of this burden.
So, for example, instead of Procter & Gamble selling individual toothbrushes to
consumers, it sells many of them to a drugstore close to you, which then sells them
to you and other people.
The specific avenue a seller uses to make a finished good or service available to you
for purchase—for example, whether you are able to buy it directly from the seller,
at a store, online, from a salesperson, and so on—is referred to as the product’s
marketing channel1 (or distribution channel). All of the people and organizations
that buy, resell, and promote the product “downstream” as it makes its way to you
are part of the marketing channel. This chapter focuses on downstream channels.
In the next chapter, we look not only “downstream” but also “upstream” at the
people and organizations that supply the materials and services and that allow
products to be made in the first place. The firms a company partners with to actively promote and sell a product as it
travels through its marketing channel to users are referred to by the firm as its
channel members2 (or partners). Companies strive to choose not only the best
marketing channels but also the best channel partners. A strong channel partner
like Walmart can promote and sell the heck out of a product that might not
otherwise turn a profit for its producer. In turn, Walmart wants to work with strong
channel partners it can depend on to continuously provide it with great products
that fly off the shelves. By contrast, a weak channel partner can be a liability.
The simplest marketing channel consists of just two parties—a producer and a
consumer. Your haircut is a good example. When you get a haircut, it travels
straight from your hairdresser to you. No one else owns, handles, or remarkets the
haircut to you before you get it. However, many other products and services pass
through multiple organizations before they get to you. These organizations are
called intermediaries3 (or middlemen or resellers). Companies partner with intermediaries not because they necessarily want to
(ideally they could sell their products straight to users) but because the
intermediaries can help them sell the products better than they could working
alone. In other words, they have some sort of capabilities the producer needs:
contact with many customers or the right customers, marketing expertise, shipping
and handling capabilities, and the ability to lend the producer credit are among the
types of help a firm can get by utilizing a channel partner. There are four forms of
utility, or value, that channels offer. These are time, form, place, and ownership.