January 30, 2024

How Do Channel Members Affect Selling Price?

A marketing channel consists of firms that work in a network to move goods from manufacturers to consumers. A manufacturer selects channel members and then manages and motivates them to perform their roles effectively and efficiently. A manufacturer also addresses conflicts that arise between channel members.

Ideally, all channel members view their success as a function of the success of the entire distribution channel. They should agree to cooperate and share resources and rewards for attaining overall channel goals. However, channel members often act alone in their own short-run best interests and disagree on goals, responsibilities and rewards. This creates channel conflict.

Different channel members perform specialized functions such as creating demand for a product, displaying products in convenient locations and answering customer questions. They also make financial arrangements, such as financing product purchases for 30 days while awaiting payment from customers.

Distributors, wholesalers and retailers each buy manufactured goods in bulk from a manufacturer and offer them to consumers in broad assortments. They may also provide services to their customers, such as training and sales support. They also negotiate with customers for sales.

A firm evaluating prospective channel members must assess the quality of the channel member's people and its organizational structure. It must also understand the channel member's responsibilities and its capacity to deliver value to end consumers. A company should use its salespeople as sources of information about channel members, and it might consult trade sources, such as industry publications and directories, or trade shows. It might also request information from intermediaries that handle a prospect's goods or ask current channel members to recommend prospective partners.

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