Pathways to Profit with Market Channel Selection

Deciding which market channels to use to enable your target market to access your products or services can have a big impact on both your brand image and bottom line.

A key consideration is to make it as easy as possible for your target market to access your product. However, making it easy for your potential customers to purchase your products may negatively impact on your profit margins and perceived brand image.

For example, a small wine producer may decide to make it easy for their prospective customers to find their products by making them available via independent retail liquor merchants. But in order to access and service those retailers, the wine producer may need a fine wine distributor. Now we have a market channel situation where sufficient profit margin will be required by two separate third parties each also expecting a competitive retail price point plus additional marketing spend by the wine producer to help pull the products off the shelf.

What often results in this type of situation is that there is insufficient margin for the producer to turn a reasonable profit. But at least here, the retail shelf sat in the right environment in terms of brand image.

An even worse situation can arise when not only is there a lack of margin for the producer but the retail environment clashes with the brand’s positioning. For example, you can tell me you make designer sunglasses but if I see them for sale in a 7-11 convenience store, I won’t believe you and if you have priced them in line with your brand positioning, you are not likely to make many sales on impulse.

These two simple examples demonstrate the strategic nature of the market channel decision and how there needs to be alignment across the key marketing mix elements as directed by your brand’s positioning. Therefore, before you select your marketing channel strategy, ask yourself these key questions;

  1. Do these channels fit with my brand’s positioning statement?

In my previous post, I discussed the brand positioning statement which highlights the primary target market and how you wish your brand to be perceived by that target market.

Firstly, your primary target market should always be foremost in mind when considering strategic decisions like market channels. Where does your target market shop for the types of products you offer? Where would they expect to be able to access your product? Do they purchase these products online?

Secondly, is there a suitable fit between how you wish your brand to be perceived and the channel environment?

For example, if your product is premium or handcrafted, then ideally it should be sold through an outlet that is known for these kinds of products.

  1. Will I make a profit with this market channel selection?

As mentioned earlier, often small producers (and sometimes larger producers) struggle to make a profit after distributors, wholesalers and retailers have taken their required margins. Such an unsustainable situation clearly doesn’t help anyone, so to prevent this from happening you need to do your sums. Start with your desired retail price point, that price which takes into account, your desired brand positioning and the price of near competitors. Then work backwards allowing for the margins required from the different market channels until you get back to a wholesale price. Now ask, is there sufficient margin in this price for me to make a reasonable profit whilst also allowing for marketing investment?

If the answer is no, then most likely an alternative approach to channel selection is required. Perhaps a more direct sales approach is needed where you sell online via your own website or through a third party site like eBay, Etsy or Shopify. Farmer’s markets and cellar doors are other examples of more direct to market channels.

Market channel selection can become even more complex or daunting when it comes to exporting your products. So if you need help in formulating your market channel strategy, please contact Baker Marketing on 8352 3091.



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