Marketing 101: channel management and the digital domain Mike | August 22nd, 2011

A marketing channel can be defined as a system used to make goods, services, or concepts available for consumption. The very best businesses are adept at managing their marketing channels and can effectively transmit goods and services from the points of conception, extraction, or production to their customer and can gain significant competitive advantage in the process.

Important to this discussion, is the concept of the “value chain.” Michael Porter first described this concept in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance. In it, Porter describes a “chain” of activities, each link in the chain adding value to a product, ultimately giving it a greater total value than the sum of the links. The elements of a product value chain typically include inbound logistics and transportation, production (or operations), outbound logistics, marketing and sales, and service or maintenance.

A classic example of a value chain is the manufacturing of a complex product: the automobile. Tons of raw materials, thousands of individual parts and components, literally hundreds of suppliers and vendors, vast logistics, acres of production plants, and thousands of workers are involved in the production of a car or truck. More logistics are involved in the outbound sees of the completed product, as well as marketing efforts, direct sales, and finally service and maintenance. The value of that car or truck is indeed greater thank the sum of the various parts that went into its creation.

Companies that deal in digital products and services, can leverage the concepts of marketing channels and the value chain to enhance their own offerings, build valuable relationships with their customers, and find efficiencies in their own processes. A powerful marketing channel available to digital businesses is the social media and platforms like Twitter and Facebook. SM can be leveraged to engage your customers, gain an understanding of their requirements, and strengthen communications and collaboration with their channel partners. Indeed, effective use of social media can be to digital companies what a well-designed logistics hub can be to a wholesaler of packaged goods.

Here are 5 tips for understanding and managing a specific marketing channel: the social media.

1. Engage your audience and your partner’s
If your goal is to make your product or service easily available to your targeted consumers, social media can provide a great channel for doing so. SM platforms can act as tools for aligning the interests of social media participants. When SM participants act as channel “partners” they can add great value to your messaging and your company’s reputation while at the same time promoting their own interests and extracting their own value. Re-tweeting a message on Twitter benefits both partners, by providing value to each and enhancing both partner’s reputations.

2. Understand what your customers want
Whether you are aware of them or not, your customers each have their  own “service output demands.” These SODs make up a person’s requirements around the purchase of your product or service. SODs typically consist of a mix of factors, including expedience (“I want to purchase a service that is convenient for me”), pricing (“I want to pay the lowest price available”), and  qualitative elements (“I need a well-trained salesperson who can educate me on using this service”). Using social media to listen can help you to understand your customers SODs by giving them the ability to talk back to you – just ask them what they value and they will tell you. Simple, right?

3. Manage relationships
Advertisers, affiliates, vendors, clients, and others are your partners in this marketing channel. SM allows you to collaborate closely with them and the tools available can make partner communication efficient and effective. By sharing information and resources quickly and easily, your channel partners can add value that might otherwise be lost.

4. Incentivize smartly
The creation of consistent incentive systems for all channel members can be very effective in producing efficiencies and extracting additional value. Partners will act on your behalf in the social media if you in turn provide value to them in the form of information, content, and visibility. Open your lists, retweet their messages, get them in front of your audience and they will reciprocate. These actions are the “currency” of SM and carefully applied they can incent the behavior that makes the channel even more valuable.

5. Mind the gap(s)
A “gap” is said to exist in a channel when some SODs are not met or when they are being provided at too high a level. For instance if low price is the most important demand and your offering is priced too high, that particular demand is not being met. Alternatively, if you are charging a very low price and your customer’s SODs do not include low-price as a requirement, you are over-providing and could actually increase your price without using customers. Take the time to understand SODs and to analyze whether the service offered is aligned with the service demanded.

Photo: Andrew McFarlane

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