In business terms, a channel is how you sell — or intend to sell — your goods or services to your target audience. Many companies sell through multiple channels. For example, you may sell on your website, via social selling, and in your brick-and-mortar store. You may even sell larger products through a network of manufacturer’s reps while selling replacement parts and accessories directly to end users online.
Selling through multiple channels helps your business maximize its reach and sales revenue. However, tracking and optimizing all channels can be a challenge. This is where channel management comes in.
What is channel management?
Channel management involves several aspects of the marketing and sales process:
- Marketing and sales strategies to reach and satisfy consumers
- Techniques for supporting distribution partners
- Vendor management
Most companies use CRM software to monitor each channel’s performance and provide appropriate support, such as printed sales materials, advertising, content and partner compensation. The best CRM software solutions often include robust channel management capabilities.
When establishing a channel management strategy, you must do the following:
- Set clear goals for each channel.
- Define policies and procedures to manage your channels.
- Identify the right channels for your products.
- Develop sales and marketing programs for each channel to meet your target customer’s needs.
When identifying a channel management solution to complement your business, consider the big picture. Communication internally and externally is key to finding a channel management strategy that helps you meet your company’s goals.
Read our review of Oracle NetSuite CRM to learn about its social channel management features, including prospect tracking, social listening, engagement tracking, and post-campaign analysis.
Examples of channel management
Essential aspects of channel management include the following:
- Channel architecture. Channel architecture is a channel’s basic framework. It encompasses how the product is provided by the producer to the consumer.
- Channel strategy. Channel strategy involves your sales and distribution channels. It includes how you plan to expand your market and specific action plans to improve your e-commerce channel.
- Channel design. How will you implement new channels? For example, you may create an affiliate marketing program to encourage specific types of people and companies to help sell and promote your product.
- Sales management. Sales management involves how you’ll manage sales and other partners. This may include the incentives you’ll offer to drive sales, the sales quotas you’ll set, and the promotional support you’ll provide for channel partners.
- Channel conflict. How will you handle conflict between channels? For example, if you use an e-commerce solution that undercuts your affiliates, you must resolve this conflict. If a direct sales rep competes with a distributor for the same business, you must either change the distributor’s pricing or separate their territories. When designing channels, pay careful attention to potential conflicts.
- Relationship management. Relationship management is about establishing and managing relationships with vendors, affiliates and other strategic partners over time. You must support existing channel partners to help them succeed. However, if they consistently underperform even with ample support, you may need to replace them.
- Brand experience. It’s crucial to develop a consistent customer experience across all channels, including online, social media, and physical locations. For example, if your brand voice emphasizes making customers feel loved and appreciated, this sentiment should hold wherever your customers go. For instance, beauty brands pamper customers, which is easy to do in person. However, the brand’s online experience must also go above and beyond to provide the same personal touch by offering exclusive deals, using positive words, and more.
- Pricing. Channel-based strategies must inform pricing. For example, you must set wholesale pricing for products sold through that channel and retail pricing for direct-to-consumer channels.
- Sales and operations planning. You must match your goods or services to general demand. For example, if your product is more popular during certain times of year (i.e., the holidays), you should increase production in the spring or summer. Add or remove new channels or salespeople depending on market fluctuations. For instance, a real estate broker’s office may hire more agents during a real estate boom and lay them off when interest rates rise and depress demand.
- Revenue management. How will you optimize revenue for your available inventory? For example, a retail store may sell swimsuits at full price until near the end of summer. Then it would likely discount the inventory to make more room for fall and winter products.
- Distribution. Distribution is about how you’ll deliver on your obligations to channel partners and customers. Distribution aspects could include properly managing logistics like shipping, product exchanges and returns.
Channel conflicts can cause myriad problems for your business, including low sales team morale, high employee turnover and even lawsuits.
How to choose channel management software
Follow these steps as you search for a channel management software solution:
1. Identify your channel management needs.
Ask yourself the following questions to identify your channel management needs:
- How many channels do you use? The number of channels you use will dictate your channel management needs. If you only have two channels, you don’t need to pay for a system that supports 10 channels.
- Do you exclusively use external channels? If you only use outside channels, you must support these partners with promotional materials.
- Do you have a mix of internal and external channels? You may sell directly through a sales team and also sell online via an e-commerce platform. If so, your in-house sales team will need tools for lead generation, brand awareness, successful lead conversion and follow-up. You must also provide compensation management and quota tracking.
- Do you sell directly to customers? If you “own” the customers (that is, you sell directly to them and have their contact information and data on purchase history), you must be able to follow up with them and interface with fulfillment centers and customer service.
- Do you sell to wholesalers? If you exclusively sell to wholesalers, they’ll handle everything. You won’t need to provide additional support materials.
Using a wholesaler has some benefits. Wholesalers act as middlemen and are well-positioned to track industry trends like product demand, economic factors, new competitors and consumer behavior shifts.
2. Assess if you need an industry-specific solution.
Consider your industry when choosing channel management software. Some industries — like healthcare — require special handling of customer data. For example, HIPAA laws require healthcare organizations to protect patient information. Other industries, such as hospitality, have unique considerations. If you sell strictly B2B, you may want a solution that focuses on direct client communication instead of mass communication methods.
3. Evaluate the technology your channel partners will use.
Technology updates, communication and enterprise alignment are vital to success. View your company as a whole, and understand how each part interacts with the other, from the smallest purchase at the local office supply store to complex technology systems. And never lose sight of the most crucial aspect of your company — your customer.
If your customers buy from multiple channels, an omnichannel strategy makes sense. This strategy should include a payment processing system that facilitates omnichannel payments.
4. Compile a list of must-have features.
Based on the previous steps, create a list of must-have features for your channel management solution. You should also compile a list of “like-to-have” features.
5. Look for CRM solutions that meet your criteria.
Research and evaluate CRM solutions and channel management software with the right features and functionality for your business. Ask for product demonstrations, pricing lists, and a breakdown of features.
6. Ensure you understand the solution’s pricing structure.
CRM solutions are priced in various ways. Some have higher upfront costs, while others have high monthly per-user costs. Others offer various pricing tiers. Calculate your total cost for each of your top four contenders at your current usage; consider reasonable growth over the next several years to ensure the solution scales with your business. Eliminate any solutions outside your budget.
7. Take advantage of free trials from CRM vendors.
Some CRMs provide a free trial period that allows you to test features and functionality. Trying out a CRM solution will help ensure it meets your needs and is easy to use. Set a reminder to cancel if the software doesn’t meet your needs.
8. Choose a channel management solution.
Once you’ve found a channel management solution, sign up and take advantage of the company’s implementation assistance. Access the company’s training materials to properly train your channel manager, marketing manager and sales manager.
Keys to CRM success for small businesses include properly training your team, making use of the CRM’s support resources, and involving your team in all CRM adoption decisions.
Channel management FAQs
Now that you understand channel management, let’s explore frequently asked questions about this complex process and software solutions designed to help companies manage their sales pipelines.
What is channel management software?
Channel management software solutions are a special type of CRM software designed to help companies streamline their production and distribution process. They can also assist with sales and marketing programs. Streamlined channels mean partners and clients can be organized into various segments, allowing internal teams to track tasks, processes and results.
How do I decide which channel management software to use?
As with any software, you should determine your needs and find solutions that meet them. Of course, the price might also play a factor. Here are some potential needs you may have:
- Being able to easily monitor sales teams and quotas
- Mobile access
- Marketing automation
- Point-of-sale (POS) integration
- Lead management
- Easily engaging with prospects and customers to boost channel pipelines
What are some good channel management software programs?
Based on our research, consider the following channel management solutions:
How much does channel management software cost?
Most channel management software vendors offer various subscription plans; monthly prices vary. You may pay as little as $25 per user per month or as much as $300 (and up) per user per month. Many solutions offer free trials. Taking advantage of a free trial is a great way to determine if the software is right for you.
Do I need a channel manager?
Small companies typically have at least one employee acting as a channel manager. If you can afford an employee whose sole job is to be your channel manager, you may be pleased with the revenue they generate. However, if you have more than one promotional channel, a software solution can help your business manage the complexity of multiple sales channels while maximizing profits.
What do channel managers do?
Depending on your company’s specific needs, a channel manager may perform the following functions:
- Help increase brand recognition.
- Connect products to people.
- Execute marketing plans.
- Track and implement marketing programs.
- Set sales strategies.
- Strategically price products and services.
- Plan which additional channels to promote your products and services on.
- Provide strategic channel direction, such as which e-commerce platform to use.
- Manage sales partners and vendors.
- Assist with customer service strategies, ensuring customers are happy and issues are resolved promptly.
- Serve as a liaison between various internal departments and company owners.
- Ensure internal and external operations run smoothly.
How do I know if channel management is working?
If your company is getting engagement from partners, your channel management efforts are working. Consider these KPIs as well:
- The value of your active sales funnel
- The average size of each deal
- How engaged your prospects are with the content your company is producing
Marisa Sanfilippo contributed to this article.