There are numerous functions performed by channel members. All of these function utilize scarce resources of the organization. Furthermore, these functions can be better performed through specialization in the function or through expertise of the function. And on top of it each function can be transferred within the various channel members.
Main functions of channel members in channel distribution are
- Risk taking – Assuming the risk connected with carrying out channel work or being a part of a channel. If the distributor or channel member is buying a product, it does not sell, or the distributor suffers bad debts or any untoward thing happens, then these are risks which the channel member has to take and it is the function of channel member.
- Financing – Most companies deal in advance payments or a credit limit. However, it is not necessary that the channel member is getting the payments from customers within that period of time. A company might take advance payment for product X but maybe that product sold after 40 days. So till 40 days, the financial burden of that product was on the channel member. Channel member should be ready for such financing.
- Physical distribution of goods – Look at any channel driven company and you will find that there are different modes to reach the end customer. The company is responsible for delivering the product to channel member. But it is the function of channel members to ensure that the goods are distributed to end customer at the earliest and in optimum condition.
- Negotiations – All negotiations with the end customers is done by channel members and the company does not take part. Once a product has been purchased by the channel member, it belongs to the channel member, and the sale of the same depends on the channel member as well.
- Inventory management – The distributor or dealer has to match the inventory which is in demand in the market, and which is in his stock. He should not uselessly order material which is not being sold in the market because this will block the dealers inventory and finances.
- Contacts – Maintaining contacts with existing customers as well establishing contacts with potential customers and sharing the same with the company is the work of channel dealers. Good companies also enable their dealers to maintain a CRM and use it for better customer retention.
- Promotions -Promotions are not only done at the company level or brand level, but they are done quite a bit on the channel level as well. Whenever a dealer or distributor wants to create more brand awareness and let customers know about the buying point for the brand, at that time he uses marketing and promotions to attract customers to him. This is in fact an inherent function of channel members – to increase sales in their locality.
- Information – Gathering information about potential customers, competition as well as tracking the environmental factors is a function of channel member. He is intricately involved in making marketing strategies for the company, because without information from the channel member, the company cannot move in the right direction.
As we can see, the more specialized a channel member is, the better he will perform in any of the above given functions. Also the functions are such that they can be shifted within various channel members.