Channel

That which keeps the organization supplied with customers, clients or consumers. Author

For many organizations, it is not practical to deal directly with customers. Whereas the Boeing aircraft company can deal with airlines directly, it is not practical for car maker Honda to do the same with car buyers. It must rely on a 'channel' of distributors.

Types of channel organization: The term 'agent' or 'broker' is generally reserved for those channel organizations charging a commission for putting the customer in contact with the provider of goods or services, e.g. real estate agent, shipping broker or agent for office furnishings or home improvements.  Distributors, retailers and franchisees usually buy the goods or are licensed to provide the service and make their money from the difference between what they pay their suppliers and what they charge the customer or client. What one sees is often deceptive. The thousands of McDonald's restaurants in countries around the world are not all owned by the company, many are franchised and are a good example of the channel merging with the organization so that the two become indistinguishable. The term ‘channel’ also applies to the service sector. For example, the channel of a financial institution such as an insurance company may be a multinational bank or a self-employed independent financial advisor.

Change: The channel-to-market is constantly changing, for example through the use of the telephone and Internet, airlines are reducing the need for booking agents and recording studios are bypassing the store in town. Companies producing tests for medical conditions who have traditionally relied on doctors to use their products are now bypassing them by directly supplying the public through stores and mail order - pregnancy testing kits which have been available for some time are now being joined by many others, including tests for osteoporosis, allergies and heart conditions.

Power of the channel:  A channel organization may be able to wield power over those 'upstream' of it. Retailers can put pressure on manufacturers to reduce their prices, or make changes to products by threatening not to carry their lines or to display them less advantageously. Agents and brokers can hold out for larger commissions by not promoting products. In some sectors, the channel can allude to the way an organization makes itself known, rather than being just the outlet for its goods and services. In this context the media - radio, television, or advertising in printed material, could count as channel. >>>