Marketing channels refers to the ways in which products move from the manufacturer to the distributor to the end user. Also called distribution channels, the number and efficiency of a company's marketing channel can have a strong impact on the company's success. If a company does not have enough channels through which to market their goods, or if the channels are inefficient and expensive, it can be difficult for a company to locate customers for its products and/or to make a profit on sales of its products.
Some companies, often referred to as direct marketing companies, sell the product directly from the manufacturer to the end user, or consumer. In such cases, the companies do not create or establish marketing channels. Instead, the consumer orders directly and the item is shipped to him, reducing costs for marketing and distribution. It can be difficult, however, for a manufacturer to locate customers using this form of marketing, since it may be less convenient if there is no storefront for a customer to go to or no local retailer a customer can interface with; the Internet, however has reduced this problem somewhat and given rise to more direct selling.
Most often, however, products do not go directly from the manufacturer to the end user. Instead, the products are first sent to a distributor or retail outlet. The retail outlets and distributors that a product is sent to can be referred to marketing channels. For example, a company that produces clothing may have multiple marketing channels: it may send its clothing to boutique stores throughout the country and to large chain stores and department stores as well.
The manner in which the product gets from the manufacturer to the distributor or store selling its product is a part of the marketing channel. The clothing may move from the clothing designer to the plant that creates the design to the shipping company that moves the design to all of the boutiques to the boutiques themselves. This is one particular marketing channel. A different channel may be used to send the items to the department stores; for example, perhaps a different shipping company is used or a different manufacturer to produce the items sold to the larger stores.
Usually, the more steps in the marketing channels, the higher the end cost is to the consumer. This phenomenon occurs because each of the people involved in the channel, or each of the "middle men," must be paid a premium, or fee. Thus an item sold in a direct sale may cost far less than the same item which had to be sent through several distribution steps before it reached the consumer.