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Harvard Business School 9-590-045
October 26, 1989
D Channel Management
ìChannelsî refers to the ways in which a product reaches its end users. Some products are
O
sold directly to their ultimate buyers, while others pass through one or more intermediary or
(indirect) channels on their way to end users. A common channel arrangement is:
Manufacturer → wholesaler → distributor → retailer → consumer
In managing customer encounters, an important task facing many companies is channel
N
management. While textbooks often use the term ìsales managementî to refer solely to the
management of a direct sales force, the fact is that most products are sold through a combination of
direct and indirect distribution channels. Managing these multichannel arrangements affects all
aspects of sales management and is often a key dimension of organizing and implementing a firmís
overall marketing effort. O
This note discusses: a) reasons for the growing prominence of multichannel arrangements in
marketing efforts; b) key components and choices of channel management; c) major factors that affect
producer-reseller relations; and d) trade-offs between control and resources inherent in most
distribution systems. T
Growth in Multichannel Systems
During the past two decades, the share of sales volume attributable to distribution
intermediaries has grown significantly in many industries.1 According to U.S. Commerce data,
C
wholesalers increased t
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