What Is a Channel Partner?

Channel relationship refers to the communication status and depth of cooperation between various members in the channel system.

Channel relationship

From the perspective of the channel as a whole, the channel relationship refers to the state of cooperation and the depth of cooperation between various members in the channel system.

Channel relationship has four forms: horizontal relationship, vertical relationship, inter-type relationship and multi-channel relationship. Horizontal relationship refers to the relationship between the same channel, the same level and similar enterprises; vertical relationship refers to the relationship between the same channel and different levels of enterprises; inter-type relationship refers to the same channel, the same level, and different types of enterprises. Relationship; Multi-channel relationship refers to the relationship between different channels of an enterprise.

I. Loose relationship ^[1]

Loose channel relationship means that the entire channel is composed of independent members. No one member has the ability to dominate other members. Each member only cares about its own best interests and performs distribution functions together.

The advantages of a loose channel relationship are mainly reflected in the following points:

(1) Enhance the market flexibility of enterprises. Because this channel relationship has no coercive force, entry or exit is completely selected by the enterprise, so the company can choose different transaction objects according to changes in the market environment, which enhances the company's adaptability.

(2 provides enterprises with an impetus for innovation. Due to the high degree of autonomy of channel members in this relationship, the only way for any enterprise to increase its influence and control over the entire channel is to continuously carry out management and innovation, Increase their say in channel relationships.

(3) It provides a realistic and feasible option for the majority of SMEs to enter the market. Due to lack of financial resources and resources, SMEs are at a disadvantage in negotiations and cooperation with large distribution companies, and it is not wise to place their products in mainstream distribution channels. It is a realistic and reasonable choice to establish such a network of real-time transactions with distributors with comparable strength.

The disadvantages of the loose channel relationship are mainly reflected in the following aspects:

(1) Temporary trading relationships make cooperation lack the basis for long-term development. The biggest deficiency of the loose channel relationship is that the relationship mode does not have the essential characteristics of an organizational system, but only a temporary transaction relationship for a specific product at a specific time and place.

(2) Poor channel stability and small safety factor. Due to the lack of effective supervision and control mechanisms in the loose channel relationship, the stability and security of the channel are completely dependent on the moral self-discipline of the channel members. In the case that the market economy conditions are not fully mature and the social credit system is not sound, The self-regulated safety factor is actually very small.

(3) The lack of incentive mechanism leads to the lack of channel loyalty. In a loose channel relationship, channel members are most concerned about whether their own interests can be realized, or at what level, this is the source of motivation for adding channels, and less consideration of the overall channel benefits As well as the interests of other members of the channel, so there is a general lack of trust among members and loyalty to the channel.

(4) The channel does not form a truly clear division of labor and cooperation relationship, which affects the overall operating efficiency of the channel. Due to the immediacy and short-term nature of the cooperation, channel members cannot share channel resources such as information, funds, and personnel. This may lead to inefficient results with large investment and small returns.

Second, the management channel relationship

A managed channel relationship refers to a channel relationship formed by one or a few large companies with strong strength and good brand reputation relying on their own influence to bring together a large number of distributors through strong management.

The advantages of managed channel relationships are mainly reflected in the following areas:

(1) The entire channel system has a core. The basis for the formation and maintenance of the management channel relationship is that large-scale and powerful enterprises have become the core of the entire channel system, and the channel's distribution strategy and planning are from this core. Each channel member is engaged in various distributions around this core The activities made the channel relationship closer and more united.

(2) The relationship between channel members is relatively stable. In a managed channel relationship, the channel system is built around a core enterprise, and the core enterprise has certain credibility and profitability for channel members. This forms an interdependent relationship as long as the core enterprise does not have With drastic changes, the channel relationship will remain relatively stable.

(3) The interests of channel members are well coordinated. Unlike loose channel relationships, channel members in a managed channel relationship no longer consider pursuing their own profits as the sole goal, because to develop in this relationship network, we must focus on the interests of the channel as a whole. Only channels The realization of the overall interests can ensure that the interests of each member are maximized.

(4) Better sharing of resources. In a managed channel relationship, depending on the market conditions and the nature of the partners, core companies can provide support in terms of funds, information, technology, equipment, personnel, and management. At the same time, these resources can also flow from other members to the core company. Improve the scope and efficiency of resource sharing.

The disadvantages of managed channel relationships are mainly reflected in the following areas:

(1) For distributors, excessive reliance on core enterprises will lead to the loss of their independent and autonomous status. The management channel relationship is based on the core company's management and leadership of the entire channel system. Based on this, the distribution rules of the channels and the distribution of benefits are all made by the manufacturers, and the distributors can only obey. This has caused the distributors to rely too much on the core manufacturers, making them lose accurate judgments of market demand. And mastery. Especially when the strength of the core enterprise is too large, it may happen that its strength can be used to coerce other members to assume more obligations without adding any support.

(2) For core companies, there is always the risk of termination of cooperation. On the one hand, once the core company has a business dilemma or crisis, due to the decline in channel profits, distributors are likely to change the door, causing manufacturers to fall into a deeper dilemma; on the other hand, when the strength of distributors is enhanced, the comparison of strength When changes occur, they will propose more profitable cooperation conditions to the core enterprises, or they will no longer implement the rules and instructions of the core enterprises, which will affect the stability and balance of the entire channel.

(3) Channel members' contribution and income are not equal. Because the status of channel members is different, it will inevitably lead to uneven income of members in the channel. Due to the small size of the company and its limited distribution capabilities, some of the benefits listed by the manufacturer may not be available to small businesses, but may incur more obligations.

Third, the property-type channel relationship

The so-called property-type channel relationship refers to the channel relationship formed by an enterprise by establishing its own sales branch, office, or by implementing an integrated production, supply, and sales strategy.

The advantages of the property-type channel relationship are shown in the following aspects:

(1) Strong control over channels. Because this model is organized with property rights as the link, all links from production to sales are under the strict supervision of the head office, which is under the unified command of the head office. Under this premise, the fundamental interests between the head office and other members of the distribution system are consistent, so the company's business strategy and distribution strategy can be thoroughly implemented and implemented, reducing the cost and risk of channel network changes.

(2) Manufacturers can get rid of the control of large retailers. With the conversion of the seller's market to the buyer's market, the center of power in the channel has gradually shifted from the manufacturer to the downstream of the channel, and the channel power of the retailer is constantly increasing. Therefore, manufacturers are increasingly receiving large retailers in their distribution activities. Restrictions and controls. Establishing property rights-type channel relationships through property rights bonds can enable manufacturers to "internalize" certain distribution functions and gradually get rid of their dependence on large independent retailers.

(3) Unification of various business strategies. The company-type channel relationship puts the production process and the distribution process under the control of a property right enterprise through property rights control, so each distribution unit can achieve the unity of image, price, service, brand and other operating elements, which is beneficial to the establishment of the company's brand image .

(4) Real-time monitoring of changes in market demand. By extending to the channel terminal, the manufacturer can approach the end consumer to the greatest extent, and the changes in customer needs and purchasing behavior can be timely understood and feedbacked to enhance the response speed of the enterprise and make corresponding adjustments to goods and services in a timely manner.

The shortcomings of the property-based channel relationship are mainly reflected in the following three aspects:

(1) The cost is large. The biggest characteristic of the property-type channel relationship is that the manufacturer invests in the establishment of a channel network and manages and controls the channel itself, which will inevitably bring a huge cost.

(2) The overall adaptability is poor. The channel system constructed through a large amount of investment has made the entire system a huge inertia, and it will encounter huge obstacles to change the channel structure or adjust the channel. On the other hand, if a large-scale adjustment is made to the channel, it may not only cause chaos in the channel, but may also cause the company's early investment to become a "sinking cost", which will bring considerable losses to the company.

(3) Manufacturers need a long learning and experience accumulation process. For manufacturers, extending to the commercial field is not a professional operation. Therefore, manufacturers need a relatively long process of learning and experience accumulation to start a property-based channel system, which is also a significant cost.

Fourth, contract-type channel relationship

Contract-type channel relationship refers to a channel relationship formed in the process of commodity circulation by the members of each channel participating in the distribution of the commodity through different forms of contract to determine each other's division of labor, cooperation and rights and obligations.

The main advantages of contractual channel relationships are as follows:

(1) The establishment of channel relationships is relatively easy. Compared with the property-type channel relationship, the contract-type channel relationship does not involve the change of property right relationship, and the use of legal contracts to "bundle" channel members together increases the stability of the channel relationship, the establishment of the channel relationship and the channel system Organization costs are low.

(2) The allocation of social resources is more rational. The contract-type channel relationship is not to add new means of production, but to reorganize social resources to generate added value, and members of the channel system share this added value.

(3) The channel relationship is more flexible. Because contractual channel relationships do not involve property rights relationships, it is much easier to adjust the channel system. When market conditions change, you can modify the contract terms to improve the channel's adaptability to the environment, even if you change the partnership. No need to pay more.

The disadvantages of contractual channel relationships include the following two aspects:

(1) Compared with the property-type channel relationship, it is more difficult to control. Although the contractual relationship does not involve property rights and is relatively flexible, it also brings problems that are difficult to control. Due to the inconsistent goals of channel members, there is an "opportunistic" problem that channel members do not comply with the contract terms, which will lead to a decrease in the efficiency of the channel system.

(2) Compared with the management channel relationship, the flexibility is poor. Through tangible contracts, contract-type channel relationships have achieved greater stability than management-type relationships, but they are inferior to management-type channel relationships in making adjustments to channel systems. This is mainly due to the inability to make timely and timely adjustments and improvements to the channel relationship because the contract has no expiration or restrictions on other terms.

Each of the above-mentioned four kinds of ubiquitous channel relationships has advantages and disadvantages, and companies can choose according to their actual conditions and development goals. In fact, there are some mixed channel relationships in practice, such as a mix of property rights and contract types, that is, the form of sales branch plus franchise, etc. These mixed channel relationships can enable enterprises to take advantage of both channel relationships Get better distribution results.