Effective Channel Management Strategies – Segmenting the Channels

Channel analytics, the often neglected sibling of customer analytics, presents significant opportunities for companies seeking to better their channel-related performance, especially those in industries with large distribution networks (such as financial institutions, telecoms operators, retailers, automotive distributors, etc.)…


In today’s marketplace, where the number of channels being utilized for providing service or conducting sales through has proliferated, companies are still managing them broadly – generally, we observe retail management (i.e. “own stores”, “partner stores”, “franchises”, etc.) and alternative channels management (i.e. web, app, etc.) concepts in use. This, however, is not enough, barely scratching the surface in regards to truly identifying the differences between and within channels, allowing for dynamic and unique management methods to be utilized. With ever-increasing pressures around managing the cost of sales, around increasing the level of service provided to customers as well as around competing fiercely with rivals for a dwindling number of potential clients, companies need to dive head-first into channel segmentation.


Channel segmentation can do wonders on the bottom line of companies. A few years ago, a prime example of this was realized when an international software vendor utilized channel segmentation as the basis for boosting its partner program. The objective was to optimize the performance of its over 250,000 partners – the result? The company realized an over 300% increase in return on marketing investments (compared to pre-program performance).

More recently, even brands known for more standard format stores have started using segmentation to customize their channels to match local needs better. One example is Target, which has recently started evaluating smaller urban-format stores (City Targets); another, is Marks & Spencer, which has been piloting with store segmentation based on the profile of customers they will attract (like ‘family first’ stores with more emphasis on kids wear). The approach is not limited to retailers, with companies that have a reliance on brick and mortar investing in channel segmentation (banks, for example, 64% of which, according to a recent Asian Banker survey, have plans for segmenting branches) as well.

Channel segmentation relies on the same principles as customer segmentation – just as with customers, all your channel partners / branches are not the same, so why treat them the same? A telecoms dealer located in a commercial district with a sophisticated customer base that is interested in data products and devices cannot be supported in the same manner as another dealer located in a sub-urban area, with a more traditional customer base that is interested in money transfer services and recharge cards. While the first would require more advanced training materials, marketing collateral focused on more sophisticated products, and higher rewarding around data sales target realization, the second dealer’s needs would be totally different. Without proper channel segmentation, recognizing these differences and customizing strategies and actions would be impossible or incomplete and inconsistent at best.

Channel segmentation can allow for improvement to be made in and around:

  • Lead Management – Better matching leads with channels which could serve their needs more effectively and efficiently, so that cost of acquisition is minimized while conversion rates are maximized
  • Product Management – Optimization of assortment by channel, based on location potential and channel capabilities, decreasing cost of stock and logistics while increasing local revenues
  • Price Management – Facilitating local price differentiation based on channel and market specifics
  • Promotion Management – Better localization of promotions as well as marketing messages and materials based on channel capabilities and customer portfolio
  • Operational Efficiency – Avoiding waste of time and resources on channels with low performance and limited potential, while addressing the exact needs of each channel (in terms of training, support, etc.) separately
  • Performance Management – More realistic and fair evaluation, with increased ability to differentiate local market conditions and compare more similar channels with each other


In order to get the most out of the channel segmentation effort, we recommend following our actionable segmentation approach, analyzing channel partners across various dimensions:

Channel 1

This effort should be conducted via the following four steps:

1. Collecting the Data: As in all analytics activities, channel segmentation relies heavily on availability and accuracy of the right data (about channel partners and their customers) as well as the socio-demographic profile of the regions they serve. Hence, companies need to first define a partner data strategy, enlisting and prioritizing data elements to be collected about and from each channel partner, and design / implement various methods for collecting this data. Various organizations with independent sales channels (such as sky) already do this, utilizing platforms such as partner portals.

Channel 2

2. Segmenting & Profiling Partners: Once the data is available for segmentation, using various data mining algorithms, partners can be clustered into micro and macro segments. The key success factor for this segmentation is to utilize various dimensions describing different characteristics of channels separately, each dimension serving a different strategic or tactical purpose. For example, in order to align product portfolio with customer needs, the company needs a micro segmentation focusing primarily on the product stocks and sales of its channels…

Channel 3

…whereas to optimize training efforts, the same company would require a micro segmentation based on the employee profile of its channels. The output from this approach is a 360 degree view of each channel, enabling customization of management across all required dimensions.

Channel 4

3. Matching Partner & Customer Segments: For companies with an already existing customer segmentation output, channel segmentation provides an immediate opportunity to identify and address mismatches between the needs of customer segments and what each channel has to offer. If the location where certain customer segments shop can be traced, then opportunities around migrating them can be identified as well – the example below shows such a situation, whereby “Tech Savvy” customers are shopping at “Minimalist” partner shops (a strong mismatch).

Channel 5

4. Strategizing & Optimizing Channel Mix: Once the segmentation effort has been completed, the next step is to design micro and macro segment-specific strategies; the objective here is to customize how each segment is being treated, supported, enhanced, etc. This must translate into specific actions and initiatives across the channel lifecycle, as well as customizations in product, promotions, and price mix for each segment.

An example of the kind of enhancements we are talking about here is being utilized by Bank Audi – in some of their branches, a video-conferencing solution is in place with tellers connecting to customers remotely; this allows the bank to virtually manage inconsistent demand levels in certain branches (such would be a concept that can be tapped into for a retail bank branch that is in the “Irregular Peaks” operations segment).

What Next?

The natural next step would be to pilot the various designed initiatives before rolling out across all channels / all locations. An assessment around the realized benefits should be conducted here, to ensure the changes will have a positive impact on the bottom line. Additionally, changes should be rolled out gradually; a radical revamp of channels is not recommended all at once.

Tags : branches, channel, channel management, channel segmentation, customer analytics, dealers, decision making, intelligence, retail, segmentation