Channel value proposition

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Channel value proposition[1] is a business model used by suppliers to attract members of its distribution (business) channel. This is made up of many elements, depending upon the sophistication of the supplier and channel members, and the intensity of competition for share of the channel. According to Julian Dent in his book "Distribution Channels",[2] the most important elements are:

1) Growth – emphasizing the level of demand for the supplier's products or services and the investment it will make in stimulating demand.

2) Profitability – showing the margins, contributions, utilisation of overheads and net profitability that selling the supplier's products or services will deliver to the channel member. This can be augmented by special funding and other payments made by the supplier for activities carried out by the channel member (putting items on display or emphasizing them in marketing materials, etc.) or for performance (achieving volume thresholds, reaching a specific segment of the market, etc.)

3) Return on capital – demonstrating the productivity of the channel member's investments in inventory, working capital or fixed assets will be improved by engaging with the supplier. For example, a fast turning product will accelerate the channel member's inventory turns, increasing the productivity of its warehouse, shelf space or website.

4) Brand – showing how the association with the supplier will empower the channel member's own brand, or allow it to "borrow" or leverage the supplier's brand. For example, often seen when small dealers and retailers post "authorized reseller" or similar badges on their letterhead and premises to demonstrate credibility to the end customer.

Skilled suppliers research their channel members' needs to ensure that they tune their channel value proposition to these needs to gain more traction in winning share of the channel and to minimize the cost of so doing.

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