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Building A Successful Channel Marketing Strategy

Think back a few years to all those marketing classes you absolutely loved in college. Do you remember your teacher saying anything about channel marketing – what is it, how it works, why it’s important? Well if you need a refresher, here’s a quick lesson on channel marketing.

Manufacturer > Distributor > Retailer

Channel marketing allows manufacturers to transfer the ownership of their goods to another company or retailer – in essence, taking goods from the point of production to the point of consumption. In order to maximize sales, brands involved with channel marketing partner with their retail channels. This allows manufacturers and distributors to have some control over promotions and advertisements on their products. Channel marketing is important because it is defined as the most efficient and effective manner in which to place a product into the hands of the customer.Sephora and Ulta Beauty logos

As a marketer and a consumer, I notice channel marketing while I’m out shopping all the time. One industry that channel marketing seems to be very prevalent within, is the makeup industry – in particular at retailers Sephora and ULTA. After a little undercover shopping here’s my take on the channel marketing in these stores.

Samples, samples, samples!

So how many of you would agree that the only thing better than a good discount is getting something for free? Getting free products is awesome for the customer but also a great marketing tool for makeup manufacturers and retailers trying to promote sales of new products. Both ULTA and Sephora use samples as a way to market their products. When I purchased something from Sephora, 2 samples were put in my bag. Both products were from AmorePacific – Moisture Bound Refreshing Hydra-Gel and Moisture Bound Sleep Recovery Mask. I also received two free samples with a purchase at ULTA – Urban Decay’s Ultra Definition Liquid and Complexion Primer Potion. Of course I really like both of these products so far, I might just have to take a trip back to these stores.

Exclusive Products

Since there are many makeup retail stores in the industry, one way both Sephora and ULTA keep customers returning is through their exclusive product lines. Both companies have partnered with some of the manufacturers in order to channel market and create exclusive products and gift sets. While the prices on the products varies, the gift sets usually are a better value, especially if you want to try a few different products. At Sephora, I noticed that many of their rollerball perfumes were exclusive Sephora products. They had partnered with companies such as Marc Jacobs, Clinique, Flowerbomb, Nirvana and Amazing Grace. Sephora also had many gift sets that were exclusive, including Michael Kors and Tokyo Milk. At ULTA they also had many exclusive products and gift sets from brands like Benefit Cosmetics and Urban Decay. One display that especially stood out was their exclusive One Direction perfume, lotion and shower gel. They also had a Taylor Swift exclusive Spray Set. These exclusive products help ULTA to target a younger generation and gets them hooked on their products at a young age. Plus, I’m sure this sells like crazy with teenage girls.

Exclusive Rewards

In order to provide their customers with even more samples and special pricing, both Sephora and ULTA use rewards programs. While these programs do not specifically deal with the manufacturers, it’s still a way for channel marketing to occur and also a way for the stores to earn customer lifetime value. At Sephora their program is called “Beauty Insider.” Beauty Insider is your fast track to a never-ending supply of beauty reward. It’s free to join, and every dollar spent earns a point that gets you closer to your next beauty fix. Points can be spent on deluxe samples, special collectibles and curated product sets. After signing up for the Beauty Insider program, customers are guaranteed a birthday gift, free beauty classes, products rewards and seasonal promotions. Once an insider has spent $350, in one calendar year, they are able to unlock the VIB status and continue on to the VIB Rouge membership after spending $1000 in one calendar year.

ULTA’s reward program is called ULTAmate REWARDS. When you join ULTAmate REWARDS you can redeem points on any in-store or online purchase. Members earn one point for every dollar spent and on specific products you can earn double or triple points. After spending $400 within a calendar year, you become Platinum status and earn points 25% faster and points never expire. ULTAmate REWARDS also does birthday gifts for its members which is a free, full-sized signature CK One mascara and double points for every dollar spent during your birthday month.

There are benefits to offering rewards programs but it’s also great to offer exclusive discounts for military personnel and students! While neither of these stores offer exclusive discounts, using a verification system, like SheerID, helps to keep exclusive offers gated, so only markets you choose are receiving the discounts.

In-store Customer Experiences

Besides having a simple product display in a store, some manufactures will take it oneDermalogica in-store product display step further and create an in-store customer experience with their product in order to channel market. ULTA has created “The Salon” which offers a wide array of hair, skin and nail services. Different services are offered at each store that offers salon experiences. Currently at the ULTA I visited, Dermalogica was the featured service. They have a skin bar called the “MicroZone.” Customers can book appointments and receive either the Microzone – a 20 minute targeted skin treatments or the Full Service – a 60 minute deep cleansing and moisturizing skin treatments. Offering the ULTA Salon not only brings customers back for the services but also encourages customers to buy the products that are used, which are all sold at ULTA retailers.

As you can see, channel marketing is a very prevalent marketing tool at Sephora and ULTA but can also be seen at tons of other retailers. If your company wants to improve it’s channel marketing, always remember free items are the best, exclusive products, rewards and in-store experiences earn customer lifetime value and offering exclusive discounts for military and students is a great way to reach new markets.

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