Channel Management

Channel Management in
Financial Services
Content designed by Arpita Sarkar (mail.arpita.s@gmail.com)

What do you understand by
channel management? What
are the steps involved in
channel management?

Channel Management
Channel Management is the set of processes involved in

managing the different distribution networks being used by
a business to deliver its products and services to customers.

Channel Management
Step Step Frequency of Management level involved
# occurrence
1 Channel Rare, as and Channel selection involves high level
Selection when a new decision making. Senior management is
channel is involved as this is a strategic decision for
added the business
2 Channel Design Rare, as and Execution is typically done by middle
when a new managers, however the project is closely
channel is monitored and reviewed by senior
added management.
3 Performance High, regular Middle managers involved in regular
Monitoring on-going monitoring of channel performance. They
activity conduct, weekly and monthly reviews.
Senior management involved in quarterly
and annual reviews (sometimes even
monthly).
4 Performance High, regular Depending upon the criticality and
Improvement on-going complexity, improvement projects are
activity taken up by junior or middle level
managers.

What factors affect channel
selection? What are the most
commonly used channels in
Financial Services Industry?

Factors Affecting Channel Selection
Cost vs.
benefit of
Customer Strategic
establishing
needs and priorities of
and
preferences the business
managing a
channel

Customer needs and preferences

• This is the most critical factor that businesses need to consider while
selecting a channel of distribution. Businesses need to be aware of the
consumer behaviour with respect to how they evaluate the options
available to them, how they make the purchase decision and lastly
how they to make the purchase.
• E.g. If a business knows that a consumer makes a purchase decision
while evaluating options on the Internet, not having an online platform
for enrolling customers would be counter-optimal. Similarly, if a business
knows that for purchase decision regarding a particular product,
customers rely on advice from experts, a well-trained and well-informed
sales team becomes a critical channel of distribution

Cost of establishing and managing a channel

• While establishing new channels of distribution, businesses need to
evaluate the costs in setting and managing a channel. Even once a
channel has been well-established, businesses need to monitor and
review channel performance in order to ensure that they are indeed
profitable to the company.
• In the context of financial services industry, which is characterised by
huge sales teams and branch networks both of which involve significant
investments and operational costs, businesses need to ensure
productivity and cost optimisation at per employee and per branch
level.

Strategic priorities of the business
• The strategic direction that a business needs to also has a bearing on
the channel selected for distribution.
• Some of the strategic questions that need to be asked while investing in
a particular channel are:
• Does this channel give the business access to the target segment of
customers?
• Does this channel help the business cover the geographical span it
wants to reach?
• How does this channel compare with the competitors?
• Is this channel in sync with the business’ positioning?
• Can the channel handle the future products and services that the
business plans to roll-out?
Commonly used channels in financial services industry
The commonly used channels in financial services industry are:

• Direct Channel - This comprises of company employed sales people
who reach out to potential customers through cold-calling and
networking. They meet face-to-face with customers in a place
convenient for the customer.
• Most commonly used for complex products like – ULIPS, PMS
• Branch Channel – These are company offices which are set up across a
geographical span. The branches are used to sell a wide array of
product offerings of the business. Customers visit the branches for their
service needs as well.
• Most commonly used for pull- products like – Fixed Deposits, Gold
Loans

Commonly used channels in financial services industry
• Online Channel – Customers can visit the company website or an
aggregator website to apply for a product. The application is received
at the call-center following which an executive calls the customer and
guides her through the application process.
• Most commonly used for simple products like term insurance plans,
NRI accounts
• Call Centre Sales – Call center executives are provided leads

(cold/warm) by the business teams. The executives have a target to
make a certain number of calls per day and generally have monthly
conversion targets.
• Most commonly used for push products like credit cards, personal
loans
• Alliances – Financial service providers enter into alliances with other

organizations, which have the distribution networks that supplement
their own distribution networks. Such alliances are strategic in nature
and help businesses reach out to new geographies and customer
segment.
• Common alliances – Bancassurance tie-ups, Exchange House tie-
ups
Channel Design
• Once a channel has been selected, the next step is to design the channel
and set it up.
• Key factors to consider during channel design:

• What products and services will be delivered through the channel?
• How would customers access the channel?
• If it is a sales channel, how will leads flow into the channel?
• What are the key performance indicators for the channel?
• What would be the monitoring mechanism for performance?
• What training is to be provided to sales/service personnel?
• What product brochures, sales/service tool-kits is to be provided to the
sales/service personnel?

Performance Monitoring and Performance Improvement
• Performance Monitoring – Once a channel has been set up, its
performance needs to be monitored on a regular basis. Some metrics which
are measured are:
• Volume
• Value
• Attrition
• Dormancy
• Productivity
• Reliability
• Performance Improvement - Activities for improving channel performance:
• Training
• Sales Kits
• Improvements in forms
• Expert help-line for sales staff
End of Session

Channel Management

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Content designed by Arpita Sarkar (mail.arpita.s@gmail.com)

Content designed by Arpita Sarkar (mail.arpita.s@gmail.com)