A Framework for Marketing Management

Chapter 13
Designing and Managing Integrated Marketing Channels

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Chapter Questions

What are marketing channel systems and value networks? What functions do marketing channels perform? What decisions do companies face in designing, managing, and integrating their channels? What key issues do companies face in e-commerce?
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Marketing Channels and Value Networks

Marketing channelssets of interdependent organizations involved in the process of making a product or service available for use or consumption. Value networka system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

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Push and Pull Strategies

Push strategyuses the manufacturers sales force and trade promotion to induce intermediaries to carry, promote, and sell the products to end users. Pull strategymanufacturer uses advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it.
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Role of Marketing Channels

Performs the work of moving products from producers to consumers, overcoming time, place, and possession gaps. Forward flow functions Backward flow functions Both directions

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Commonalities Among All Channel Functions

They use up scarce resources. They can often be performed better through specialization. They can be shifted among channel members.

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Channel Levels

Zero-level channel One-level channel Two-level channel Three-level channel

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Channel-Design Decisions

Analyze customers desired service output levels Establish objectives and constraints Identify major channel alternatives Evaluate the major alternatives

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Analyzing Customers Desired Service Output Levels

Lot size Waiting and delivery time Spatial convenience Product variety Service backup

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Establishing Objectives and Constraints

State channel objectives in terms of targeted service output levels. Objectives vary with product characteristics. Environmental factors:

Competitors channels Economic conditions Legal regulations and restrictions

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Identifying Major Channel Alternatives

Types of intermediaries

Merchants Facilitators

Terms and responsibilities of channel members

Number of intermediaries

Exclusive Selective Intensive

Price policy Conditions of sale Distributors territorial rights Mutual services and responsibilities

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Evaluating the Major Alternatives

Determine whether own sales force or a sales agency will produce more sales. Estimate the costs of selling different volumes through each channel.

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Channel-Management Decisions

Selecting channel members Training and motivating channel members Evaluating channel members Modifying channel arrangements

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Channel Integration and Systems

Vertical marketing system Horizontal marketing system Multichannel marketing system

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Vertical Marketing System (VMS)

Producer, wholesaler(s), and retailer(s) acting as a unified system. Types:

Corporate VMS Administered VMS Contractual VMS

Wholesaler-sponsored voluntary chains Retailer cooperatives Franchise organizations

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Horizontal Marketing Systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

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Integrated Multichannel Marketing Systems

Multichannel marketinga single firm uses two or more marketing channels to reach one or more customer segments. Integrated marketing channel systemthe strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels. Benefits:

Increased market coverage Lower channel costs More customized selling

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Conflict, Cooperation, and Competition

Channel conflictgenerated when one channel members actions prevent another channel member from achieving its goal. Channel coordinationchannel members are brought together to advance the goals of the channel.

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Types of Conflict

Vertical channel conflictbetween different levels within the same channel. Multichannel conflictmanufacturer has established two or more channels that sell to the same market.

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Causes of Channel Conflict

Goal incompatibility Unclear roles and rights Differences in perception Dependence

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Strategies for Managing Channel Conflict

Adoption of superordinate goals Exchange of employees Joint membership in trade associations Co-optation Diplomacy, mediation, or arbitration Legal recourse

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Legal and Ethical Issues in Channel Relations

Exclusive dealing Exclusive territories Tying agreements Dealers rights

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E-Commerce Marketing Practices

E-businessuse of electronic means and platforms to conduct a companys business. E-commercethe company or site transacts or facilitates the online selling of products and services. E-purchasingcompanies buy goods, services, and information from online suppliers. E-marketingcompany efforts to inform buyers, communicate, promote, and sell its offerings online.

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Pure-Click Companies

Search engines Internet service providers (ISPs) Commerce sites Transaction sites Content sites Enabler sites

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Internet Sources of Information

Supplier Web sites Infomediaries Market makers Customer communities

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Brick-and-Click Companies

Strategies for gaining acceptance from intermediaries when selling through intermediaries and online:

Offer different brands or products on the Internet. Offer offline partners higher commissions to cushion the negative impact on sales. Take orders on the Web site but have retailers deliver and collect payment.

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M-Commerce

Mobile commerce Using cellular phones or personal digital assistants to wirelessly connect to the Internet. Success will be driven by:

Convenience Ease of use Trust Widespread availability

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

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