Marketing Management: Designing and Managing Integrated Marketing Channels

Marketing Management
Fifteenth Edition
Chapter 17
Designing and
Managing
Integrated
Marketing
Channels
Copyright © 2016, 2012, 2009 Pearson Education, Inc. All Rights Reserved
Learning Objectives (1 of 2)
17.1 What is a marketing channel
system and value network?
17.2 What work do marketing
channels perform?
17.3 How should channels be
designed?
17.4 What decisions do
companies face in managing their
channels?
17.5 How should companies
integrate channels?
Learning Objectives (2 of 2)
17.6 What are the key channel issues in e-commerce?
17.7 What are the key channel issues in m-commerce?
17.8 How should companies manage channel conflict?
Marketing Channels and Value
Networks (1 of 3)
• Marketing channels
– Sets of interdependent
organizations participating
in the process of making a
product or service
available for use or
consumption
– Intermediaries:
merchants, agents, and
facilitators
Networks (2 of 3)
• A marketing channel system
– The particular set of marketing channels a firm
employs
– Push vs. pull strategy
Networks (3 of 3)
• Multichannel marketing
– Using two or more
marketing channels to
reach customer
segments in one market
area
– Omnichannel marketing
– Integrated marketing
channel system
Figure 17.1 The Hybrid Grid
Networks (1 of 2)
• Value network
– A system of partnerships and alliances that a firm
creates to source, augment, and deliver its offerings
– Demand chain planning
Networks (2 of 2)
• The digital channels
revolution
– Customer support in
store/online/phone
– Check online for product
availability at local stores
– Order product online to pick
up at store
– Return a product purchased
online to a nearby store
The Role of Marketing Channels (1 of 2)
• Channel functions and flows
Table 17.1 Channel Member Functions
• Gather information about potential and current customers, competitors, and other actors and
forces in the marketing environment.
• Develop and disseminate persuasive communications to stimulate purchasing.
• Negotiate and reach agreements on price and other terms so that transfer of ownership or
possession can be affected.
• Place orders with manufacturers.
• Acquire the funds to finance inventories at different levels in the marketing channel.
• Assume risks connected with carrying out channel work.
• Provide for the successive storage and movement of physical products.
• Provide for buyers’ payment of their bills through banks and other financial institutions.
• Oversee actual transfer of ownership from one organization or person to another.
Figure 17.2 Marketing Flows for
Forklift Trucks
The Role of Marketing Channels (2 of 2)
• Channel levels
– Zero-level channel (direct)
– One/two/three-level
channels (intermediaries)
– Reverse-flow channels
• Service sector channels
Figure 17.3 Consumer/Industrial
Marketing Channels
Channel-Design Decisions (1 of 4)
• Analyzing customer needs and wants
‒ Desired lot size
‒ Waiting and delivery time
‒ Spatial convenience
‒ Product variety
‒ Service backup
• Establishing objectives and constraints
• Identifying major channel alternatives
– Types of intermediaries
– Number of intermediaries
– Terms/responsibilities of channel members
Identifying Major Channel
Alternatives (1 of 2)
• Number of intermediaries
– Exclusive distribution
– Selective distribution
– Intensive distribution
Identifying Major Channel
Alternatives (2 of 2)
• Terms and responsibilities of channel members
‒ Price policy
‒ Conditions of sale
‒ Distributors’ territorial rights
‒ Mutual services and responsibilities
• Evaluating major channel alternatives
– Economic criteria
– Control and adaptive criteria
Figure 17.4 The Value-Adds versus Costs of Different Channels
Source: Oxford Associates, adapted from Dr. Rowland T. Moriarty. Cubex Corp.
Figure 17.5 Break-Even For Sales
Force vs. Sales Agency
Channel-Management Decisions
• Selecting channel members
• Training channel members
• Global channel considerations
• Evaluating channel members
• Channel modification decisions
• Modifying channel design
Training and Motivating Channel
Members (1 of 2)
• Channel power
– Coercive
– Reward
– Legitimate
– Expert
– Referent
Training and Motivating Channel
Members (2 of 2)
• Channel partnerships and
ECR practices
– Demand-side management
– Supply-side management
– Enablers and integrators
Channel Integration and Systems
• Conventional marketing
channel
• Vertical marketing systems
• Horizontal marketing
systems
Vertical Marketing Systems
• Corporate VMS
• Administered VMS
• Contractual VMS
– Wholesaler-sponsored voluntary chains
– Retailer cooperatives
– Franchise organizations
• New competition in retailing
E-Commerce Marketing Practices
• E-commerce
– Uses a Web site to transact or facilitate the sale of
products and services online
• Pure-click vs. brick-and-click companies
M-Commerce Marketing Practices
• Mobile channels and media can
keep consumers as connected and
interacting with a brand as they
choose
– Advertising and promotion
– Geofencing
• Privacy issues
Conflict, Cooperation, and
Competition (1 of 5)
• Channel conflict
– Generated when one channel member’s actions
prevent another channel member from achieving its
goal
• Channel coordination
– Occurs when channel members are brought together to
advance the goals of the channel instead of their own
potentially incompatible goals
• Types of conflict and competition
– Horizontal channel conflict
– Vertical channel conflict
– Multichannel conflict
• Causes of channel conflict
‒ Goal incompatibility
‒ Unclear roles and rights
‒ Differences in perception
‒ Intermediaries’ dependence on manufacturer
Table 17.2 Strategies to Manage Channel Conflict
Strategic justification
Dual compensation
Superordinate goals
Employee exchange
Joint memberships
Co-potation
Diplomacy, mediation, or arbitration
Legal recourse
• Dilution and cannibalization
– Marketers must be careful not to dilute their brands
through inappropriate channels
• Legal and ethical issues in channel relations
– Exclusive dealing/territories, tying agreements, and
dealers’ rights
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Marketing Management

• Assume risks connected with carrying out channel work.

• Provide for the successive storage and movement of physical products.

• Oversee actual transfer of ownership from one organization or person to another.

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