Copyright 2009, Prentice-Hall, Inc.13-1 A Framework for Marketing Management Chapter 13 Designing...

Copyright 2009, Prentice-Hall, Inc. 13-1

A Framework forMarketing Management

Chapter 13Chapter 13Designing and Managing Integrated Marketing Channels


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?


Marketing Channels and Value Networks Marketing channels—sets of interdependent

organizations involved in the process of making a product or service available for use or consumption.

Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.


Push and Pull Strategies

Push strategy—uses the manufacturer’s sales force and trade promotion to induce intermediaries to carry, promote, and sell the products to end users.

Pull strategy—manufacturer uses advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it.


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


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.


Channel Levels

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


Channel-Design Decisions

Analyze customers’ desired service output levels

Establish objectives and constraints Identify major channel alternatives Evaluate the major alternatives


Analyzing Customers’ Desired Service Output Levels Lot size Waiting and delivery time Spatial convenience Product variety Service backup


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


Identifying Major Channel Alternatives Types of intermediaries

Merchants Facilitators

Number of intermediaries Exclusive Selective Intensive

Terms and responsibilities of channel members Price policy Conditions of sale Distributors’ territorial

rights Mutual services and

responsibilities


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.


Channel-Management Decisions Selecting channel members Training and motivating channel members Evaluating channel members Modifying channel arrangements


Channel Integration and Systems Vertical marketing system Horizontal marketing system Multichannel marketing system


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


Horizontal Marketing Systems Two or more unrelated companies put

together resources or programs to exploit an emerging marketing opportunity.


Integrated Multichannel Marketing Systems Multichannel marketing—a single firm uses two or

more marketing channels to reach one or more customer segments.

Integrated marketing channel system—the 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


Conflict, Cooperation, and Competition Channel conflict—generated when one

channel member’s actions prevent another channel member from achieving its goal.

Channel coordination—channel members are brought together to advance the goals of the channel.


Types of Conflict

Vertical channel conflict—between different levels within the same channel.

Multichannel conflict—manufacturer has established two or more channels that sell to the same market.


Causes of Channel Conflict

Goal incompatibility Unclear roles and rights Differences in perception Dependence


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


Legal and Ethical Issues in Channel Relations Exclusive dealing Exclusive territories Tying agreements Dealers’ rights


E-Commerce Marketing Practices E-business—use of electronic means and platforms

to conduct a company’s business. E-commerce—the company or site transacts or

facilitates the online selling of products and services.

E-purchasing—companies buy goods, services, and information from online suppliers.

E-marketing—company efforts to inform buyers, communicate, promote, and sell its offerings online.


Pure-Click Companies

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


Internet Sources of Information Supplier Web sites Infomediaries Market makers Customer communities


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.


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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Copyright 2009, Prentice-Hall, Inc.13-1 A Framework for Marketing Management Chapter 13 Designing...

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