Designing and Managing Integrated Marketing Channel

Most of the organization does not sell the product direct to the final consumer, between them a set of
intermediaries performing a variety of function such as distribution of good, transportation of goods and
storage of goods. These intermediaries constitute a Marketing Channel.

Marketing channel consist of merchant, Agents and facilitators.

The Importance of Channel:

The major role of marketing channel is to convert potential buyer to profitable customer. Marketing
channel not only serve market they must also make market. In managing marketing channel firm must
decide how much effort should be put into push vs. pull strategy. In push strategy firm use his money,
sale force and other resources to induce their intermediaries to carry, promote and sale the product
whereas in pull strategy firm use promotion, advertising and other communication methods is used by
form to persuade customer to demand product from their intermediaries thus induce intermediaries to
order the product.

Hybrid Channels and Multi Marketing:

As mentioned above product may be served in market by marketing channel therefore various
successful organizations use Hybrid and Multichannel Marketing. Firm uses two or more marketing
channel in order to implement the Hybrid or multi channel marketing strategy.

Value Networks:
In order to source, augment and deliver the offering to final customer firm builds valued relationship
with suppliers, supplier’s supplier, immediate customer, a end customer and other institution such as
Government approving agencies and university researcher. This value relationship creates a value
network.

Channels Functions and Flow:

Marketing channels perform the function to make goods available for consumer. Various flows are
created due to marketing channel functions. In forward flow communication and transportation
activities is carried out by marketing channel to make the goods available for customer whereas in
backward flow customer demand the product form intermediaries thus intermediaries made payment
and order the product from manufacturer. Marketing function also creates other flows that are
bidirectional includes negotiation, finance and risk taking.
A firm which is selling good required three channels i.e. sale, delivery and service channel. In this regard
five different flows are shown as follows.
Channel Level:
The channel level is used to designate the lengths of channel. Following figure is showing different
channel level, the zero level channel is direct marketing channel in which manufacturer directly sell his
product to consumer whereas in Level 1 there is a retailer between final customer and manufactures
thus the No. of intermediaries increase the length or level of channel.

Channel Integration and Systems:

Vertical marketing system:

In VMS producer, wholesaler and retailer act as a unified system. One channel member, channel captain
own or franchise the other or has so much power that they all corporate. VMS arose from strong
channel member attempts to control channel behavior and eliminate conflict over independent
members perusing their own objectives.

Horizontal marketing system:

In HMS two or more unrelated companies put their resources and program tighter to exploit and
emerging market opportunity. The companies might work together on temporary or permanent basis or
create a joint venture company.
 Competitive Dynamics
Competitive Dynamics result from a series of competitive responses among firms competing within a
particular industry. A market leader has the largest share in the market whereas market challenger has
second larger market share resultantly he attacks the market leader and other competitor is aggressive
mode.

Market leader uses following strategies to remain dominant in market

1. Expand Total Market Demand

2. Protect Market Share
3. Increase Market Share

Expand Total Market demand:

Market demand can be increased either through finding new customers or by more usage of product.

New Customer:
New customer can be increased through market penetration, new market segmentation strategy and
geographic expansion strategy.

More usage of product:

Marketer some times boost the usage amount through packaging or product redesign Larger package
sizes increased the amount of product use in one time.

Increasing in frequency of consumption on the other hand required

1. Identifying additional opportunities to use product e.g. in various festival occasion marketer
persuade customer to use the product and announces extra discount.
2. Identifying completely new and different ways to use brand. E.g. Most of the foods companies
advertise of communicate various recipes relevant to product to convince customer to use their
product in different way.

Protecting Market Share:

The market leader must actively defend it market share while trying to expand total market size. In this
regard market leader increases its competitive strength by providing comprehensive solution to
customers in shape of customer services, distribution effectiveness and cost cutting that increase value
to customers.

Proactive Marketing :
In satisfying customer’s needs a distinction between responsive marketing, anticipating marketing and
creative marketing is drawn. In responsive marketing finds a stated needs of customer and try to fill it, in
anticipating marketing marketer look the need of customer may have in near future, in creative
marketer discovers the solutions customer did not ask for but they enthusiastically respond to that
solution. Many marketer who adapt the needs of customer are reactive whereas proactive marketer
needs two approaches i.e. responsive anticipation and creative anticipation. Proactive companies cerate
new offers to serve the customer.

Defensive Marketing:
Marketing Leader adopt following defensive strategies to protect market share.

1. Position Defense: through this marketer occupying most desirable market space that make
brand impregnable.
2. Flank Defense: through this marketer defend their side product.
3. Preemptive Defense: is the aggressive defense mode in which marketer attack first with guerilla
action. e.g. India state bank introduced in rural area in large No. of scale first to capture market.
4. Counter Offensive Defense: Market leader meet his attacker frontal and launch a pincer
involvement. The leader crush competitor through subsidizing, up gradation product.
5. Mobile Defense: leader stretch his domain over new territories through marketing broadening
and diversification. “Petroleum” Company recast them self as “Energy” Company through
market broadening and companies enter into unrelated industry through diversification.
6. Contraction Defense: large companies cannot defend their entire territories therefore they
decide to plan contraction called strategic withdrawal.

Increasing Market Share:

Market leader can increase market share by considering following four issues
1. Possibility of attacking legal action for violating competition act.
2. Economic Cost: Marginal Cost = Marginal Revenue
3. The danger of perusing wrong marketing activities: cutting price may effect the achievement of
gain.
4. The effect of increased market share on actual and perceived quality. More customer can effect
the quality, firm’s resources and service delivery.

Market Challenger Strategies:

The main goal of market challenger attacks market leader, its own size firms and small size firm to
capture large market share so that he can become market leader.

Market Challenger Attack Strategies:

Frontal Attack: competitor meet leader front in market. In this regard competitor must have fir power
with 3:1, staying power and clear distinctive advantage.
Flank Attacks: competitor attacks weaker point of leader, such attack is suitable if competitor has not
enough resources.
Encirclement Attack: Competitor attacks in many fronts in same time, suitable for competitor having
superior resources.
Bypass Attack: by entering into unrelated diversification or market which is neglected by leader. Such as
PEPSI launch aquafina against Coca-Cola.
Guerrilla Attack: competitor launch small intermittent attack to harass market leader e.g. airlines launch
short term discount to harass national airlines.