15

Designing and Managing Integrated

Marketing Channels

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Chapter Questions
 What is a marketing channel system and value
network?
 What work do marketing channels perform?
 How should channels be designed?
 What decisions do companies face in managing
their channels?
 How should companies integrate channels and
manage channel conflict?
 What are the key issues with e-commerce?

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What is a Marketing Channel?

A marketing channel system is the particular

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

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Channels and
Marketing Decisions
 A push strategy uses the manufacturer’s sales
force, trade promotion money, and other means
to induce intermediaries to carry, promote, and
sell the product to end users
 A pull strategy uses advertising, promotion, and
other forms of communication to persuade
consumers to demand the product from
intermediaries

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Buyer Expectations for
Channel Integration

 Ability to order a product online and pick it up at a

convenient retail location
 Ability to return an online-ordered product to a
nearby store
 Right to receive discounts based on total online and
offline purchases

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Categories of Buyers

 Habitual shoppers
 High value deal seekers
 Variety-loving shoppers
 High-involvement shoppers

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 Types of Shoppers
 Service/quality customers
 Price/value customers

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Channel Member Functions
 Gather information
 Develop and disseminate persuasive
communications
 Reach agreements on price and terms
 Acquire funds to finance inventories
 Assume risks
 Provide for storage
 Oversee actual transfer of ownership

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Designing a
Marketing Channel System
 Analyze customer needs
 Establish channel objectives
 Identify major channel alternatives
 Evaluate major channel alternatives

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Channel Service Outputs

 Lot size
 Waiting/delivery time
 Spatial convenience
 Product variety
 Service backup

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Identifying Channel Alternatives

 Types of intermediaries
 Number of intermediaries
 Terms and responsibilities

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Number of Intermediaries

 Exclusive
 Selective
 Intensive

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Terms and Responsibilities
of Channel Members

 Price policy
 Condition of sale
 Distributors’ territorial rights
 Mutual services and responsibilities

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Channel-Management Decisions

 Selecting channel members

 Training channel members
 Motivating channel members
 Evaluating channel members
 Modifying channel members

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 Channel Power

 Coercive
 Reward
 Legitimate
 Expert
 Referent

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What is Channel Conflict?

 Channel conflict occurs when one member’s

actions prevent another channel from
achieving its goal.
 Types of channel conflict
 Vertical
 Horizontal
 Multichannel

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Causes of Channel Conflict

 Goal incompatibility
 Unclear roles and rights
 Differences in perception
 Intermediaries’ dependence on manufacturer

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Table 15.3 Strategies for Managing Channel
Conflict

 Cooptation
Adoption of superordinate goals
 Diplomacy
Exchange of employees
 Mediation
Joint membership in trade associations
 Arbitration
 Legal recourse

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 Value Delivery
Network Marketing
Channels Create
Time Place Possession
Marketing channel Utility

Marketing
Channel Functions

Provide information Scientific Financing title of the

Price stability
Management Promotion goods
Designing and
Managing Integrated
Marketing Channels

Marketing channel •Product flow Channel Conflict

flow •Negotiation flow ••Types
Types of
of conflicts
conflicts
•Ownership flow
•Information flow IHorizontal
IHorizontal conflict
conflict
•Promotion flow II Vertical
Vertical conflict
conflict

Factors determining the Size of the Order lot

length of the Channel l market size
Product Service
Types of intermediaries variety requirement
requirement 10
s
O N 15
I
S TER
S
Intensity at various Merchant Functional SE HAP
levels middleman middleman C
Intensive Selective
Selective Exclusive
distribution distribution s distribution