This document discusses key concepts related to designing and managing integrated marketing channels. It covers topics such as defining marketing channels and their importance, understanding customer needs, channel design decisions, identifying and evaluating channel alternatives, channel management, integration and potential conflicts. The document provides an outline and overview of these various concepts through headings, bullet points and diagrams.
3. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
4. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
5. • 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.
- used for low brand loyalty in categories or
impulse items
6. • A pull strategy uses advertising, promotion, and
other forms of communication to persuade
consumers to demand the product from
intermediaries.
- used when consumers can differentiate brands
well and brand are chosen prior to purchase
7. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
8. Categories of Buyers
• Habitual Buyers
• Same place, same manner
• High value deal seekers
• They know what they need and they
surf before buying at the lowest possible
price
9. Categories of Buyers
• Variety-loving shoppers
• Gather info through various channels,
take advantage of high-touch services,
then buy in their favorite channel
regardless of price
• High-involvement shoppers
• Gather info through alls channels and
purchase in a low cost channel but takes
advantage of customer support from a
high-touch channel
10. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
11. Decisions in Designing a
Marketing Channel System
A. Analyze customer needs
* Greater service = greater channel costs = higher prices
12. Decisions in Designing a
Marketing Channel System
A. Analyze customer needs
* Greater service = greater channel costs = higher prices
B. Establish channel objectives
* Which market segment to serve and what best
channel to use
13. Decisions in Designing a
Marketing Channel System
A. Analyze customer needs
* Greater service = greater channel costs = higher prices
B. Establish channel objectives
* Which market segment to serve and what best
channel to use
C. Identify major channel alternatives
* Each channel reaches a different segment and
delivers the right product at the least cost
14. Decisions in Designing a
Marketing Channel System
A. Analyze customer needs
* Greater service = greater channel costs = higher prices
B. Establish channel objectives
* Which market segment to serve and what best channel to
use
C. Identify major channel alternatives
* Each channel reaches a different segment and delivers the
right product at the least cost
D. Evaluate major channel alternative
* vs. economic, control and adaptive criteria
15. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
16. Analyzing customer needs:
Channel Service Outputs
– Lot size: How many can be purchased on 1
occasion?
?
17. Analyzing customer needs:
Channel Service Outputs
– Lot size: How many can be purchased on 1
occasion?
– Waiting and delivery time: The faster, the
better
18. Analyzing customer needs:
Channel Service Outputs
– Lot size: How many can be purchased on 1
occasion?
– Waiting and delivery time: The faster, the
better
– Spatial convenience: how easy is it to buy
the product?
19. Analyzing customer needs:
Channel Service Outputs
– Product variety: more choices = more
chances of finding what is needed
21. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
23. Identifying Channel Alternatives:
Three Elements
1. Types of intermediaries
* Do I need a wholesaler? Retailer? Dealer?
2. Number of intermediaries
* Distribution: Exclusive? Selective? Intensive?
* Risk = price wars among retailers
24. Identifying Channel Alternatives:
Three Elements
1. Types of intermediaries
* Do I need a wholesaler? Retailer? Dealer?
2. Number of intermediaries
* Distribution: Exclusive? Selective? Intensive?
* Risk = price wars among retailers
3. Terms and responsibilities
* Respect + Opportunity to make profits
25. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
27. Channel-Management Decisions
Because to the customers, the channels are
Select the company!
Train
Because intermediaries are partners in
satisfying customers!
Motivate
28. Channel-Management Decisions
Because to the customers, the channels are
Select the company!
Train
Because intermediaries are partners in
satisfying customers!
Motivate
Evaluate
Is the strategy still working? (external analysis
Modify and current channels)
29. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
30. • Channel Power is the ability to
alter channel’s behavior
• Cooperation is a huge challenge!
31. Channel Power
a. Coercive power
- Withdraw resource or terminate relationship
b. Reward power
- Extra benefit for performance
c. Legitimate power
- Behavior warranted under the contract
d. Expert power
- Must develop new expertise for them to cooperate
e. Referent power
- Respect causes intermediaries to have pride in the
association
32. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
33. Channel Integration and Systems
Vertical Marketing Systems
-Producer + Wholesaler + Retailer
= Unified system under channel
captain
- Corporate (single ownership),
administered or contractual
(independent firms)
34. Channel Integration and Systems
Vertical Marketing Systems
Horizontal - 2 or more unrelated
Marketing Systems companies put together
resources to exploit an
emerging market
35. Channel Integration and Systems
Vertical Marketing Systems
- More marketing
channels/ strategies of 1
Horizontal channel reflect the
Marketing Systems strategies of other
channels
- Goal: maximum market
Integrated Multichannel coverage
Marketing Systems
36. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
37. • Channel Coordination – channel
members are brought together to
advance the goals of the channel
38. • Channel conflict - one member’s
actions prevent another channel
from achieving its goal
* Can be vertical, horizontal or
multichannel
39. Top 10 Concepts
1. Marketing Channel System: Push and Pull
2. Categories of Buyers
3. Decisions in Designing a Marketing Channel System
4. Analyzing customer needs: Channel Service Outputs
5. Identifying Channel Alternatives: Three Elements
6. Channel-Management Decisions
7. Channel Power
8. Channel Integration and Systems
9. Channel Coordination / Channel Conflict
10. E-Commerce Marketing Practices
40. * Online retailers provide convenient,
informative and personalized experiences
without:
• Retail floor space
• Staff
• Inventory
* Customer service is critical: no social
interaction
42. E-Commerce Marketing Practices
Pure-click
Launched a website without any previous
experience as a firm
Brick-and-click
- Existing companies with an added online site
- Risk: conflict with offline intermediaries
44. What is a Marketing Channel?
A marketing channel
Producer
Agent system is the particular
set of interdependent
Retailer
organizations involved in
the process of making a
product or service
Product to the Consumer available for use or
consumption.
45. Channels and
Marketing Decisions
Producer
A push strategy uses
the manufacturer’s
Consumer Sales Force sales force, trade
promotion money, and
other means to induce
intermediaries to carry,
Retailer Wholesaler
promote, and sell the
product to end users
46. Channels and
Marketing Decisions
A pull strategy uses Advertise
advertising, Demand
promotion, and Pull Product
other forms of Manufacturer
communication to
persuade consumers
to demand the
product from
intermediaries
47. Buyer Expectations for
Channel Integration
• Ability to order a product
online and pick it up at a
Ease convenient retail location
Expertise Experience • Ability to return an online-
ordered product to a
Product nearby store
• Right to receive discounts
based on total online and
offline purchases
48. Category and Types of Buyers
Habitual Quality
Buyers
Service
High Value
deal Seakers
Variety Loving
Shoppers
Buyers
High
Affinity
Price
Involvement
Shoppers Value
49. Channel Member Functions
Gather Information
• Develop and disseminate persuasive communication
Reach Agreement on price and terms
• Acquire funds to finance inventories
Assume risk and Provide for storage
Provide for buyers payment of their bills
• Supervise actual transfer of ownership
50. Designing a
Marketing Channel System
Analyze Establish
customer channel
needs objectives
Identify Evaluate
major major
channel channel
alternatives alternatives
51. Channel Service Outputs
Lot size
Waiting/delivery
Service backup
time
Spatial
Product variety
convenience
54. Terms and Responsibilities
of Channel Members
• Price policy
• Condition of sale
• Distributors’ territorial rights
• Mutual services and responsibilities
57. Channel Integration and Systems
Vertical marketing systems
• Corporate VMS
• Administered VMS
• Contractual VMS
Horizontal marketing systems
Multichannel systems
58. 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
59. Causes of Channel Conflict
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries’ dependence on manufacturer
60. Table 15.3 Strategies for Managing Channel
Conflict
• Adoption of • Cooptation
superordinate goals • Diplomacy
• Exchange of employees • Mediation
• Joint membership in • Arbitration
trade associations • Legal recourse
64. Designing and Managing Integrated
Marketing Channels
(10 Things to Remember)
www.kristofjongco.blogspot.com
65. Outline:
1. Defining Marketing Channels
2. Importance of Marketing Channels
3. Understand Customer Needs
4. Role of Marketing Channels
5. Channel Design Decisions
6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
66. 1. Marketing Channels
Means by which firms attempt to inform, persuade, and remind consumers,
directly or indirectly, about the products and brands they sell
67. Outline:
1. Defining Marketing Channels
2. Importance of Marketing Channels
3. Understand Customer Needs
4. Role of Marketing Channels
5. Channel Design Decisions
6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
68. 2. Importance of Marketing Channels
New Ideas Increase Profits
www.kristofjongco.blogspot.com
69. Outline:
1. Defining Marketing Channels
2. Importance of Marketing Channels
3. Understand Customer Needs
4. Role of Marketing Channels
5. Channel Design Decisions
6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
78. 7.Identify & Evaluate Major Channel
Alternatives
Selective Distribution Exclusive Distribution Intensive Distribution
www.kristofjongco.blogspot.com
87. Chap. 15
Designing and Managing Integrated
Marketing Channels
Raymund C. Piñon
Marketing Management V57
Prof. Bong De Ungria
88. Outline
• 6th Task of Marketing – Delivering Customer Value
• Marketing channels: definition, importance, examples
• Functions of marketing channels
• Flows and levels of marketing channels
• Value networks – a broader view of customer value delivery
• How to design marketing channels
• Challenges in managing channels
• Integrated marketing channels – a new development
• Channel conflicts and how they are managed
• Key issues with e-commerce
89. Recall: Marketing is…
• A system of profitably creating, DELIVERING
and communicating superior VALUE to satisfy
customers’ needs, wants and demands better
than competition.
90. To achieve this,
the 6th Task of Marketing is…
1. Developing marketing strategies and plans
2. Capturing marketing insights and
performance
3. Connecting with customers
4. Building strong brands
5. Shaping the marketing offer
6. Delivering and communicating value
7. Creating successful long-term growth
91. 1st some definitions
• Marketing Channels, Trade Channels, Distribution Channels
– A set of interdependent organizations involved in the process of making products or services
available for use or consumption
– A set of pathways a product or service follows after production, culminating in purchase and
use by the final end-user
– Intermediaries performing a variety of functions
• Value-delivery network
– A company’s supply chain and how it partners with specific suppliers and distributors to make
products and bring them to markets
• Value-delivery system
– All the expectancies the customers will have on the way to obtaining and using the offering
• Value networks
– A system of partnerships and alliances that a firm creates to source, augment and deliver its
offerings
92. Examples of Intermediaries
• Merchants
– Wholesalers and Retailers
– Buy, take title to goods, resell
• Agents
– Brokers, manufacturers’ representatives, sales agents
– Look for customers, negotiate for producer, don’t take title to
goods
• Facilitators
– Transportation companies, warehouses banks, advertising
agencies
– Assist in the distribution process but don’t take title to goods
nor negotiate on purchases or sales
93. Why are Channels Important?
Channel functions and flows
• Gather marketing information
• Develop and disseminate persuasive communications
• Reach agreement on prices and terms to effect transfer of ownership or
possession of goods
• Place order with manufacturers
• Acquire funds to finance inventory
• Assume risks for carrying out channel functions
• Provide for storage and movement of physical products
• Provide for buyers’ payment of bills through banks
• Oversee actual transfer of ownership of goods
• Convert potential buyers into profitable customers
94. Why are Channels Important?
Marketing channel system
• Choice of particular set of marketing channels a firm
employs is critical
– They account for 30% to 50% of SRP
– They can convert potential buyers to profitable customers
– Channel decisions affect all other marketing decisions
• Pricing
• Sales force and advertising decisions
• Involve long-term commitments with other firms
as well as a set of policies and procedures
• Channel decisions must align with overall strategy
95. So (again) Step #1 is…
Understanding Customer Needs
Consumers choose where to buy based on:
• Price
• Product assortment
• Convenience
• Personal shopping goals
Marketers using different channels must be aware that
different consumers have different needs
during the buying process
96. There are 5 marketing flows in a marketing channel
Physical Flow
Transporters, Transporters,
Suppliers Manufacturer Dealers Transporters Customers
Warehouses Warehouses
Title Flow
Suppliers Manufacturer Dealers Customers
Payment Flow
Suppliers Banks Manufacturer Banks Dealers Banks Customers
Information Flow
Transporters, Transporters,
Transporters,
Suppliers Warehouses, Manufacturer Warehouses, Dealers Customers
Banks
Banks Banks
Promotions Flow
Advertising Advertising
Suppliers Manufacturer Dealers Customers
agencies agencies
98. A broader view of delivering customer value:
Value Networks
Partnerships created to source, augment & deliver offerings
• From a linear view -> Supply Chain
– See markets as destinations
• To a customer-centric view -> Demand Chain Planning
– Emphasize what customers are looking for instead of what we are selling
– SIVA 4-Ps
• Solutions Product
• Information Promotions
• Value Price
• Access Placement
• To a broad view of customer value delivery -> Value Networks
– Seeing the company at the center of a value network
– Include suppliers, suppliers’ suppliers, immediate customers and their end customers
– A company needs to orchestrate these parties in order to deliver superior value to the target
market
– Managing value chains require increased investments in IT and software
• SCM
• SAP, Oracle
• ERP
• CRM
99. Channel Design Decisions
What are key issues in designing channels?
1. Analyzing customer needs
2. Establishing channel objectives
3. Evaluating major channel alternatives
100. In Channel Design, Step #1 is…
Analyze customers’ desired service output level
There are 5 channel service outputs
• Lot size – customers prefer lot size of one
• Waiting and delivery time – fast delivery channels
• Spatial convenience – ease of purchase
• Product variety – greater assortment
• Service back-up – credit, delivery, service, repair, training, consulting
Note: increased service output = increased channel costs, and increased prices to
consumers. Some customers are willing to accept smaller service outputs if
they could save on costs
101. Channel Design Decision Step #2 is…
Establishing channel objectives and constraints
• State channel target service output level
• Arrange channel tasks to minimize total channel costs and provide
desired service level output
• Choose market segments to serve and best channels for each
• In entering new markets, observe what competitors are doing
• Adapt channel objectives to larger environmental context
– E.g. During depression – use shorter channels to maintain price
– E.g. Note legal constraints – vs. monopoly
102. Channel Design Decisions
In establishing channel objectives and constraints
• Vary objectives to suit product characteristics
– For perishables – direct marketing
– For bulky (building materials) – minimize shipping distance and
amount of handling
– Nonstandard products (custom-built machinery) – sales force
– Products needing installation or maintenance (heating or cooling
systems) – sales force or franchised dealers
– High-unit value products (generators of turbines) – sales force
103. In Channel Design Decision, Step #3 is…
Identifying and evaluating major channel alternatives
Choose a mix of channels that reach different segments
of buyers and delivers the right products at the least cost
Channel Advantages Disadvantages
Sales Force or Can handle complex products Too expensive
owned branches and transactions
Internet, Less expensive Not effective with complex
telemarketing products
Distributors Can create sales Customer contact by company is
lost
Manufacturer’s Able to contact customers at Selling effort per customer is less
representatives low cost per customer intense than if company reps did
because several clients share the selling
costs
104. In Evaluating Channels
Consider 3 elements of channel alternatives
1. What types of business intermediaries are available?
2. How many intermediaries are needed?
– Exclusive distribution – limited number of intermediaries
• Maintain control of service levels and outputs offered by intermediaries
– Selective distribution – few but less than all
• Gain adequate market coverage, more control, less cost
– Intensive distribution
• Places its products in as many outlets as possible
3. What are the terms, and what are the responsibilities of each channel
members?
105. In Channel Design
Evaluate major channel alternatives using…
• Economic criteria
• Control criteria
• Adaptive criteria
106. Economic criteria in channel evaluation
Each channel alternative will generate different
levels of sales and costs
high
Sales
Value- force
Added
partners
Direct sales
Value-Added of Sales
Distributors
channels
Retail
Stores
Telemarketing “Indirect” channels
Internet Direct marketing
low channels
low high
Cost per Transaction
Try to align customers and channels to maximize demand at the lowest overall cost
107. Channel Design Decisions
Control and adaptive criteria in evaluation
• Using sales agency poses control problems for you
– They are independent firms seeking to maximize profits
– They concentrate on customers who buy
– They may not master technical details of product or handle
promotions effectively
• In rapidly changing, volatile, or uncertain product
markets, producers need channel structures and policies
that provide high adaptability
108. Channel Management Decisions
After choosing a channel system, the company must:
1. Select individual channel members
2. Train and motivate channel members
3. Evaluate individual channel members
4. Modify channel design and arrangements
over time
109. Channel Management Decisions
After choosing a channel system, the company must:
1. Set criteria for selection of channel members
– Number of years in business
– Other lines carried
– Growth and profit records
– Financial strength
– Cooperativeness
– Service reputation
– Size and quality of sales force
– Location
– Type of clientele
– Future growth potential
110. Channel Management Decisions
After choosing a channel system, the company must:
2. Train and motivate channel members
– Understand intermediaries’ needs and wants
– Construct a channel positioning
– Implement capacity-building programs
• Training
• Market research
– Exercise channel power to compel action
111. Channel Management Decisions
After choosing a channel system, the company must:
2. Train and motivate channel members
– Types of power to elicit cooperation
• Coercive power
– Threaten to withdraw a resource or terminate a relationship
• Reward power
– Higher margins, deals, premiums, cooperative advertising
allowances, display allowances, sales contest, bonuses
• Legitimate power
– Use contract agreements to force compliance
• Expert power
– Posses special knowledge the intermediary values
• Referent power
– Intermediary feels proud to be associated with producer
112. Channel Management Decisions
In motivating channel members
2. Forge long-term partnerships by clarifying expectations
– Market coverage
– Inventory levels
– Marketing development
– Account solicitation
– Technical advise and services
– Marketing information
113. Channel Management Decisions
In motivating channel members
2. Streamline supply chain and cut costs:
ECR – Efficient Consumer Response practices
help organize relationship in 3 areas:
– Demand-side management
• Stimulate demand with joint sales
and marketing activities
– Supply-side management
• Focus on logistics and supply chain
activities to optimize supply
– Enablers and integrators
• Use IT and process improvement tools
to support joint activities
114. Channel Management Decisions
After choosing a channel system, the company must:
3. Evaluate individual channel members on…
– Sales quota achievement
– Average inventory levels
– Customer delivery time
– Treatment of damaged
and lost goods
– Cooperation in training
and promotions programs
Note: underperformers need to be counseled,
retrained, motivated or terminated
115. Channel Management Decisions
After choosing a channel system, the company must:
4. Modify channel design and arrangements over time when:
– Channel is not working as planned
– Consumer buying patterns change
– Market expands
– New competition arises
– Innovative distribution channels emerge
– Product moves into later stages of PLC
Note: change may mean adding or dropping individual
channel members, adding or dropping market channels,
or developing totally new ways to sell goods
116. In managing channels, how much effort to
devote to push or pull?
• Push strategy
– for low-involvement, impulse products
– Use sales force, trade promo to induce
intermediaries to carry, promote and
sell products to end-users
• Pull strategy
– For high-involvement, differentiated offers
– Use advertising, consumer promotions
and other forms of communication to
persuade consumers to demand the
product from intermediaries
117. Channel Integration and Systems
Some of the recent developments in channels
• Vertical Marketing Systems
– Corporate VMS
– Administered VMS
– Contractual VMS
– New competition in retailing
• Horizontal Marketing Systems
• Integrating Multi-channel
Marketing Systems
118. Channel Integration and Systems
Some of the recent developments in channels
• Vertical Marketing Systems
– Producer, wholesaler(s) and retailer(s)
acting as a unified system
– Channel captain owns others or
franchises them or has so much
power that they all cooperate
– Strong channel members’ attempts
to control channel behavior and
eliminate conflict
– Achieve economies of scale via size,
bargaining power, and elimination
of duplicate services
– Provides extensive exchange of information
119. Channel Integration and Systems
Some of the recent developments in channels
• New competition in retailing
– Is no longer between independent business units
but between
• whole systems of centrally-planned networks
(Corporate, administered, and contractual)
• competing against one another
• to achieve the best economies and customer response
120. Channel Integration and Systems
Some of the recent developments in channels
• Horizontal Marketing Systems
– Two or more unrelated companies
put together resources or programs to
exploit an emerging marketing opportunity
– Each company lacks capital, know-how,
production or marketing resources
to venture alone or is afraid of the risks
– Arrangements may be temporary,
permanent or result in joint-venture company
121. Channel Integration and Systems
Some of the recent developments in channels
• Integrating Multi-channel Marketing Systems
– Multi-channel marketing
• A company uses two or more channels to reach one or more
customer segments
– Integrated marketing channel system
• Strategies and tactics of selling through one channel reflects
the strategies and tactics of selling through other channels
122. Channel Integration and Systems
3 benefits of multi-channel marketing systems
• Increased market coverage
– Customers can shop for company
products in more places
– Multi-channel shoppers are
more profitable customers
• Lower channel cost
– Selling by phone is cheaper than selling
by personal visit to small customers
• More customized selling
– Adding a technical sales force to
sell more complex products
123. Channel Integration and Systems
Disadvantages of multi-channel marketing systems
• Channel conflicts
– Channels competing for same customer
– New channels independent and makes
cooperation difficult
• Problems with control
– Execution of merchandizing and
promotions programs
– Market coverage and frequency
of visits to customers
– Inventory levels
– Handling of customer complaints,
returns and damaged goods
– Allocation of effort to other principals
served by intermediaries
124. In Channel Architecture
Demand-generation Tasks
Determine which channels should perform which functions
Better Disseminate Reach Pace Acquire Assume Facilitate Facilitate Oversee
Information information price orders funds for risks product payment ownership
agreement inventories storage & terms
movement
Internet
National
account
Marketing channels and Methods
management
Direct sales
Tele-
Customer
marketing
Vendor
Direct mail
Retail stores
Distributors
Dealers and
value-added
resellers
Advertising
Multi-channel architecture optimizes coverage, customization and control,
while minimizing costs and conflict
125. Conflict, Cooperation and Competition
Causes of channel conflicts
• Goal incompatibility
– Low-price market penetration strategy vs.
high-margin, short-run profitability
• Unclear roles and rights
– Territorial boundaries
– Sales crediting
• Differences in perception
– Optimistic vs. pessimistic views on business prospects
– Differences in perception about advertising strategy
• Intermediaries’ dependence on the manufacturer
– Exclusive dealers are at the mercy of manufacturers’
product and pricing policies
126. Conflict, Cooperation and Competition
Management of channel conflicts
• As companies add channels to grow sales, they risk creating channel conflicts
• Too much conflict is dysfunctional
• The challenge is not to eliminate conflicts but to manage them through
– Adoption of super-ordinate goals – agree on goals they jointly seek
– Exchange of employees – e.g. between manufacturer and dealer
– Joint membership in trade associations – manufacturers and marketers
– Co-optation – include leaders in boards, advisory councils
– Diplomacy, mediation, or arbitration – conflict resolution methods
– Legal recourse
127. E-Commerce Marketing Practices
Some definitions
• E-business
– Use of electronic means and platforms to conduct a company’s
business
• E-commerce
– Company or site offers to transact or facilitate the selling of products
and services online
• E-purchasing
– Purchase of goods, services and information from online sources
• E-marketing
– Efforts to inform buyers, communicate, promote and sell company
products and services over the internet
128. E-Commerce Marketing Practices
Some advantages
• Provides convenient, informative and personalized
experiences for different types of customers
• Allows online retailers to sell low-volume products to
niche markets at lesser or no cost in maintaining retail
floor space, staff, and inventory
129. E-Commerce Marketing Practices
3 Aspects of online transactions in retailing competition
• Customer interaction with the Website
• Delivery of the product
• Ability to address problems when they occur
130. E-Commerce Marketing Practices
2 Types of Online Competitors
• Pure-Click Companies
– Launched a website without previous existence as a company
• Search engines
• ISPs
• Commerce sites – amazon.com, buy.com
– sell all types of products and services – books, music, toys, stocks, clothes,
insurance, financial services
• Transaction sites
• Content sites
• Enabler sites
• Brick-and-Click Companies
– Existing companies that have added an online site for information or
e-commerce
131. E-Commerce Marketing Practices
Issues of using online channels for Brick-and-Click
and how to handle them
• Potential channel conflict with retailers, brokers, agents
and branch outlets
• How to sell both to intermediaries and online?
– Offer different brands or products online
– Offer off-line partners higher commissions to offset
negative impact on sales
– Take orders on the web but have retailers deliver and
collect payment
133. Summary of Top 10 Concepts
• 6th Task of Marketing – Delivering Customer Value
• Marketing channels: definition, importance, examples
• Functions of marketing channels
• Flows and levels of marketing channels
• Value networks – a broader view of customer value delivery
• How to design marketing channels
• Challenges in managing channels
• Integrated marketing channels – a new development
• Channel conflicts and how they are managed
• Key issues with e-commerce