Ch 15

A marketing channel system is set of interdependent org involved in the process of making a
product/service available for use/consumption.

 A push strategy: uses manufacturer’s sales force, trade promotion money etc to persuade
intermediaries to carry/promote/sell product to end users
 A pull strategy: uses ad, promotion, etc to persuade consumers to demand product from
intermediaries
Types of distribution:
1. Exclusive: limits the number of intermediaries. used for new automobiles, some major
appliances and women’s apparel brands. includes exclusive dealing arrangements in price
driven market eg- .Gucci found its image severely tarnished by overexposure from
licensing/discount stores, it decided to end contracts with third-party suppliers/control its
distribution/ open its own stores to bring back some of the luster.
2. Selective: selling products at select outlets in specific locations. For instance, Sony TVs can
be purchased at a number of outlets such as Circuit City, Best Buy, or Walmart, but the same
models are generally not sold at all the outlets. The company can gain adequate market
coverage with more control and less cost than intensive distribution.
3. Intensive: places the goods or services in as many outlets as possible. Inc coverage and sales.
Works for short time but may hamper for long time eg- Soft drinks and cigarettes.

Channel Integration and Systems:

1. Vertical marketing systems- main members of a distribution channel—producer, wholesaler,
and retailer—work together.

 Corporate VMS– one member of Distribution channel Owns all the other Members,
production and distribution channel under single ownership. EG- Apple selling the products
it designs and manufactures through its own retail stores
 Contractual VMS– every member works independently and integrate their activities on a
Contractual Basis to earn more. Eg- Mc-Donalds, Dominos, Pizza Hut, etc. are all forms of the
franchise which are working on a contractual basis.
 Administered VMS– no contract between the members of production & distribution channel
but their activities get influenced by the Size and Power of any one of the member. Eg- P&G
in terms of display, shelf space, pricing policies, and promotional schemes.

2. Horizontal marketing systems- merger of two unrelated companies who have come together
to exploit the market opportunities. Eg- nike and apple came together to create such shoes
connected with iphone display info about time, distance covered, calories burned and heart
pace on the screen.

3. Multichannel systems- interacting with customers using indirect/direct communication

channels – websites, retail stores, mail order, direct mail, email, mobile, etc. Starbucks uses
a multichannel distribution system by selling in their own-stores, grocery stores, and their
own online site.
Categories of Buyers:
1. Habitual shoppers- same places same manner over time
2. High value deal seekers- channel surf a great deal before buying at the lowest price
3. Variety-loving shoppers- gather info from different channels, but buy from their favorite
channel
4. High-involvement shoppers- gather info from all channels, buy from low cost channel, enjoy
customer support from high touch channel

Channel conflict occurs when one member’s actions prevent another channel from achieving its
goal.

Types of channel conflict-

1. Vertical (Manufacturer vs. dealer)
2. Horizontal (Dealer vs. dealer)
3. Multichannel (Going on line vs. current dealers, Stile doing projects directly)

Causes of Channel Conflict

1. Goal incompatibility
2. Unclear roles and rights
3. Differences in perception
4. Intermediaries’ dependence on the manufacturer