Designing and Managing Integrated Marketing Channels

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.

How a Distributor Reduces the Number of Channel Transactions Manufacturer Customer 1 2 3 4 5 6 Number of contacts without a distributor MxC=3X3=9 7 8 9 .

How a Distributor Reduces the Number of Channel Transactions Manufacturer Customer 1 4 Store 2 5 Number of contacts with a distributor MxC=3+3=6 3 6 = Distribut .

suppliers. – It include the valued relations . and ultimately customers who “partner” with each other to improve the performance of the entire system. distributors.Definitions • Value Delivery Network – The network made up of the company.

Information Transfer Payments Physical Distribution Risk Taking Communication Negotiation Ordering Financing .

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

Push Pull Strategy .

and the Internet to sell specialty items – Charles Schwab enables its customers to do transactions in branch offices. directresponse Internet site.000 linked affiliated sites 17-11 . over the phone. direct mail sells to small accounts. and 30. or via the Internet – Staples markets through traditional retail. outbound telemarketing sells to medium-sized accounts. virtual malls.HYBRID CHANNEL • “Go-to-market” or hybrid channels – IBM’s sales force sells to large accounts. retailers sell to still smaller accounts.

promotion – company to consumer • Backward flow. finance risk taking .ordering and payment – costumers to company • Both directioninformation. negotiation.Channel flows • Forward flow – physical. title.

Consumer Marketing Channels 0-level channel Manufacturer 1-level channel Manufacturer 2-level channel Consumer Retailer    Consumer Mfg  Wholesaler  Wholesaler Jobber Retailer Consumer 3-level channel Mfg  Retailer Consumer .

Industrial Marketing Channels Manufacturer Industrial distributors Manufacturer’s representative Manufacturer’s sales branch Consumer .

Channel design decisions Analyzing the customer desired output levels Establishing objectives and constraints Identifying & evaluating major channel alternatives Evaluating the major alternatives .

Analyzing the customer desired output levels Lot size Waiting & delivery time Spatial convenience The number of units that channel prefers to purchase on one occasion As faster delivery is needed Gather information in many channel and buy in their favorite channel Assortment variety The add on services Product variety Service backup .

perishable products require more direct marketing to avoid delays and too much handling.g. • Besides the target market. Here. the company’s size and financial situation determine which functions it can . e. – the nature of its product.g. the company’s channel objectives are influenced by. e. – company characteristics.Setting the Channel Objectives and Constraints • The company must decide which segments to target and the best channels to use in each segment. the objective of the company is to minimize the total channel cost.

producers want to distribute their goods in the most economical way. in a depressed economy.g.g. some companies may prefer to compete in or near the same outlets that carry competitors’ products – environmental factors.handle. how many channels it can use. economic conditions and legal constraints affect channel design decisions e. which transportation can be used… – characteristics of intermediaries. . – competitors’ channel. intermediaries differ in their abilities to handle promotions. storage and credit e. the company’s own sales force is more intense in selling. customer contact. using shorter channels.

the company should identify its major channel alternatives in terms of (1) types of intermediaries. and (3) the responsibilities of each channel member. . (2) number of intermediaries.Identifying Major Alternatives After the channel objective have been determined. • Types of Intermediaries A firm should identify the types of channel members that are available to carry out its channel work.

the advantages are maximum brand exposure and consumer convenience.• Number of Marketing Intermediaries Companies must also determine the number of channel members to use. toothpaste. – exclusive distribution. is a strategy (opposite to intensive distribution) in which the producer gives only a limited number of dealers the exclusive right to . candy… Procter & Gamble. is a strategy in which companies stock their products in as many outlets as possible. Convenience products and common raw materials must be available where and when consumers want them e. Coca-Cola distributes its products in this way.g. – intensive distribution. Here. There are three strategies.

Rolls-Royce.g. Here. • Responsibilities of Channel Members The producer and intermediaries must agree on price policies. the advantages are establishing image and getting higher markups.– distribute its products in their territories. Most television. – selective distribution. the advantages are. territories. (is between intensive and exclusive distribution) is a strategy in which the company uses more than one but fewer than all of the intermediaries. it provides good market coverage with more control and less cost than intensive distribution + it does not spread its efforts over many outlets as in intensive distribution. furniture brands are distributed in this way. Here. discounts. and . Often found in new automobiles and prestige women’s clothing e.

g. training. McDonald’s provides franchisees with promotional support. franchisees must meet company standards for physical be performed by each party. . in turn.. E. management assistance.. buy specific food products.

the company prefers to keep the channel which is the most flexible to the changing marketing environment. each alternative should be evaluated by using.  ADAPTIVE CRITERIA.  CONTROL ISSUES.  ECONOMIC CRITERIA. the company prefers to keep the channel where it has the highest control.Evaluating the Major Alternatives In order to select the channel that satisfy the company objectives in the best way. . the company compares the projected profits and costs of each channel.

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Channel Behavior and Organization • Channel Conflict – Occurs when channel members disagree on roles. activities. or rewards. – Types of Conflict: • Horizontal conflict: occurs among firms at the same channel level • Vertical conflict: occurs among firms at different channel levels .

Conflict and Control in Channels • Channel conflict exists when channel members interfere with each others’ objectives.30 . rewards and sanctions. – Based on expertise. 15 . • Vertical conflict involves firms at different levels – producer versus wholesaler – producer versus retailer • Channel Power is the ability to influence or determine behaviour of others in channel. drug store. • Horizontal conflict involves firms on same level-grocery store vs.

31 . 15 . Can be done carefully. • Exclusive Dealing involves shutting out competitors. • Exclusive Territories can create monopolies. giving most business to one firm.Legal Considerations • Dealer Selection: Refusing to sell to some firms. • Tying Contracts involves providing one item on condition other lines be carried as well.

IDA. Roots.Goodyear. 15 .32 .Rolex.Vertical Marketing Systems (VMS) • a tightly coordinated distribution channel designed to improve operating efficiency and marketing effectiveness. • Corporate VMS: One firm owns other firms in channel or the entire channel-.. Kraft General Foods. • Contractual VMS: Independents work together for much greater effectiveness: IGA. • Administered VMS: Relies on economic power of one channel member-.

and frequent communications . honest.Case Study Caterpillar • Dominates world’s markets for heavy construction and mining equipment. • Independent dealers are key to success • Dealer network is linked via computers • Caterpillar stresses dealer profitability. extraordinary dealer support. dealer performance and full. personal relationships.

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