MARKETING MANAGEMENT

COURSE CODE: MKT-412

09/18/2021
Designing and Managing
Integrated Marketing Channels

1
 MARKETING CHANNELS
AND VALUE NETWORKS
Marketing channels are sets of
interdependent organizations participating
in the process of making a product or
service available for use or consumption.
They are the set of pathways a product or
service follows after production,

09/18/2021
culminating in purchase and consumption
2 by the final end user.
 DEFINITION OF MARCHANTS,
AGENT AND FACILITATORS
Merchants are :- Some intermediaries—such as
wholesalers and retailers—buy, take title to, and resell

09/18/2021
the merchandise.

Agents are those—brokers, manufacturers’

representatives, sales agents—search for customers and
may negotiate on the producer’s behalf but do not take
3 title to the goods

Still others— transportation companies, independent

warehouses, banks, advertising agencies—assist in the
distribution process but neither take title to goods nor
negotiate purchases or sales; they are called facilitators.
 THE IMPORTANCE OF

09/18/2021
CHANNELS

A marketing channel system is the particular

set of marketing channels a firm employs, and
decisions about it are among the most critical
ones management faces.
The channels chosen affect all other
marketing decisions. The company’s pricing
depends on whether it uses online discounters
4 or high-quality boutiques
 Definitions of Push Strategy:

A push strategy uses the manufacturer’s sales force,

trade promotion money, or other means to induce

09/18/2021
intermediaries to carry, promote, and sell the product to
end users. This strategy is particularly appropriate when
there is low brand loyalty in a category, brand choice is
made in the store, the product is an impulse item, and
product benefits are well understood.

5
 09/18/2021
Definition of Pull Strategy:

A pull strategy the manufacturer uses

advertising, promotion, and other forms of
communication to persuade consumers to
demand the product from intermediaries,
thus inducing the intermediaries to order
it.

6
 09/18/2021
MULTICHANNEL MARKETING

Today’s successful companies typically employ

multichannel marketing, using two or more
marketing channels to reach customer segments
in one market area.

HP uses its sales force to sell to large accounts,

outbound telemarketing to sell to medium-sized
accounts, direct mail with an inbound phone
7 number to sell to small accounts, retailers to sell
to still smaller accounts, and the Internet to sell
specialty items.
 INTEGRATING
MULTICHANNEL

09/18/2021
MARKETING SYSTEMS
Most companies today have adopted multichannel
marketing. Disney sells its videos through multiple
channels: movie rental merchants such as Netflix and
Redbox, Disney Stores and other catalog sellers.

Omni channel marketing, in which multiple channels

work seamlessly together and match each target
customer’s preferred ways of doing business, delivering
the right product information and customer service
8 regardless of whether customers are online, in the store,
or on the phone.
 INTEGRATING

09/18/2021
MULTICHANNEL
MARKETING SYSTEMS
An integrated marketing channel system is one in
which the strategies and tactics of selling through one
channel reflect the strategies and tactics of selling
through one or more other channels. Adding more
channels gives companies three important benefits.
1.The first is increased market coverage. Not only are
more customers able to shop for the company’s
products in more places, as noted above, but those who
buy in more than one channel are often more profitable
9 than single-channel customers.
 09/18/2021
2. The second benefit is lower channel cost—
selling online or by catalog and phone is
cheaper than using personal selling to reach
small customers.
3. The third is the ability to do more
customized selling—such as by adding a
technical sales force to sell complex
equipment. There is a trade-of
10
 09/18/2021
VALUE NETWORKS
The company should first think of the target market,
however, and then design the supply chain backward
from that point. This strategy has been called
demand chain planning.

A broader view sees a company at the center of a

value network—a system of partnerships and
alliances that a firm creates to source, augment, and
deliver its offerings.
A value network includes a firm’s suppliers and its
11
suppliers’ suppliers and its immediate customers and
their end customers. It also incorporates valued
relationships with others such as university
researchers and government approval agencies
 THE DIGITAL CHANNELS
REVOLUTION

09/18/2021
The digital revolution is profoundly
transforming distribution strategies. With
customers—both individuals and businesses
—becoming more comfortable buying online
and the use of smart phones exploding,
traditional brick and-mortar channel
12 strategies are being modified or even
replaced.
 THE DIGITAL CHANNELS

09/18/2021
REVOLUTION
• Enjoy helpful customer support in a store, online, or
on the phone
• Check online for product availability at local stores
before making a trip
• Find out in-store whether a product that is
unavailable can be purchased and shipped from another
store to home
• Order a product online and pick it up at a convenient
retail location
• Return a product purchased online to a nearby store
13
of the retailer
• Receive discounts and promotional offers based on
total online and offline purchases Retailers and
manufacturers are responding. Consider some of the
changes being made by retail giant Walmart.
 THE ROLE OF MARKETING

09/18/2021
CHANNELS
• Gather information about potential and
current customers, competitors, and other
actors and forces in the marketing
environment.
• Develop and disseminate persuasive
communications to stimulate purchasing.
• Negotiate and reach agreements on price
and other terms so that transfer of ownership
14 or possession can be affected.
• Place orders with manufacturers.
.
 09/18/2021
• Acquire the funds to finance inventories at
different levels in the marketing channel.

• Assume risks connected with carrying out

channel work.
• Provide for the successive storage and
movement of physical products.
• Provide for buyers’ payment of their bills
through banks and other financial institutions.
15

• Oversee actual transfer of ownership from one

organization or person to another
 09/18/2021
FLOWS

16
 09/18/2021
CHANNEL LEVELS

A zero-level channel, also called a direct marketing

channel, consists of a manufacturer selling directly to
the final customer. The major examples are mail order,
online selling, TV selling, telemarketing, door-to-door
sales, home parties, and manufacturer-owned stores.
A one-level channel contains one selling intermediary,
such as a retailer.
A two-level channel contains two intermediaries,
typically a wholesaler and a retailer, and a three-level
channel contains three. In the meatpacking industry,
17
wholesalers sell to jobbers, essentially small-scale
wholesalers, who sell to small retailers.
In Japan, food distribution may include as many as six
levels
09/18/2021
18
09/18/2021
19
 09/18/2021
CHANNEL-DESIGN DECISIONS

Analyzing Customer Needs and Wants

1. Desired lot size—The number of units the
channel permits a typical customer to purchase
on one occasion. In buying cars for its fleet,
Hertz prefers a channel from which it can buy a
large lot size; a household wants a channel that
permits a lot size of one.

2. Waiting and delivery time—The average time

20
customers wait for receipt of goods. Customers
increasingly prefer faster delivery channels.
 CHANNEL-DESIGN DECISIONS

09/18/2021
3. Spatial convenience—The degree to which the
marketing channel makes it easy for customers to
purchase the product. Toyota offers greater spatial
convenience than Lexus because there are more Toyota
dealers, helping customers save on transportation and
search costs in buying and repairing an automobile.
4. Product variety—The assortment provided by the
marketing channel. Normally, customers prefer a greater
assortment because more choices increase the chance of
finding what they need, though too many choices can
sometimes create a negative effect.
21
5. Service backup—Add-on services (credit, delivery,
installation, repairs) provided by the channel. The more
service backup, the greater the benefit provided by the
channel
 ESTABLISHING OBJECTIVES
AND CONSTRAINTS
Channel objectives vary with product characteristics.

09/18/2021
Bulky products, such as building materials, require
channels that minimize the shipping distance and the
amount of handling.
Nonstandard products such as custom-built machinery
are sold directly by sales representatives. Products
requiring installation or maintenance services, such as
heating and cooling systems, are usually sold and
maintained by the company or by franchised dealers.
22
High-unit-value products such as generators and
turbines are often sold through a company sales force
rather than intermediaries
 IDENTIFYING MAJOR

09/18/2021
CHANNEL ALTERNATIVES

Each channel—from sales forces to agents, distributors,

dealers, direct mail, telemarketing, and the Internet—has
unique strengths and weaknesses.
Channel alternatives differ in three ways:
1. Types of Intermediaries Consider the channel
alternatives identified by a consumer electronics
company that produces satellite radios.
2.Number of Intermediaries Three strategies based on
the number of intermediaries are exclusive, selective,
23 and intensive distribution.
 09/18/2021
3. Terms and Responsibilities of Channel Members

• Price policy calls for the producer to establish a

price list and schedule of discounts and allowances
that intermediaries see as equitable and sufficient.
• Conditions of sale refers to payment terms and
producer guarantees
• Distributors’ territorial rights define the
distributors’ territories and the terms under which the
producer will enfranchise other distributors.
• Mutual services and responsibilities must be
24 carefully spelled out, especially in franchised and
exclusive agency channels. McDonald’s provides
franchisees
 EVALUATING MAJOR CHANNEL
ALTERNATIVES

09/18/2021
25
| Fig. 17.5 | Break-Even Cost Chart for the Choice between a Company Sales
Force and a Manufacturer’s Sales Agency

09/18/2021
26
 CHANNEL-MANAGEMENT

09/18/2021
DECISIONS
Selecting Channel Members
Training and Motivating Channel Members

Channel Power

Evaluating Channel Members

Modifying Channel Design and

Arrangements
Channel Evolution

Channel Modification Decisions

27
Global Channel Considerations
 CHANNEL INTEGRATION AND

09/18/2021
SYSTEMS

A vertical marketing system (VMS), by

contrast, includes the producer, wholesaler(s),
and retailer(s) acting as a unified system. One
channel member, the channel captain,
sometimes called a channel steward, owns or
franchises the others or has so much power
that they all cooperate.
28
CHANNEL INTEGRATION AND
SYSTEMS

09/18/2021
Horizontal Marketing Systems

Another channel development is the horizontal

marketing system, in which two or more unrelated
companies put together resources or programs to
exploit an emerging marketing opportunity.
Each company lacks the capital, know-how,
production, or marketing resources to venture alone, or
it is afraid of the risk. The companies might work
29
together on a temporary or permanent basis or create a
joint venture company.
For example, many supermarket chains have
 09/18/2021
E-COMMERCE
- Highly Confidential E-commerce “a website
providing or enabling an individual to do transactions
online”
OR “a way to sell or shop online or direct selling that
utilize Internet on a website providing get & deliver
service”
• E-commerce in general
• E-Purchasing
• E-Marketing
• E-Commerce type
• Pure click
• Brick n Click 30
 09/18/2021
Conflict, Cooperation and Competition

• Channel conflict is generated when one channel

members’ action prevent another channel from
achieving its goals.

• Channel coordination occurs when channel

members are brought together to advance goals of
the channel as opposed to their own potentially
incompatible goals.
31
 09/18/2021
• Type of conflicts:
– Vertical Conflict “Conflicts between different
levels within the same channel”

–Horizontal Conflict “Conflicts between same

levels within the different channel”

– Multi-Channel Conflict “Conflicts when multiple

channels are employed and all sell to same market
CONF
32
 09/18/2021
Causes of Channel Conflict
• Conflicts may arise from:-
1. Goal incompatibility :- Manufacturers want to
achieve rapid market penetration through low price
policy.
2. Unclear Roles and Rights :- HP may sell personal
computers to large accounts through its own sales
force, but its licensed dealers may also be trying to sell
to large accounts.
33
 09/18/2021
3. Differences in Perception:- Disputes between
manufacturers and distributors about optimal
advertising strategy.

4. Intermediaries Dependence on Manufacturer :-

Fortune of exclusive dealers depend totally upon
manufacturers’ products and pricing decisions which
creates high potential for conflict.

34
 09/18/2021
Managing Channel Conflict

• Various mechanisms of managing conflicts

are:-
1. Strategic justification
2. Adoption of Super ordinate Goal:- Channel
members come to an agreement on
fundamental goals they are jointly seeking,
weather it is survival, market share, high
quality or customer satisfaction.
3. Exchange of Employees
35
 09/18/2021
4. Joint Membership in Trade Association:- The
manufacturer and the intermediaries come together in
good cooperation which may lead to better
understanding between them.

5. Co-option:- It is an effort by one organization to win

the support of leaders of other organization by including
them in advisory council, board of directors, which
reduces the chances of conflicts.

6. Diplomacy, Mediation or Arbitration:- when

conflict is chronic, the companies may need to resort to
diplomacy, mediation or arbitration. i. Diplomacy 36
i. Diplomacy:- It takes place when each sends a

09/18/2021
person or groups to meet with its counterparts to
resolve the conflict.

ii. Mediation:- It means resorting to a neutral third

party skilled in conciliating the two parties
interest.
iii. Arbitration:- It occurs when both the parties
agree to present their arguments to one or more
arbitrators and accept their decisions.
6. Legal Recourse:- when none of the above methods
prove effective, company or channel partners may
choose to file a law suit. 37
 09/18/2021
Dilution and Cannibalization

– Happens mostly on luxury brands that has

its brand image built based on exclusivity and
services that customized based on customer’s
need.

– Their brand image will be “downgraded” if

they sell to much in a discounted channel.
38
 THANK YOU

39