MARKETING MANAGEMENT

Designing and Managing

Integrated Marketing
Channels

JAN IRISH GAVAS

D E S I G N I N G A N D M A N A G I N G I N T E G R AT E D M A R K E T I N G C H A N N E L S

01 05
What is a marketing channel system and value network? How should companies integrate channels and manage
channel conflict?

02 06
What work do marketing channels perform? What are the key issues with e-commerce and m-
commerce?

03 How should channels be designed?

04
What decisions do companies face in managing their
channels?
Marketing channels are sets of
interdependent organizations
participating in the process of
making a product or service
available for use or
consumption.
Marketing channels are sets of
interdependent organizations
participating in the process of
making a product or service
available for use or
consumption.
• direct selling / marketing
• catalog
• value-added resale
• Digital advertisements
• events
• SEO marketing
• email marketing
• Indirect marketing
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.
2 S T R AT E G I E S
• 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.
Instances where push marketing can be helpful include:

When launching a new business or website without a reputation

When releasing new products
During holidays, or seasonal events
For sales and temporary promotional campaigns
When expanding to a new niche
To generate cash-flow or sales quickly
To help clear out product stock before the end of a season
To help promote brand recognition when competing against a dominant competitor
Just in general, when trying to subsidize a multi-channel strategy
Pull marketing is often the primary business strategy for companies looking to:

Ensure long-term business growth

Maintain dominance in a specific niche or industry
Build a return customer base or improve loyalty
To promote brand recognition with customer engagement and visibility
Increase social media traffic as well as social media sharing
Grow traffic to their site across organic, referral, and social segments
Improve sales and revenue affordably, without an expensive ad budget
Engage with customers before they know what they want, at the top of their shopping funnel
Hybrid channels or multichannel marketing
occurs when a single firm uses two or more marketing channels to
reach customer segments.
CHANNEL FUNCTIONS AND FLOWS

• forward flow of activity from the company to the customer

(storage and movement, title, and communications)

• backward flow from customers to the company (ordering and

payment)
 CHANNEL LEVELS

01
zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final
customer.

02 one-level channel contains one selling intermediary, such as a retailer.

03 two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a
retailer.

04
three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers,
essentially small-scale wholesalers, who sell to small retailers.
Channel-Design Decision—To design a
marketing channel system, marketers analyze
customer needs and wants, establish channel
objectives and constraints, and identify and
evaluate major channel alternatives.
CHANNEL-DESIGN DECISION

• ANALYZE CUSTOMER NEEDS / WANTS

• ESTABLISH CHANNEL OBJECTIVES
• IDENTIFY MAJOR CHANNEL ALTERNATIVES
• EVALUATE MAJOR CHANNEL ALTERNATIVES
A N A LY Z I N G C U S T O M E R WA N T S A N D N E E D S

01 Service/quality customers

02 Price/value customers

03 Affinity customers
 S E RV I C E O U T P U T S

01
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.

02 Waiting and delivery time—The average time customers wait for receipt of goods. Customers increasingly prefer
faster delivery channels.

Spatial convenience—The degree to which the marketing channel makes it easy for customers to purchase the

03 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.

04 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, although too many choices can
sometimes create a negative effect.

05
Service backup—Add-on services (credit, delivery, installation, repairs) provided by the channel. The greater the
service backup, the greater the work provided by the channel.
IDENTIFYING MAJOR
C H A N N E L A L T E R N AT I V E S

Each channel—from sales forces to agents, distributors, dealers, direct mail, telemarketing, and the
Internet—has unique strengths and weaknesses. Sales forces can handle complex products and
transactions, but they are expensive. The Internet is inexpensive but may not be as effective with complex
products. Distributors can create sales, but the company loses direct contact with customers. Several
clients can share the cost of manufacturers’ reps, but the selling effort is less intense than company reps
provide.

Channel alternatives differ in three ways: the types of intermediaries, the number needed, and the terms
and responsibilities of each.
TERMS AND RESPONSIBILITIES OF CHANNEL MEMBERS

Each channel member must be treated respectfully and given the opportunity to be
profitable. The main elements in the “trade-relations mix” are price policies,
conditions of sale, territorial rights, and specific services to be performed by each
party.
TERMS AND RESPONSIBILITIES OF CHANNEL
MEMBERS

• Price policy
• Conditions of sale
• Distributor’s territorial rights
• Mutual services and responsibilities
Evaluating Major Channel Alternatives
CHANNEL-MANAGEMENT DECISIONS

01 Selecting channel members

02 Training and motivating channel members

03 Evaluating channel members

04 Modifying channel design and arrangements

05 Channel modification decisions

C H A N N E L I N T E G R AT I O N
AND SYSTEMS
• Vertical marketing systems
• Corporate VMS
• Administered VMS
• Contractual VMS

• Horizontal marketing systems

• Multichannel systems
Conflict, Cooperation and Competition

Channel conflict is generated when one channel member’s actions

prevent another channel from achieving its goal.

Types of channel conflict

• Vertical
• Horizontal
• Multichannel
 CAUSES OF CHANNEL CONFLICT

Goal incompatibility. The manufacturer may want to achieve rapid market penetration through a low-price policy.
01 Dealers, in contrast, may prefer to work with high margins and pursue short-run profitability.

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. Territory bound- aries and credit for sales often

02 produce conflict.

Differences in perception. The manufacturer may be optimistic about the short-term eco- nomic outlook and want
dealers to carry higher inventory. Dealers may be pessimistic. In the beverage category, it is not uncommon for

03
disputes to arise between manufacturers and their distributors about the optimal advertising strategy.

Intermediaries’ dependence on the manufacturer. The fortunes of exclusive dealers, such as auto dealers, are
profoundly affected by the manufacturer’s product and pricing decisions. This situation creates a high potential for
conflict.

04
MANAGING CHANNEL CONFLICT

• Strategic Justification
• Dual Compensation
• Superordinate Goals
• Employee Exchange
• Joint Memberships
• Co-option
• Diplomacy, Mediation, and Arbitration
Marketing Communications,
Advertising Sales Promotions

Marketing
Management
Markmarie Gaile Ardivilla
Developing and Managing an Advertising Program

Advertising can be a cost-effective way to

disseminate messages, whether to build a brand
preference or to educate people. In developing an
advertising program, marketing managers must
always start by identifying the target market and
buyer motives.
Then they can make the five major decisions, known as "the five Ms":

1. Mission: What are our advertising objectives?

2. Money: How much can we spend and how do we allocate our spending
across media types?
3. Message: What message should we send?
4. Media: What media should
* we use?
5. Measurement: How should we evaluate the results?

*Product Life
Cycle
 Advertising Objective
Advertising Objective - (or goal) is a
specific communications task and
achievement level to be accomplished
with a specific audience in a specific
period of time.

We can classify advertising objectives

according to whether their aim is to
inform, persuade, remind, or reinforce.
Setting thE Objectives
Informative advertising
Persuasive advertising
Reminder
Reinforcement
advertising
advertising
 Informative ADs
Aims to create brand awareness and knowledge of
new products or new features of existing products.
 Persuasive advertising

Aims to create liking,

preference, conviction,
and purchase of a
product or service.
They aim to convince
potential customers to
buy the featured
product or service.
Reminder advertising

Aims to stimulate repeat

purchase of products
and services. Any ad
that isn't aimed at a new
product launch serves as
a reminder ad.
 Reinforcement advertising
Convince current purchasers that they made the right
choice.
Deciding on the Advertising
Budget
How does a company know it’s
spending the right amount?
Although advertising is treated as a
current expense, part of it is really
an investment in building brand
equity and customer loyalty.
 FACTORS AFFECTING BUDGET
DECISIONS
Stage in the product life cycle—New products typically merit large advertising budgets to
01 build awareness and to gain consumer trial. Established brands usually are supported with
lower advertising budgets, measured as a ratio to sales.

02 Market share and consumer base—High-market-share brands usually require less

advertising expenditure as a percentage of sales to maintain share. To build share by
increasing market size requires larger expenditures.
Competition and clutter—In a market with a large number of competitors and high advertis-
03 ing spending, a brand must advertise more heavily to be heard. Even simple clutter from
advertisements not directly competitive to the brand creates a need for heavier advertising

04 Advertising frequency—The number of repetitions needed to put the brand’s message across
to consumers has an obvious impact on the advertising budget.

05 Product substitutability—Brands in less-differentiated or commodity-like product classes

(beer, soft drinks, banks, and airlines) require heavy advertising to establish a unique image.
Developing the Advertising
Campaign
In designing and evaluating an ad campaign,
marketers employ both art and science to
develop the message strategy or positioning of
an ad—what the ad attempts to convey about
the brand—and its creative strategy—how the
ad expresses the brand claims. Advertisers go
through three steps: message generation and
evaluation, creative development and
execution, and social-responsibility review.
MESSAGE GENERATION AND
EVALUATION
A good ad normally focuses on one or two core
selling propositions. As part of refining the brand
positioning, the advertiser should conduct market
research to determine which appeal works best with
its target audience and then prepare a creative brief,
typically one or two pages. This is an elaboration of
the positioning statement and includes
considerations such as key message, target
audience, communications objectives (to do, to
know, to believe), key brand benefits, supports for
the brand promise, and media. Marketers can also
cut the cost of creative dramatically by using
consumers as their creative team, a strategy
sometimes called "open source" or "crowd-
 CREATIVE
The ad’s impact depends not only on what it says, but
DEVELOPMENT often more important, on how it says it. Execution can
AND be decisive. Every advertising medium has advantages
and disadvantages.
EXECUTION
Television Ads
The TV is generally
acknowledged as the most
powerful advertising medium
and reaches a broad spectrum
of consumers at low cost per
exposure.
Print AdsPrint media offers magazines and
newspapers that can provide detailed
product information and effectively
communicate user and usage imagery.
Radio Ads
Radio is a particularly effective medium in
the morning; it can also let companies
achieve a balance between broad and
localized market coverage.
Internet Ads
Online advertising, also known as online marketing, Internet
advertising, digital advertising or web advertising, is a form
of marketing and advertising which uses the Internet to
promote products and services to audiences and platform
users.
 DECIDING ON MEDIA AND
MEASURING EFFECTIVENESS
After choosing the message, the advertiser's next task
is to choose media to carry it. The steps here are
deciding on desired reach, frequency, and impact;
choosing among major media types; selecting specific
media vehicles; deciding on media timing; and
deciding on geographical media allocation. Then the
marketer evaluates the results of these decisions.
Deciding on Reach, Frequency,
and Impact

Media selection is finding the most cost-

effective media to deliver the desired number
and type of exposures to the target audience.
The effect of exposures on audience
awareness depends on the exposures' reach,
frequency, and impact:
• Reach (R). The number of different persons
or households exposed to a particular
media schedule at least once during a
specified time period

Reach is important when launching new

products, extensions of well-known brands, or
infrequently purchased brands; or when going
after an undefined target market.
The effect of exposures on audience awareness depends on the exposures'
reach, frequency, and impact:

• Frequency (F). The number of times within

the specified time period that an average
person or household is exposed to the
message

Frequency is where there are strong

competitors, a complex story to tell, high
consumer resistance, or a frequent-purchase
cycle.
The effect of exposures on audience awareness depends on the exposures' reach,
frequency, and impact:

• Impact (I). The qualitative value of an

exposure through a given medium.

The effect of each type shows the relationship

between audience awareness and reach.
Audience awareness will be greater, the higher
the exposures' reach, frequency, and impact.
There will be more important trade-offs here.
A key reason for repetition is forgetting.The higher the forgetting rate associated
with a brand, product category, or message, the higher the warranted level of
repetition.
Choosing Among Major Media
Types
The media planner must know the capacity
of the major advertising media types to
deliver reach, frequency, and impact. Media
planners make their choices by considering
factors such as target audience media
habits, product characteristics, message
requirements, and cost.
ALternate Advertising Options

Placement advertising, a type of out-of-home

(OOH) media that's found in set locations such
as malls, gas stations, grocery stores,
restaurants, college campuses, and more.
Advertisers use place-based media to engage
with their audience in spaces where they like to
spend their time. Popular options include
billboards, public spaces, product placement,
and point of purchase.
 Placement Advertising

01 Billboards Billboards have been transformed and now use

colorful, digitally produced graphics, backlighting, sounds,
movement, and unusual—even 3D—images.

02 Public Spaces Advertisers have been increasingly placing ads

in unconventional places such as on movie screens, on
airplanes, and in fitness clubs, as well as in classrooms, sports
arenas, office and hotel elevators, and other public places.

03 Product Placement Marketers pay product placement fees so

their products will make cameo appearances in movies and on
television.

04 Point of Purchase— In-store advertising includes ads on

shopping carts, cart straps, aisles, and shelves, as well as
promotion options such as in-store demonstrations, live
sampling, and instant coupon machines.
EVALUATING ALTERNATE
The main advantage of nontraditional media is that they
MEDIA
can often reach a very precise and captive audience in a
cost-effective manner. The message must be simple and
direct. The challenge for nontraditional media is
demonstrating its reach and effectiveness through
credible, independent research. Consumers must be
favourably affected in some way to justify the
marketing expenditures.
Selecting Specific Media
Vehicles
The media planner must search for the most cost-
effective vehicles within each chosen media type.
In making choices, the planner must rely on
measurement services that estimate audience
size, composition,and media cost.Media planners
then calculate the cost per thousand persons
reached by a vehicle.
Deciding on Media Timing and
Allocation
In choosing media,the advertiser has both a macro-
scheduling and a micro-scheduling decision.The macro-
scheduling decision relates to seasons and the business
cycle. The micro-scheduling decision calls for allocating
advertising expenditures within a short period to obtain
maximum impact.
Deciding on Media Timing and
The chosenAllocation
pattern should meet the
communications objectives set in
relationship to the nature of the
product, target customers, distribution
channels, and other marketing factors.
Factors on Deciding on Media Timing and Allocation
The timing pattern should consider three factors.

• Buyer turnover expresses the rate at which new buyers enter

the market; the higher this rate,the more continuous the
advertising should be.
• Purchase frequency is the number of times the average buyer
buys the product during the period; the higher the purchase
frequency, the more continuous the advertising should be.
• The forgetting rate is the rate at which the buyer forgets the
brand;the higher the forgetting rate,the more continuous the
advertising should be.
In launching a new product, the advertiser
must choose among:

• continuity
• concentration
• flighting
• pulsing
 Deciding on Media Timing and
Allocation

Continuity Concentration

Means exposures appear Calls for spending all the

evenly throughout a given
period. Generally,
advertisers use continuous
advertising in expanding
market situations, with
frequently purchased items,
and in tightly defined buyer
categories.
advertising money in a
single period. This makes
sense for products with one
selling season or related
holiday.
 Deciding on Media Timing and
Allocation
Flighting
It is useful when funding is
limited, the purchase cycle is
relatively infrequent, or items are
seasonal. Flighting is an
advertising scheduling strategy
that alternates between running a
normal schedule of advertising
and a complete cessation of all
runs. Flighting refers to the period
when advertising is being run,
PULSING
This model is the combination of
both continuity and flighting
scheduling, to create a compromise
scheduling strategy. It is a
continuous advertising at low-
weight levels, reinforced
periodically by waves of heavier
activity. Those who favour pulsing
believe the audience will learn the
message more thoroughly, and at a
 Evaluating Advertising
Effectiveness

Most advertisers try to measure the

communication effect of an ad—that
is, its potential impact on awareness,
knowledge, or preference. They would
also like to measure the ad's sales
effect.
 Evaluating Advertising
Effectiveness

COMMUNICATION-EFFECT
RESEARCH
also called as Copy Testing.
Seeks to determine whether
an ad is communicating
effectively. Marketers should
perform this test both before
an ad is put into media and
after it is printed or
broadcast.
SALES-EFFECT
RESEARCH
The sales impact is easiest
to measure in direct
marketing situations and
hardest in brand or
corporate image-building
advertising.
Companies are generally interested in finding out whether
they are overspending or underspending on advertising.

Formula for Measuring Different Stages in the Sales Impact

of Advertising:

1. Share of Expenditure
2. Share of Voice
3. Share of Mind and Heart
4. Share of Market
A company's share of advertising expenditures
produces a share of voice (proportion of
company advertising of that product to all
advertising of that product) that earns a share of
consumers' minds and hearts and, ultimately, a
share of market. Researchers try to measure the
sales impact by analysing historical or
experimental data. The historical approach
correlates past sales to past advertising
expenditures using advanced statistical
techniques. Other researchers use an
experimental design to measure advertising's
 Sales Promotion
a key ingredient in marketing campaigns, consists of a
collection of incentive tools, mostly short term,
designed to stimulate quicker or greater purchase of
particular products or services by consumers or the
trade.
Sales Promotion
Whereas advertising offers a reason to buy, sales promotion offers an
incentive.
Sales promotion includes tools for:

- Consumer Promotions
- Trade Promotions
- Business and Sales Force Promotions
Sales promotion tools vary in their specific objectives.

Sellers use incentive-type promotions to attract new

triers, to reward loyal customers, and to increase the
repurchase rates of occasional users.

Sales promotions often attract brand switchers,who are

primarily looking for low price, good value, or
premiums.

Sales promotions in markets of high brand similarity

can produce a high sales response in the short run but
little permanent gain in brand preference over the
longer term.
Advertising versus Promotion

Promotion became more accepted by top management

as an effective sales tool, the number of brands
increased, competitors used promotions frequently,
many brands were seen as similar, consumers became
more price-oriented, the trade demanded more deals
from manufacturers, and advertising efficiency
declined.
In using sales promotion, a company must
establish its objectives, select the tools,
develop the program, pretest the program,
implement and control it, and evaluate the
results.
 ESTABLISHING
OBJECTIVES
Sales promotion objectives derive from broader
communication objectives, which derive from more
basic marketing objectives for the product.
 SELECTING CONSUMER
PROMOTION TOOLS

The promotion planner should take - Premiums (Gifts)

into account the type of market, sales - Frequency Programs
promotion objectives, competitive - Prizes (Contests, Sweepstake's,
conditions, and each tool's cost- Games)
effectiveness. - Patronage Awards
- Free Trials
- Samples - Product Warranties
- Coupons - Tie-in/Cross Promotions
- Cash Refund Offers (Rebates) - Point-of-Purchase (P-O-P)
- Price Packs (Cents-Off Deals) Displays and Demonstrations.
 SELECTING TRADE
PROMOTION TOOLS
Manufacturers use a number of trade
promotion tools.
- Price-Off (Off-Invoice or Off-List) - A
straight discount off the list price on each
case purchased during a stated time period.
- Allowance - An amount offered in return
for the retailer's agreeing to feature the
manufacturer's products in some way.
- Free Goods - Offers of extra cases of
merchandise to intermediaries who buy a
certain quantity or who feature a certain
flavor or size.
 SELECTING BUSINESS AND
SALES FORCE PROMOTION
TOOLS
They typically develop budgets for
tools that remain fairly constant from
year to year. Trade shows are an
important tool, but the cost per
contact is the highest of all
Acommunication options.
trade show, trade fair, or exposition is an
exhibition in which companies promote their
products and services. Most trade shows focus
on a particular industry, such as aviation,
computers, tourism, smartphones,
automobiles, etc.
 DEVELOPING THE PROGRAM
In planning sales promotion programs, marketers are increasingly
blending several media into a total campaign concept.

• Marketers must first determine its size, in deciding to use a

particular incentive. A certain minimum is necessary if the
promotion is to succeed.
• The marketing manager must establish conditions for
participation. Incentives might be offered to everyone or to select
groups.
DEVELOPING THE PROGRAM
3. The marketer must decide on the duration of the promotion.
4. The marketer must choose a distribution vehicle.
5. The marketing manager must establish the timing of
promotion, and finally, the total sales promotion budget.

The cost of a particular promotion consists of the administrative cost (printing,

mailing, and promoting the deal) and the incentive cost (cost of premium or cents-
off, including redemption costs), multiplied by the expected number of units sold.

The cost of a coupon deal would recognise that only a fraction of consumers will
redeem the coupons.
 Implementing and Evaluating the
Program
Marketing managers must prepare
implementation and control plans that cover
lead time and sell-in time for each individual
Lead time is the time necessarypromotion.
to prepare the program prior to launching it.
Implementing and Evaluating the
Program

Sell-in time begins with the

promotional launch and ends when
approximately 95 percent of the deal
merchandise is in the hands of
consumers.
Implementing and Evaluating the
Program
Sales (scanner) data helps analyse the types of
people who took advantage of the promotion,
what they bought before the promotion, and
how they behaved later toward the brand and
other brands.
T h an k
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