A Framework for Marketing Management Chapter 13 Designing and Managing Integrated Marketing Channels Copyright 2009, Prentice-Hall, Inc.

Copyright 2009, Prentice-Hall, Inc. Chapter Questions What are marketing channel systems and value networks? What functions do marketing channels perform? What decisions do companies face in designing, managing, and integrating their channels? What key issues do companies face in e-commerce? Copyright 2009, Prentice-Hall, Inc.

Marketing Channels and Value Networks Marketing channels—sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. Copyright 2009, Prentice-Hall, Inc.

Push and Pull Strategies Push strategy—uses the manufacturer’s sales force and trade promotion to induce intermediaries to carry, promote, and sell the products to end users. Pull strategy—manufacturer uses advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it. Copyright 2009, Prentice-Hall, Inc.

Role of Marketing Channels Performs the work of moving products from producers to consumers, overcoming time, place, and possession gaps. Forward flow functions Backward flow functions Both directions Copyright 2009, Prentice-Hall, Inc.

Commonalities Among All Channel Functions They use up scarce resources. They can often be performed better through specialization. They can be shifted among channel members. Copyright 2009, Prentice-Hall, Inc.

Copyright 2009, Prentice-Hall, Inc. Channel Levels Zero-level channel One-level channel Two-level channel Three-level channel Copyright 2009, Prentice-Hall, Inc.

Channel-Design Decisions Analyze customers’ desired service output levels Establish objectives and constraints Identify major channel alternatives Evaluate the major alternatives Copyright 2009, Prentice-Hall, Inc.

Analyzing Customers’ Desired Service Output Levels Lot size Waiting and delivery time Spatial convenience Product variety Service backup Copyright 2009, Prentice-Hall, Inc.

Establishing Objectives and Constraints State channel objectives in terms of targeted service output levels. Objectives vary with product characteristics. Environmental factors: Competitors’ channels Economic conditions Legal regulations and restrictions Copyright 2009, Prentice-Hall, Inc.

Identifying Major Channel Alternatives Types of intermediaries Merchants Facilitators Number of intermediaries Exclusive Selective Intensive Terms and responsibilities of channel members Price policy Conditions of sale Distributors’ territorial rights Mutual services and responsibilities Copyright 2009, Prentice-Hall, Inc.

Evaluating the Major Alternatives Determine whether own sales force or a sales agency will produce more sales. Estimate the costs of selling different volumes through each channel. Copyright 2009, Prentice-Hall, Inc.

Channel-Management Decisions Selecting channel members Training and motivating channel members Evaluating channel members Modifying channel arrangements Copyright 2009, Prentice-Hall, Inc.

Channel Integration and Systems Vertical marketing system Horizontal marketing system Multichannel marketing system Copyright 2009, Prentice-Hall, Inc.

Vertical Marketing System (VMS) Producer, wholesaler(s), and retailer(s) acting as a unified system. Types: Corporate VMS Administered VMS Contractual VMS Wholesaler-sponsored voluntary chains Retailer cooperatives Franchise organizations Copyright 2009, Prentice-Hall, Inc.

Horizontal Marketing Systems Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. Copyright 2009, Prentice-Hall, Inc.

Integrated Multichannel Marketing Systems Multichannel marketing—a single firm uses two or more marketing channels to reach one or more customer segments. Integrated marketing channel system—the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels. Benefits: Increased market coverage Lower channel costs More customized selling Copyright 2009, Prentice-Hall, Inc.

Conflict, Cooperation, and Competition Channel conflict—generated when one channel member’s actions prevent another channel member from achieving its goal. Channel coordination—channel members are brought together to advance the goals of the channel. Copyright 2009, Prentice-Hall, Inc.

Copyright 2009, Prentice-Hall, Inc. Types of Conflict Vertical channel conflict—between different levels within the same channel. Multichannel conflict—manufacturer has established two or more channels that sell to the same market. Copyright 2009, Prentice-Hall, Inc.

Causes of Channel Conflict Goal incompatibility Unclear roles and rights Differences in perception Dependence Copyright 2009, Prentice-Hall, Inc.

Strategies for Managing Channel Conflict Adoption of superordinate goals Exchange of employees Joint membership in trade associations Co-optation Diplomacy, mediation, or arbitration Legal recourse Copyright 2009, Prentice-Hall, Inc.

Legal and Ethical Issues in Channel Relations Exclusive dealing Exclusive territories Tying agreements Dealers’ rights Copyright 2009, Prentice-Hall, Inc.

E-Commerce Marketing Practices E-business—use of electronic means and platforms to conduct a company’s business. E-commerce—the company or site transacts or facilitates the online selling of products and services. E-purchasing—companies buy goods, services, and information from online suppliers. E-marketing—company efforts to inform buyers, communicate, promote, and sell its offerings online. Copyright 2009, Prentice-Hall, Inc.

Copyright 2009, Prentice-Hall, Inc. Pure-Click Companies Search engines Internet service providers (ISPs) Commerce sites Transaction sites Content sites Enabler sites Copyright 2009, Prentice-Hall, Inc.

Internet Sources of Information Supplier Web sites Infomediaries Market makers Customer communities Copyright 2009, Prentice-Hall, Inc.

Brick-and-Click Companies Strategies for gaining acceptance from intermediaries when selling through intermediaries and online: Offer different brands or products on the Internet. Offer offline partners higher commissions to cushion the negative impact on sales. Take orders on the Web site but have retailers deliver and collect payment. Copyright 2009, Prentice-Hall, Inc.

Copyright 2009, Prentice-Hall, Inc. M-Commerce Mobile commerce Using cellular phones or personal digital assistants to wirelessly connect to the Internet. Success will be driven by: Convenience Ease of use Trust Widespread availability Copyright 2009, Prentice-Hall, Inc.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall Copyright 2009, Prentice-Hall, Inc.