Designing and Managing Integrated Marketing Channels Key Concepts

Marketing Management at Royal Philips Electronics One of the world’s biggest electronics companies and Europe’s largest, with sales of over $36 billion. Secret of RPE’s success is Distribution

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.

Push and Pull Strategies Advertising and promotion Push Sales force and trade promotion

Marketing Flows

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

Consumer and Industrial Marketing Channels

Channel-Design Decisions Analyze customers’ desired service output levels Establish objectives and constraints Identify major channel alternatives Evaluate the major alternatives

Analyzing Customers’ Desired Service Output Levels Lot size Waiting and delivery time Spatial convenience Product variety Service backup

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

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

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.

The Value-Adds vs. Costs of Different Channels

Channel-Management Decisions Selecting channel members Training and motivating channel members Evaluating channel members Modifying channel arrangements

Channel Integration and Systems Horizontal marketing system Vertical marketing system Multichannel marketing systems

Vertical Marketing Systems (VMS) Administered VMS Corporate VMS Contractual VMS

Contractual VMSs Wholesaler-sponsored voluntary chains Retailer cooperatives Wholesaler-sponsored voluntary chains Franchise organizations

Horizontal Marketing Systems Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Integrated Multichannel Marketing Systems Multichannel marketing Occurs when a single firm uses two or more marketing channels to reach one or more customer segments. Integrated marketing channel system Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

Conflict and Cooperation Channel conflict Generated when one channel member’s actions prevent another channel member from achieving its goals. Channel coordination Channel members are brought together to advance the goals of the channel.

Types of Conflict Multichannel Vertical

Causes of Channel Conflict Unclear roles and rights Differences in perception Goal incompatibility Dependence

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

Legal and Ethical Issues in Channel Relations Exclusive dealing Exclusive territories Tying agreements Dealers’ rights .

Impact of Internet on Marketing Practices E-business E-commerce E-purchasing E-marketing

Breakthrough Marketing: Amazon Started as a bookseller, now a $10 billion company!

Pure-Click Companies Search engines Internet service providers (ISPs) Commerce sites Transaction sites Content sites Enabler sites

Internet Sources of Information Supplier Web sites Infomediaries Market makers Consumer communities

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.

Why E-Commerce Succeeds Convenience – 24/7 Ease of use Trust Availability