1. Designing and Managing Integrated Marketing Channels15
Designing and Managing Integrated Marketing Channels
Marketing Management, 13th ed

2. Chapter Questions
What is a marketing channel system and value network?
What work do marketing channels perform?
How should channels be designed?
What decisions do companies face in managing their channels?
How should companies integrate channels and manage channel conflict?
What are the key issues with e-commerce?
Copyright © 2009 Jared Hansen

3. 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.
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4. The Supply Chain
A supply chain or channel must perform eight marketing functions:
Buying
Selling
Storing
Transporting
Sorting
Financing
Information Gathering
Risk Taking
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5. The Supply Chain
A marketing function does not have to be shifted in its entirety to another institution or to the consumer but can be divided among several entities.
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6. The Supply Chain Primary Marketing Institutions:
Are those channel members that take title to the goods as they move through the marketing channel. They include manufacturers, wholesalers, and retailers.
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7. Primary Marketing Institutions
Costco is a primary marketing institution that acts as both a wholesaler (selling to small businesses) and a retailer (selling to households).
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8. The Supply Chain Facilitating Marketing Institutions:
Are those that do not actually take title but assist in the marketing process by specializing in the performance of certain marketing functions.
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9. Facilitating Institutions
Agents
Brokers
Communications agencies
Advertising agencies
Transporters
Public warehouse
Technology specialists
Financing institutions
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10. Types of Supply Chains Supply Chain Length Supply Chain Width
Control of the Supply Chain
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11. Strategic Decisions in Supply Chain Design
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12. Direct and Indirect Supply Chains
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13. Width of Marketing Supply Chain
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14. Supply Chain Width Intensive Distribution:
Means that all possible retailers are used in a trade area.
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15. Supply Chain Width Selective Distribution :
Means that a moderate number of retailers are used in a trade area.
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16. Supply Chain Width Exclusive Distribution:
Means only one retailer is used to cover a trading area.
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17. Marketing Channel Patterns
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18. Vertical Marketing Channels
Quick Response (QR) Systems:
Also known as Efficient Consumer Response (ECR) Systems, are integrated information, production, and logistical systems that obtain real-time information on customer actions by capturing sale data at point-of-purchase terminals and then transmitting this information back through the entire channel to enable efficient production and distribution scheduling.
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19. Advantages of Franchising
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20. Disadvantages of Franchising
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21. Channels and Marketing Decisions
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
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22. Managing Retailer-Supplier Relations
Dependency
Power
Conflict
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23. Managing Retailer-Supplier Relations
Dependency:
Every supply chain needs to perform eight marketing functions by any combination of the members. None can be isolated; each depends on the others to do an effective job.
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24. Managing Retailer-Supplier Relations
Power:
Is the ability of one channel member to influence the decisions of the other channel members.
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25. Types of Power Reward Power:
Is based on B’s perception that A has the ability to provide rewards for B.
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26. Types of Power Expertise Power:
Is based on B’s perception that A has some special knowledge.
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27. Types of Power Referent Power:
Is based on the identification of B with A.
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28. Types of Power Coercive Power:
Is based on B’s belief that A has the capability to punish or harm B if B doesn’t do what a wants.
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29. Types of Power Legitimate Power:
Is based on A’s right to influence B, or B’s belief that B should accept A’s influence.
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30. Types of Power Informational Power:
Is based on A’s ability to provide B with factual data.
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31. Managing Retailer-Supplier Relations
Conflict:
Is inevitable because retailers and suppliers are interdependent.
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LO 3

32. Conflict Perceptual Incongruity:
Occurs when the retailer and supplier have different perceptions of reality.
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33. Conflict Goal Incompatibility:
Occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other.
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34. Conflict Dual Distribution:
Occurs when a manufacturer sells to independent retailers and also through its own retail outlets.
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35. Conflict Domain Disagreements:
Occurs when there is disagreements about which member of the marketing channel should make decisions.
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36. Conflict
Diverter:
Is an unauthorized member of a channel who buys and sells excess merchandise to and from authorized channel members.
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37. Conflict Gray Marketing:
Is when branded merchandise flows through unauthorized channels.
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38. Conflict Free-riding:
Is when a consumer seeks product information, usage instructions, and sometimes even warranty work from a full service store but then, armed with the brand’s model number, purchases the product from a limited service discounter or over the Internet.
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LO 3

39. Conflict Process Role of Channel Interdependency
Dependency of
Retailer on Supplier
Dependency of
Supplier on Retailer
Supplier’s Power Sources
Power of
Retailer Over Supplier
Power of
Supplier Over Retailer
Retailer’s Power Sources
Conflict
Potential
Conflict
Potential
Conflict
Conflict
Perceived
Felt
Manifest
Perceived
Felt
Manifest
Conflict Resolution
Copyright © 2009 Jared Hansen

40. Category Management Category Management (CM):
Is the process of managing all the SKUs within a product category and involves the simultaneous management of price, shelf space, merchandising strategy, promotional efforts, and other elements of the retail mix within the category based on the firm’s goals, the changing environment, and consumer behavior.
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LO 4

41. Category Management Category Manager:
Is an employee designated by a retailer for each category sold in their store. The manager leverages detailed knowledge of the consumer and trends, detailed point-of-sales information, and specific analysis provided by each supplier to tailor a store’s offerings to the specific needs of each market. The manager works with the suppliers to plan promotions throughout the year.
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LO 4

42. The Marketing Functions
Buying
Selling
Storing
Transporting
Sorting
Financing
Information
Gathering
Risk
Taking
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43. Managing Retailer-Supplier Relations
Dependency
Power
Conflict
Copyright © 2009 Jared Hansen
LO 3

44. Buyer Expectations for Channel Integration
Ability to order a product online and pick it up at a convenient retail location
Ability to return an online-ordered product to a nearby store
Right to receive discounts based on total online and offline purchases
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45. Categories of Buyers Habitual shoppers High value deal seekers
Variety-loving shoppers
High-involvement shoppers
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46. Types of Shoppers Service/quality customers Price/value customers
Affinity customers
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47. Channel Member Functions
Gather information
Develop and disseminate persuasive communications
Reach agreements on price and terms
Acquire funds to finance inventories
Assume risks
Provide for storage
Provide for buyers’ payment of their bills
Oversee actual transfer of ownership
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48. Designing a Marketing Channel System
Analyze customer needs
Establish channel objectives
Identify major channel alternatives
Evaluate major channel alternatives
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49. Channel Service Outputs
Lot size
Waiting/delivery time
Spatial convenience
Product variety
Service backup
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50. Identifying Channel Alternatives
Types of intermediaries
Number of intermediaries
Terms and responsibilities
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51. Number of Intermediaries
Exclusive
Selective
Intensive
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52. Terms and Responsibilities of Channel Members
Price policy
Condition of sale
Distributors’ territorial rights
Mutual services and responsibilities
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53. Channel-Management Decisions
Selecting channel members
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members
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54. Channel Power Coercive Reward Legitimate Expert Referent
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55. Channel Integration and Systems
Vertical marketing systems
Corporate VMS
Administered VMS
Contractual VMS
Horizontal marketing systems
Multichannel systems
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56. What is Channel Conflict?
Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.
Types of channel conflict
Vertical
Horizontal
Multichannel
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57. Causes of Channel Conflict
Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries’ dependence on manufacturer
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58. Table 15.3 Strategies for Managing Channel Conflict
Adoption of superordinate goals
Exchange of employees
Joint membership in trade associations
Cooptation
Diplomacy
Mediation
Arbitration
Legal recourse
Copyright © 2009 Jared Hansen