2. Arab World Edition Kotler, Keller, Hassan, Baalbaki and Shamma
Marketing Management
Arab World Edition
Kotler, Keller, Hassan, Baalbaki and Shamma
Chapter 15
Designing and
Managing Integrated Marketing channels

3. 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?
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4. Marketing Channels and Value Networks
Chapter Question 1:
What is a marketing channel system and value network?
Marketing Channels and Value Networks
A marketing channel is the set of interdependent organizations involved in the process of making a product or service available for use or consumption.
A marketing channel system is the particular set of marketing channels employed by a firm.
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5. The Importance of Channels
Chapter Question 1:
What is a marketing channel system and value network?
The Importance of Channels
Companies must decide how much effort to devote to push versus pull marketing:
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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6. What is a marketing channel system and value network?
Chapter Question 1:
What is a marketing channel system and value network?
Channels
Hybrid channels - use of multiple channels of distribution to reach customers in a defined market.
Within hybrid channels, customers expect channel integration, with features such as:
The ability to order a product online and pick it up at a convenient retail location.
The ability to return an online-ordered product to a nearby store of the retailer.
The right to receive discounts and promotional offers based on total online and offline purchases.
Hybrid
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7. Understanding Customer Needs
Chapter Question 1:
What is a marketing channel system and value network?
Understanding Customer Needs
When choosing channels, marketers must be aware that different consumers have different needs.
Buyers fall into one of four categories:
Habitual shoppers (Same place – Same manner)
High value deal seekers (need – lowest price)
Variety-loving shoppers (Info – High tech – priceless)
High-involvement shoppers (Info – low cost chanl-support)
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8. Understanding Customer Needs
Chapter Question 1:
What is a marketing channel system and value network?
Understanding Customer Needs
As Figure 15.1 shows, customer profiles for these types of retailers differed across three markets studied:
Fig. 15.1: What Do European Customers Value?
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9. The Role of Marketing Channels
Chapter Question 2:
What work do marketing channels perform?
The Role of Marketing Channels
Channel Functions and Flows
Members of the marketing channel perform a number of key functions:
Box 15.1: Channel Member Functions
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10. Fig. 15.2: Five Marketing Flows in the Marketing Channel
Chapter Question 2:
What work do marketing channels perform?
Channel Functions and Flows
Five flows are illustrated in Figure 15.2:
Fig. 15.2: Five Marketing Flows in the Marketing Channel
for Forklift Trucks
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11. Fig. 15.3: Consumer and Industrial Marketing Channels
Chapter Question 2:
What work do marketing channels perform?
Channel Levels
The producer and the final customer are part of every channel.
The number of intermediary levels determines the length of a channel.
Fig. 15.3: Consumer and Industrial Marketing Channels
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12. What work do marketing channels perform?
Chapter Question 2:
What work do marketing channels perform?
Service Sector Channels
Services and ideas companies also face the problem of making their output available and accessible to target populations.
As internet and other technologies advance, service industries such as banking, insurance, travel, and stock buying and selling are operating through new channels.
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13. Channel-Design Decisions
Chapter Question 3:
How should channels be designed?
Channel-Design Decisions
Designing a marketing channel system requires:
Analyzing customer needs
Establishing channel objectives
Identifying major channel alternatives
Evaluating major channel alternatives
We’ll look at each in turn…
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14. How should channels be designed?
Chapter Question 3:
How should channels be designed?
1- Analyzing Customers’ Desired
Service Output Levels
Channels produce five service outputs:
Lot size (car rent – taxi)
Waiting/delivery time. (Faster)
Spatial convenience. (easy to reach)
Product variety. (greater choices)
Service backup (credit – repair(
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15. How should channels be designed?
Chapter Question 3:
How should channels be designed?
2- Establishing Objectives and
Constraints
Marketers should state their channel objectives in terms of targeted service output levels. (cost / service)
Channel objectives vary with product characteristics.
Fresh – nonstandard- Installations – high value
Other factors affect channel objectives:
Entering new markets
Business environment pressures, e.g. economic conditions, laws, etc
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16. How should channels be designed?
Chapter Question 3:
How should channels be designed?
3- Identifying and Evaluating Major
Channel Alternatives
Companies can choose from a wide variety of channels for reaching customers, from sales forces to agents, distributors, dealers, direct mail, telemarketing, and the internet.
Each channel has unique strengths as well as weaknesses.
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17. How should channels be designed?
Chapter Question 3:
How should channels be designed?
Identifying and Evaluating Major
Channel Alternatives
Number of Intermediaries
Three strategies are available:
Exclusive distribution (control–close partnership- new car -
Selective distribution (New company- special)
Intensive distribution (grocery- hard long run – price war)
McDonald’s Bahrain operates one of the few 24/7 McDelivery services in the world.
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18. Fig. 15.4: The Value-Adds versus Costs of Different Channels
Chapter Question 3:
How should channels be designed?
4- Evaluating the Major Alternatives
Each channel alternative needs to be evaluated against economic, control, and adaptive criteria.
Economic criteria – Each channel alternative will produce a different level of sales and costs.
Booz Allen
Branch 4.07
Phone 0.54
ATM 0.27
Web 0.1
Fig. 15.4: The Value-Adds versus Costs of Different Channels
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19. Channel-Management Decisions
Chapter Question 4:
What decisions do companies face in managing their channels?
Channel-Management Decisions
After a company has chosen a channel system, it must:
Select, train, motivate, and evaluate individual intermediaries for each channel.
Modify channel design and arrangements over time.
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20. Selecting Channel Members
Chapter Question 4:
What decisions do companies face in managing their channels?
Selecting Channel Members
The company needs to decide which characteristics distinguish the better intermediaries. Criteria might include:
Number of years in business
Other lines carried
Growth and profit record
Financial strength
Cooperativeness
Service reputation
Locations
Future growth potential
Type of clientele
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21. Training and Motivating Channel Members
Chapter Question 4:
What decisions do companies face in managing their channels?
Training and Motivating Channel Members
Channel power is the ability to alter channel members’ behavior so that they take actions they would not otherwise have taken.
Companies can use the following types of power to gain cooperation:
Coercive power (withdraw)
Reward power (benefits)
Legitimate power (warrantee)
Expert power (Knowledge)
Referent power (Associate with)
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22. Evaluating Channel Members
Chapter Question 4:
What decisions do companies face in managing their channels?
Evaluating Channel Members
Producers must periodically evaluate intermediaries’ performance.
They can use standards such as:
Sales quota attainment
Average inventory levels
Customer delivery time
Treatment of damaged and lost goods
Cooperation in promotional and training programs
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23. Channel Integration and Systems
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Channel Integration and Systems
Vertical Marketing Systems (VMS)
In a VMS, the producer, wholesaler(s), and retailer(s) act as a unified system.
Three types of VMS:
Corporate VMS (one ownership) Sears
Administered VMS (one member _ P&G / Americana)
Contractual VMS (Independent firm)
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24. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Horizontal Marketing Systems
In a horizontal marketing system, two or more unrelated companies put together resources or programs to exploit an emerging market opportunity.
Horizontal marketing systems include HDFC Bank’s arrangement with exchange houses throughout several Gulf countries.
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25. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Integrating Multichannel Marketing Systems
Multichannel marketing occurs when a single firm uses two or more marketing channels to reach one or more customer segments.
An integrated marketing channel system is one in which the same strategies and tactics of selling are used through all channels.
A traveler can get flight schedule information and rates and buy a ticket through the airline’s own office, through airline appointed agents, through a travel agent, through the airline’s website, or through an online web portal or intermediary.
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26. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Integrating Multichannel Marketing Systems
• Train all store associates on processes for online merchandise returns.
• List your company’s freephone number on the internet homepage, and be sure your customer-service hours of operation are easily accessible.
• Provide an information center that is easy to navigate and includes
contact information, FAQs, guarantees, return policies, and tips for first-time customers.
• Implement a store locator feature that includes store locations, hours, and events.
• Make store pickup for purchases an option and include real-time inventory levels, where applicable.
• Post the store’s weekly circular online for a more complete multichannel experience.
• Offer gift certificates that can be redeemed online and offline.
• Send notifications of the order, shipping, and return credit; include a reminder of the returns process in notifications as well as a link to your store locator.
• Supply all pertinent/compatible information for store return of merchandise on the packing slip or invoice.
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27. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Integrating Multichannel Marketing Systems
Figure 15.6 shows a simple grid to help make channel architecture decisions.
Fig. 15.6: The Hybrid Grid
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28. Conflict, Cooperation and Competition
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Conflict, Cooperation and Competition
Types of Conflict and Competition
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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29. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Causes of Channel Conflict
Conflict may arise from:
Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries’ dependence on manufacturer
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30. Box 15.3: Strategies to Manage Channel Conflict
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Managing Channel Conflict
Box 15.3: Strategies to Manage Channel Conflict
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31. How should companies integrate channels and manage channel conflict?
Chapter Question 5:
How should companies integrate channels and manage channel conflict?
Dilution and Cannibalization
Marketers must be careful not to dilute their brands through inappropriate channels.
This is especially a concern with luxury brands whose images are often built on the basis of exclusivity and personalized service.
Coach avoids brand dilution while enjoying multichannel distribution by keeping its full-price store shoppers separate from its discount shoppers, even locating its factory outlets a minimum of 95 kilometers from its retail stores.
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32. E-Commerce Marketing Practices
Chapter Question 6:
What are the key issues with e-commerce?
E-Commerce Marketing Practices
e-business - the use of electronic means and platforms to conduct a company’s business.
e-commerce - a company or site offers to transact or facilitate the selling of products and services online.
e-purchasing - purchase of goods, services, and information from various online suppliers.
e-marketing - company efforts to inform buyers, communicate, promote, and sell its products and services over the internet.
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33. E-Commerce Marketing Practices
Chapter Question 6:
What are the key issues with e-commerce?
E-Commerce Marketing Practices
The text explores particular issues for the following:
Pure-click companies – companies that have launched a website without any previous existence as a firm.
Brick-and-click companies – existing companies that have added an online site for information and/or e-commerce.
M-commerce – use of mobile phones or PDAs to access the internet.
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34. Credits Slide 1 Alamy Images: Tom Tracy Photography
Slide 7 Peter N. Child, Suzanne Heywood, and Michael Kliger, “Do Retail Brands Travel?,” McKinsley Quarterly, January 2002, pp. 11–13. Reprinted by permission
Slide 18 Alamy Images: Jochen Tack
Slide 20 ‘The Value-Adds versus Costs of Different Channels’ adapted from Oxford Associates, Dr. Rowland T. Moriarty, Cubex Corporation. Reproduced with kind permission
Slide 27 TravelStore
Slide 29 Getty Images: India Today Group
Slide 30 Egypt Air, Reproduced with kind permission
Slide 32 adapted from “Marketing Hybrid Marketing Systems” Harvard Business Review, p.150 (Moriarty, R.T., and Moran, U.), November–December 1990, copyright © 1990 by President and Fellows of Harvard College. All rights reserved
Slide 36 Press Association Images: Weng lei / AP