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?
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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.

4. 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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5. 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

6. Categories of Buyers
Habitual shoppers—purchase from the same places in the same manner over time
High value deal seekers—know their needs and “channel surf” a great deal before buying at the lowest possible price
Variety-loving shoppers—gather information in many channels, regardless of price
High-involvement shoppers—gather information in all channels, make their purchases in a low-cost channel, but takes advantage of customer support from a high-touch channel
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7. Increasing Efficiency

8. Types of Shoppers
Service/quality customers—care most about the variety and performance of products in stores as well as the service provided
Price/value customers—most concerned about spending their money wisely
Affinity customers—sought stores that suited people like themselves or the members of groups they aspired to join
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9. 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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10. Designing a Marketing Channel System
Analyze customer needs
Establish channel objectives
Identify major channel alternatives
Evaluate major channel alternatives

11. Channel Service Outputs
Lot size—number of units the channel permits a typical customer to purchase on one occasion
Waiting/delivery time—average time customers of that channel wait for receipt of the goods
Spatial convenience—degree to which the marketing channel makes it easy for customers to purchase the product
Product variety—assortment breadth provided by the marketing channel
Service backup—add-on services (credit, delivery, installation, repairs) provided by the channel
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12. Channel objectives State in terms of targeted service output levels
Minimize total cost and still provide desired levels of service output
Channel Objectives vary with product characteristics
Perishable products—more direct marketing
Bulky products—minimize shipping distance
Nonstandard products—sold directly by sales representatives
Products requiring installation or maintenance service—sold and maintained by company or franchised dealers
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13. Identifying Channel Alternatives
Types of
intermediaries
Number of
intermediaries
Terms and
responsibilities

14. Consumer Marketing Channels

15. Industrial Marketing Channels

16. Number of Intermediaries
Exclusive
Selective
Intensive

17. The Best Channel System Should Achieve Ideal Market Exposure
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Intensive
Selective
Market Exposure Strategies
Summary Overview
Ideal market exposure makes a product available widely enough to satisfy target customers’ needs but not exceed them. Too much exposure increases marketing costs and such inefficiency is detrimental to both the firm and the customers who ultimately pay more for products.
Key Issues
Intensive distribution: selling the product through all responsible and suitable wholesalers and retailers who will stock and/or sell the product.
Intensive distribution means “sell it where they buy it.”
This exposure is particularly appropriate for convenience products, because consumers do not want to expend a lot of effort to find them.
Selective distribution: selling only through those middlemen who will give the product special attention.
Selective distribution means “sell it where it sells best.”
This exposure is typically associated with shopping products.
Selective distribution can reduce costs and get better partners.
Selective distribution often moves to intensive as the market grows.
Exclusive distribution means selling through only one middleman in a particular geographic area.
Exclusive distribution sometimes makes sense, especially when dealing with specialty products.
Discussion Question: How is the image of a product related to its ideal market exposure?
Intensive
Exclusive :
Selective
= number of
outlets : :

18. Terms and Responsibilities of Channel Members
Price policy—price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient
Condition of sale —payment terms and producer guarantees
Distributors’ territorial rights—distributors’ territories and the terms under with the producer will enfranchise other distributors
Mutual services and responsibilities (e.g., McDonald’s provide franchisees with a building, promotion support, recordkeeping system, training, and general administrative and technical assistance; franchisees are expected to satisfy company standards for the physical facilities, cooperate with new promotion programs, furnish requested information, and buy supplies from specified vendors)
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19. The Value-Adds Versus Costs of Different Channels

20. Break-Even Chart for the Choice Between A Company Sales Force and Manufacturer’s Sales Agency

21. Channel-Management Decisions
Selecting channel members
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members

22. Channel Power Coercive--threat Reward—extra benefit
Legitimate--contract
Expert--knowledge
Referent—proud to be associated

23. Channel Integration and Systems
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: Indicates place where slide “builds” to include the corresponding point.
Characteristics
Type of channel
Little or
none
None
Typical “inde-pendents”
Amount of cooperation
Traditional
Vertical marketing systems
Administered
Contractual
Corporate
Control maintained by
Examples
Summary Overview
Compared to a traditional channel, in a vertical marketing system, the whole channel focuses on the same target market at the end of the channel.
Key Issues
Corporate channel system: characterized by the ownership of each level of the channel by the same corporation, giving the appearance that the firm is going direct.
Vertical integration -- the buying of other firms by one member of the channel. Any level of the channel may become the acquiring corporation.
Administered channel system: channel members informally agree to cooperate with each other. Such agreements typically cover procedures to routinize ordering, standardize accounting, and coordinate promotion efforts.
Discussion Question: Do you think there might be the potential for a channel captain to emerge in an administered system? Why or why not?
Contractual channel system: channel members formally agree to cooperate via contracts. Many popular franchise systems are examples of contractual channels.
Vertical marketing systems are a new wave in the marketplace. In fact, they capture a majority of retail sales and should increase their share in the future.
Short-term alliances are also popular, in which firms work together for a short time to achieve a particular objective. :
Some to good
Economic power and leadership
General Electric
Fairly good
to good
Contracts
McDonald’s
Complete
One company ownership
Florsheim : : :

24. Producers or Middlemen May Be Channel Captains
This slide relates to material on p. 301.
: Indicates place where slide “builds” to include the corresponding point.
Summary Overview
Although it is often the case that producers assume leadership positions in channels of distribution, powerful middlemen may also serve as channel captains. In recent years, it has become more popular for middlemen to take on this role.
Key Issues
This exhibit illustrates an example of how a producer-led channel might operate.
The producer develops the product and the price structure, but relies mainly on middlemen to help with distribution and promotion.
Wholesalers or retailers might also be channel captains, either because of their size or their proximity to consumers.
In this case, the middleman takes on all of the place and promotion functions, and part of the pricing and product functions.
A retailer or wholesaler might get involved with the product and pricing by developing dealer brands.
When middlemen are large and wield channel power because of their size, they can influence the structure and processes in the channel.
Large retailers buy in such large volume from producers that they often bypass wholesalers and deal with the producers directly.
They also secure volume discounts from producers.
Discussion Question: In a middleman-dominated channel, what impact do direct dealings with producers and volume discounts have on the final consumer? : :

25. 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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26. Managing Channel Conflict
Adoption of superordinate goals —jointly seeking goals
Cooptation--efforts by one organization to win the support of the leaders of another organization by including them in advisory councils, boards of directors, etc
Diplomacy--each side sends a person or group to meet with its counterpart to resolve a conflict
Mediation--resorting to a neutral third party to conciliate two parties interest
Arbitration--two parties agree to present arguments to one or more arbitrators and accept the arbitration decision

27. Causes of Channel Conflict
Goal incompatibility—manufacturer want rapid penetration with low prices but dealers want high margins and pursue short-run profitability
Unclear roles and rights—company’s sales force competing with dealers
Differences in perception—manufacturers optimistic about short-term economic outlook and want dealers to carry higher inventory than dealers want to carry because they are pessimistic
Intermediaries’ dependence on manufacturer—dealers affected by manufacturer’s product and pricing decisions
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28. e-Commerce Marketing Practices
Pure-click
Brick-and-click
Brick-and-mortar

29. Study Question 1 One of the chief roles of marketing
channels is to convert potential buyers
into profitable ________.
sales
marketers
customers
orders
consumers
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30. Study Question 2 A________ strategy involves the
manufacturer using its sales force and
trade promotion money to induce
intermediaries to carry, promote, and sell
the product to end users.
push
pull
promote
provide
none of the above
Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall

31. Study Question 3 A ________ strategy creates consumer
demand through promotions and
advertising as a way to induce
intermediaries to carry the product.
push
pull
promote
provide
none of the above
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32. Study Question 4 Channel objectives should be stated in
terms of ________ service output levels.
efficient
budgeted
targeted
affordable
none of the above
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33. Study Question 5 By granting ________, the producer
hopes to obtain more dedicated and
knowledgeable selling.
selective distribution
intensive distribution
extensive distribution
random distribution
exclusive distribution
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