Chapter

21
Designing
And Managing Integrated
Marketing Channels
Learning Objectives
1. What is a marketing channel system and value
network?
2. What work do marketing channels perform?
3. How should channels be designed?
4. What decisions do companies face in managing
their channels?
5. How should companies integrate channels?
Learning Objectives

6. What are the key channel issues in e-commerce?

7. What are the key channel issues in m-commerce?
8. How should companies manage channel conflict?
 Marketing Channels
and Value Networks
• Marketing channels
– Sets of interdependent
organizations participating
in the process of making a
product or service
available for use or
consumption
– Intermediaries:
merchants, agents, and
facilitators
 Marketing Channels
and Value Networks
• A marketing channel system
– The particular set of marketing channels a
firm employs
– Push vs. pull strategy
 Marketing Channels
and Value Networks
• Multichannel marketing
– Using two or more
marketing channels to
reach customer segments
in one market area
– Omnichannel marketing
– Integrated marketing
channel system
 Figure 17.1
The Hybrid Grid
 Marketing Channels
and Value Networks
• Value network
– A system of partnerships and alliances that a
firm creates to source, augment, and deliver
its offerings
– Demand chain planning
 Marketing Channels
and Value Networks
• The digital channels
revolution
– Customer support in
store/online/phone
– Check online for product
availability at local stores
– Order product online to
pick up at store
– Return a product
purchased online to a
nearby store
 The Role of
Marketing Channels
• Channel functions and flows
 Figure 17.2
Marketing Flows For Forklift Trucks
 The Role of
Marketing Channels
• Channel levels
– Zero-level channel
(direct)
– One/two/three-level
channels
(intermediaries)
– Reverse-flow channels
• Service sector channels
 Figure 17.3
Consumer/Industrial Marketing Channels
 Channel-Design Decisions

• Analyzing customer needs and wants

 Desired lot size

 Waiting and delivery time
 Spatial convenience
 Product variety
 Service backup
 Channel-Design Decisions

• Establishing objectives and constraints

 Channel-Design Decisions

• Identifying major channel alternatives

Types of intermediaries

Number of intermediaries

Terms/responsibilities of
channel members
 Identifying major channel
alternatives
• Number of
intermediaries
– Exclusive
distribution
– Selective
distribution
– Intensive
distribution
 Identifying Major Channel
Alternatives
• Terms and responsibilities of channel
members

 Price policy
 Conditions of sale
 Distributors’ territorial rights
 Mutual services and responsibilities
 Channel-Design Decisions

• Evaluating major channel alternatives

– Economic criteria
– Control and adaptive criteria
 Figure 17.5
Break-Even For Sales Force
vs. Sales Agency
Channel-Management Decisions

Selecting Training
channel channel
members members

Evaluating
Global channel channel
considerations members

Channel Modifying
modification channel
decisions design
 Training and Motivating Channel
Members
• Channel power

Coercive

Reward

Legitimate

Expert

Referent
 Training and Motivating Channel
Members
• Channel partnerships
and ECR practices
– Demand-side
management
– Supply-side
management
– Enablers and
integrators
 Channel Integration and Systems

• Conventional
marketing channel
• Vertical marketing
systems
• Horizontal
marketing systems
 Vertical
Marketing Systems
• Corporate VMS
• Administered VMS
• Contractual VMS
– Wholesaler-sponsored voluntary chains
– Retailer cooperatives
– Franchise organizations
• New competition in retailing
 E-Commerce
Marketing Practices
• E-commerce
– Uses a Web site to transact or facilitate the
sale of products and services online
• Pure-click vs. brick-and-click companies
 M-Commerce
Marketing Practices
• Mobile channels and media can keep
consumers as connected and interacting
with a brand as they choose
– Advertising and promotion
– Geofencing
• Privacy issues
 Conflict, Cooperation,
and Competition
• Channel conflict
– Generated when one channel member’s
actions prevent another channel member from
achieving its goal
• Channel coordination
– Occurs when channel members are brought
together to advance the goals of the channel
instead of their own potentially incompatible
goals
 Conflict, Cooperation,
and Competition
• Types of conflict and competition

Horizontal channel conflict

Vertical channel conflict

Multichannel conflict
 Conflict, Cooperation,
and Competition
• Causes of channel conflict

 Goal incompatibility
 Unclear roles and rights
 Differences in perception
 Intermediaries’ dependence on
manufacturer
Conflict, Cooperation,
and Competition
 Conflict, Cooperation,
and Competition
• Dilution and cannibalization
– Marketers must be careful not to dilute their
brands through inappropriate channels
• Legal and ethical issues in channel
relations
– Exclusive dealing/territories, tying
agreements, and dealers’ rights