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
– Hybrid channel
– Integrated marketing
channel system
Figure 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
• [Link]
OTOQ
 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
Marketing Flows For Forklift Trucks
 Channels of distribution
The path a product takes from producer or
manufacturer to the final user
 Lets take a look at an example

• How does the Kit Kat get from the factory into
your hands?
• What are the different steps?
Step 1: Factory (Producer)
Now where does it go?
 Hold on a minute
• Let’s work backwards now instead.
• Where do you (the consumer) go to buy the
Kit Kat (the product)?
• So the consumer (you) buys the product (the
Kit Kat) from the retailer (Jio bazar, pop and
mom shop, independent shop).
• Where does the retailer buy the Kit Kat’s
from?
– Let’s think about Reliance Mart first.
– How about an independent retailer?
Wholesaler
 Channels of distribution
• Which channel is used by organized retailer?
• Which channel is used by an independent
retailer?
• How is this advantageous to organized retailer?
What do you think the third channel is?
 How could Reliance Mart use the third
channel of distribution?
• What is one of the advantages of this method
of distribution?
• Can you think of any
disadvantages?
• Can you think of any other examples for these
methods of distribution?
• For each of the three methods, outline an
example which we haven’t talked about.
• What is the product and who produces it?
• Where is the product wholesaled and where does
it retail?
• Which products don’t use a retailer or wholesaler?
Questions
1. Work in pairs to think of examples for each
method of distribution.
2. Copy the diagrams and write in your
examples.
3. What is the difference between a wholesaler
and a retailer?
 The Role of
Marketing Channels
• Channel levels
– Zero-level channel
(direct)
– One/two/three-level
channels
(intermediaries)
– Reverse-flow channels
• Service sector channels
Consumer/Industrial Marketing Channels
 The Role of
Marketing Channels
• Channel levels
– Zero-level channel
(direct)
– One/two/three-level
channels
(intermediaries)
– Reverse-flow channels
• Service sector channels
• [Link]
EWKQ
Channel-Design Decisions
 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
 Channel-Design Decisions
• Identifying major channel alternatives

Types of intermediaries

Number of intermediaries

Terms/responsibilities of
channel members
 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