Designing and

Managing Integrated Marketing Channels

Key Concepts

Marketing Management at

Royal Philips Electronics

One of the world’s biggest electronics companies and Europe’s largest, with sales of over $36 billion.

Secret of RPE’s success isDistribution

Marketing Channels and Value

Networks

• Marketing channels—sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

• Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

Push and Pull Strategies

PullAdvertising and

promotion

PushSales force and trade promotion

Marketing Flows

Commonalities Among All

Channel Functions

• They use up scarce resources

• They can often be performed better through specialization

• They can be shifted among channel members

Consumer and Industrial

Marketing Channels

Channel-Design Decisions

• Analyze customers’ desired service output levels

• Establish objectives and constraints

• Identify major channel alternatives

• Evaluate the major alternatives

Analyzing Customers’ Desired

Service Output Levels

Lot sizeLot sizeWaiting and delivery time

Waiting and delivery time

Spatial convenienceSpatial

convenience

Service backupService backup

Product varietyProduct variety

Establishing Objectives

and Constraints

• State channel objectives in terms of targeted service output levels.

• Objectives vary with product characteristics.

• Environmental factors:• Competitors’ channels• Economic conditions• Legal regulations and restrictions

Identifying Major Channel

Alternatives

• Types of intermediaries• Merchants• Facilitators

• Number of intermediaries• Exclusive• Selective• Intensive

• Terms and responsibilities of channel members• Price policy• Conditions of sale• Distributors’ territorial rights

• Mutual services and responsibilities

Evaluating the Major

AlternativesDetermine whether own sales force or a sales agency will produce more sales.

Determine whether own sales force or a sales agency will produce more sales. Estimate the

costs of selling different volumes through each channel.

Estimate the costs of selling different volumes through each channel.

The Value-Adds vs. Costs of

Different Channels

Channel-Management Decisions

• Selecting channel members

• Training and motivating channel members

• Evaluating channel members

• Modifying channel arrangements

Channel Integration and

Systems

Horizontal marketing system

Horizontal marketing system

Vertical marketing system

Vertical marketing system

Multichannel marketing systems

Multichannel marketing systems

Vertical Marketing

Systems (VMS)

Administered VMS

Administered VMS

Corporate VMSCorporate VMS

Contractual VMSContractual VMS

Contractual VMSs

Retailer cooperatives

Retailer cooperatives

Wholesaler-sponsored

voluntary chains

Wholesaler-sponsored

voluntary chains

Franchise organizations

Franchise organizations

Horizontal Marketing Systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Integrated Multichannel

Marketing Systems

Multichannel marketing

Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

Multichannel marketing

Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

Integrated marketing channel system

Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

Integrated marketing channel system

Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

Conflict and Cooperation

Channel conflictGenerated when one channel member’s actions prevent another channel member from achieving its goals.

Channel conflictGenerated when one channel member’s actions prevent another channel member from achieving its goals.Channel

coordinationChannel members are brought together to advance the goals of the channel.

Channel coordinationChannel members are brought together to advance the goals of the channel.

Types of Conflict

Multichannel

Vertical

Causes of Channel Conflict

Unclear roles and rights

Differences in perception

Goal incompatibility

Dependence

Strategies for Managing

Channel Conflict• Adoption of superordinate goals

• Exchange of employees

• Joint membership in trade associations

• Co-optation

• Diplomacy, mediation, or arbitration

• Legal recourse

Legal and Ethical Issues in

Channel Relations

.

Exclusive dealingExclusive dealing

Exclusive territoriesExclusive

territories

Tying agreementsTying agreements

Dealers’ rightsDealers’ rights

Impact of Internet on

Marketing Practices

E-businessE-business

E-commerceE-commerce

E-purchasingE-purchasing

E-marketingE-marketing

Breakthrough Marketing:

Amazon

Started as a bookseller, now a $10 billion company!

Pure-Click Companies

• Search engines

• Internet service providers (ISPs)

• Commerce sites

• Transaction sites

• Content sites

• Enabler sites

Internet Sources of Information

Supplier Web sitesSupplier Web sites

InfomediariesInfomediaries

Market makersMarket makers

Consumer communitiesConsumer communities

Brick-and-Click Companies

• Strategies for gaining acceptance from intermediaries when selling through intermediaries and online:• Offer different brands or products on the Internet.

• Offer offline partners higher commissions to cushion the negative impact on sales.

• Take orders on the Web site but have retailers deliver and collect payment.

Why E-Commerce Succeeds

Convenience – 24/7Convenience – 24/7

Ease of useEase of use

TrustTrust

AvailabilityAvailability