The document discusses marketing channels and integrated marketing. It defines key terms like supply chain, value delivery network, marketing channel, and types of intermediaries. It explains how channel members add value through various functions. The document also covers evaluating and selecting channel alternatives, designing channel systems, and managing channel conflicts. Integrated marketing channels aim to provide consistent strategies across all sales channels.

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115Designing and Managing Integrated Marketing Channels1
Supply chain consists of upstream and downstream partners
−Upstream partners are the set of firms that supply the raw materials, components, parts, information, finances, and expertise to create a product or service
−Downstream partners are the marketing channels or distribution channels that look toward the customer
Supply ChainValue Delivery Network and Marketing Channel
Value delivery network is the firm’s suppliers, distributors, and ultimately customerswho partner with each other to improve the performance of the entire system
A marketing channel is a set of interdependent organizations involved in the process of making a product or service available for use or consumption
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Merchants--wholesalers and retailers who buy, take title to, and resell goods
Agents--brokers, sales agents, and manufactures’ representatives who searchfor customers, negotiate, and don’t take title to goods
Facilitators--bank, ad agencies who assistin the distribution process but neither take title to goods nor negotiate purchases or sales
Types of Intermediaries
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Channel of DistributionClick the picture above to play videoeGO faces challenges in establishing a channel of distribution for its product. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-5Buyer Expectations from Channel Integration
Order a product online and pick it up at a convenient retail location
Returnan online-ordered product to a nearby store
Receivediscounts based on total online and offline purchases
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2How Channel Members Add Value
Offerproducers greater efficiency in making goods available to target markets
−They have contacts, experience, specialization, and scale of operations
Transformthe assortment of products into assortments wanted by consumers
Bridgethe major time, place, and possession gaps that separate goods and services from those who would use them
Decreasecost and the number of transactions
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Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-8How Channel Members Add ValueHow Channel Members Add ValueChannels perform the following functions:
Gather information
Develop and spread persuasive communications
Find and communicate with prospective buyers
Shape and fit the offer to the buyer’s needs
Reach agreements on price and other terms
Transport and store goods
Acquire and use funds to cover channel workcosts
Assume risks to carry out the channel workInformationPromotion
Contact
MatchingNegotiationPhysical Di
Financing
Risk taking
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-9Distribution in ActionFedEx’s creative and imposing distribution system made it a market leader in express delivery. Channels and Marketing Decisions
How much effort to devote to push Vs. 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 ad, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries
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Fig 15.1: Five Marketing Flows in the Marketing Channel for Forklift Trucks
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Marketing Channel Levels
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-13Figure 15.2 Consumer Markets and Industrial MarketsCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-14Reverse-Flow ChannelsCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-15Analyzing Analyzing consumer needsneedsSetting Setting channel objectivesobjectives
Identifying major channel alternativesalternatives
Evaluating channel alternativesalternatives
Designing a Marketing Channel System
Analyzing customer needs
Find out what target customers want from the channel
–Do they want to buy from nearby locations or are they willing to travel to more distant and centralized locations?
–Would they rather buy in person, by phone, or online?
–Do they value breadth of assortment or do they prefer specialization?
–Do they want many add-on services or will they obtain these services elsewhere?
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-17Analyzing customer needs
Consider cost and feasibility of meeting needs
Channels produce five service outputs:
–Lot size
–Waiting Time
–Spatial convenience
–Product variety
–Service backup
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4Establishing channel objectives
State channel objectives in terms of service output levels
–Identify different segments that need different levels of service
–Decide which segment to serve and the best channels to use in each case
–Minimize total cost and provide desired levels of service output
Objectives vary with the nature of the company, its products, its marketing intermediaries, its competitors, and the environment
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Identifying Channel Alternatives
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Types of intermediaries
Number of marketing intermediaries
Responsibilities of channel members
Types of intermediaries
Types of intermediaries refers to channel members available to carry out channel work
–Examples include the company sales force, manufacturer’s agency, and industrial distributors
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-21Number of intermediaries (Intensity)
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ExclusiveSelectiveSelectiveIntensiveIntensive
Candy and toothpaste
Luxury automobiles
TV and home applianceCopyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-23
Terms and Responsibilities of Channel Members
Price policy--price list, discounts, allowances
Conditions of sale—payment terms, producer guarantees
Distributors’ territorial rights
Mutual services and responsibilities--in franchised and exclusive-agency channelsFig 15.4 The Value-Adds versus Costs of Different ChannelsEvaluating Major Alternatives
Evaluate each channel against three criteria:
– Economic criteriaEconomic criteria--sales, costs, and profitability
– Control criteriaControl criteria--channel members’ control over the marketing of the product
– Adaptive criteriaAdaptive criteria--remain flexible to adapt to environmental changes

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5Fig 15.4 The Value-Adds versus Costs of Different Channels
Evaluating Major Alternatives
Fig 15.5 Break-even chart for the choice between A company sales force and manufacturer’s sales agency
Evaluating Major AlternativesCopyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-27
Channel-Management DecisionsSelecting channel membersTraining channel membersMotivating channel membersEvaluating channel members
Modifying channel members
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Selecting Channel Members
Determine the characteristics that distinguish the better ones
Consider the following for selection
–Number of years in business
–Other lines carried
–Growth and profit record
–Financial strength
–Cooperativeness
–Service reputation
–Location
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Training and Motivating Channel Members
Knowthe channel members’ needs and wants and tailorchannel offering
Implementtraining and capability-building programs to motivate andimprove intermediaries’ performances
–Microsoft requires its third-party service engineers to complete a set of courses and take certification exams. Those who pass are formally recognized as Microsoft Certified Professionals
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Channel Power
Coercive--threat
Reward--extra benefit
Legitimate--contract
Expert--knowledge
Referent--proud to be associatedThe ability to alter channel members’ behavior

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Channel Partnerships
Demand side management to stimulate consumer demand by promoting joint marketing and sales activities
Supply side management to optimize supply (with a focus on joint logistics and supply chain activities)
Enablers and integrators (ITs) to support joint activities that reduce operational problems, allow greater standardization, and so on.
Companies use ECR to organize relationships in 3 key areas
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Evaluating Channel Members
Evaluate performance against:
–Sales quota attainment
–Average inventory levels
–Customer delivery time
–Treatment of damaged and lost goods
–Cooperation in promotional and training programs
Underperformers need to be counseled, retrained, motivated, or terminated. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-33Modifying Channel Design and Arrangements
Periodically review and modify channel when:
–The distribution channel is not working as planned
–Customer buying patterns change
–The market expands
–New competition arises
–Innovative distribution channels emerge
Channel Integration and Systems
Conventional marketing channel
Vertical marketing systems
–Corporate VMS
–Administered VMS
–Contractual VMS
Horizontal marketing systems
Multichannel systems
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ManufacturerWholesalerRetailerConsumerFeatures
•Each work independently with separate objectives
•Each maximizes his profit at the expense of profits for the system
•No channel members has control over others
•No negotiation and integration
•BAT, Square Products
Conventional Marketing ChannelCopyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-35Vertical Marketing SystemFeatures
•Each work as a unified system
•Each maximizes the profits for the system
•Channel members own others, has contact with them, cooperate
•VMSs provide channel leadership
•Arong, Zara

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7Conventional Marketing Channel Vs. Vertical Marketing SystemCorporate VMSIntegrates successive stages of production and distribution under common ownership at different levels of the channel(Sears) Contractual VMSIndependent firms at different levels who join together through contracts to obtain more sales or economies(ACE Hardware) Administered VMSLeadership is assumed by one or a few dominant members based on size and power of the party(Kraft)
Types of Vertical Marketing SystemHighLow Control
In HMStwo or more non- competing firms on the same level join together to pursue a new marketing opportunity
–Can combine their capital and production capabilities to produce synergistic benefits for all members.
–Example: Banks in grocery stores; Doctors and Pharmaceuticals stores
Horizontal Marketing System Vs Hybrid Channels or Multichannels
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In hybrid channels a single firm uses two or more marketing channels to reach one or more customer segments
–Each channel delivers the right products in the right places in the right way at the least cost
–Example: HaqueBiscuitHybrid Channels or Multichannel MarketingCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-40REI Employs Hybrid Channels
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Advantages
Increased sales and greater market coverage
New opportunities to tailor offerings to specific needs of diverse customer segments
Challenges
Hard to control
Create channel conflict
Hybrid Channels or Multichannel MarketingCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-42

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Integrated Marketing Channel System
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Consistent strategies and tactics of selling through all channels
Benefits of adding more channels:
–Increased market coverage
–Lower channel cost
–Customized selling
Disintermediationoccurs when producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones
Changing Channel Organization
Channel conflict refers to disagreement over goals, roles, and rewards by channel members
Types of channel conflict
–Vertical
–Horizontal
–Multichannel
Channel Conflict
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 15-45Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-46Causes of Channel Conflict
Goal incompatibility–manufacturers want rapid penetration with low prices but dealers want high margins and ST profitability
Unclear roles and rights--company’s sales force competing with dealers
Differences in perception--want dealers to carry higher inventory Vs. dealers want to carry
Intermediaries’ dependence on manufacturer--dependence on product and pricing decisions
Strategies for Managing Channel Conflict
Strategic justification--convincing that they serve distinctive segments
Dual compensation--paying existing channels for sales made through new channels
Superordinate goals--seeking goals jointly
Employee exchange--exchanging persons between two or more channel levels
Joint memberships--encouraging joint memberships in trade associations
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15-47Strategies for Managing Channel Conflict
Cooptation--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--agreeing to present arguments to arbitrator(s) and accept the arbitration decision
Legal recourse--filing lawsuits
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M-Commerce
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Director Customer
Management
Regional Manager
Area Manager
Territory Manager
Distributor
Sales Supervisor
Delivery Man Distributor’s Sales
Representative
Cashier
Unilever Bangladesh Ltd (UBL)
Distribution System
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