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 is
Distribution
 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

Push
Sales force and trade
promotion

Pull
Advertising and
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

Waiting and Spatial

Lot size
delivery time convenience

Product variety Service backup

 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 • Terms and

intermediaries responsibilities of
• Merchants channel members
• Facilitators • Price policy
• Conditions of sale
• Number of • Distributors’ territorial
intermediaries rights
• Exclusive • Mutual services and
• Selective responsibilities
• Intensive
 Evaluating the Major
Alternatives
Determine whether
own sales force or a
sales agency will
produce more sales.
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

Vertical marketing
system

Horizontal marketing
system

Multichannel
marketing systems
Vertical Marketing Systems (VMS)

Corporate VMS

Administered VMS

Contractual VMS
Contractual VMSs
Wholesaler-sponsored
voluntary chains

Retailer cooperatives

Franchise organizations
 Horizontal Marketing
Systems

Two or more unrelated companies

put together resources or
programs to exploit an emerging
marketing opportunity.
 Integrated Multichannel Marketing
Systems

Multichannel marketing Integrated marketing

channel system
Occurs when a single firm
uses two or more Strategies and tactics of
marketing channels to selling through one channel
reach one or more reflect the strategies and
customer segments. tactics of selling through
other channels.
Conflict and Cooperation
Channel conflict
Generated when one channel
member’s actions prevent
another channel member from
achieving its goals.
Channel coordination
Channel members are
brought together to
advance the goals of the
channel.
 Types of Conflict

Vertical

Multichannel
Causes of Channel
Conflict
Goal incompatibility

Unclear roles and rights

Differences in
perception

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 dealing

Exclusive territories

Tying agreements

Dealers’ rights

.
Impact of Internet on Marketing
Practices

E-business

E-commerce

E-purchasing

E-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 sites

Infomediaries

Market makers

Consumer 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 – 24/7

Ease of use

Trust

Availability