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A Framework for
Marketing Management
Chapter 13
Designing and Managing IntegratedMarketing Channels
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Chapter Questions
What are marketing channel systems and
value networks?
What functions do marketing channels
perform?
What decisions do companies face in
designing, managing, and integrating their
channels? What key issues do companies face in
e-commerce?
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Marketing Channels and Value
Networks Marketing channelssets of interdependent
organizations involved in the process of
making a product or service available for use
or consumption. Value networka system of partnerships
and alliances that a firm creates to source,
augment, and deliver its offerings.
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Push and Pull Strategies
Push strategyuses the manufacturers
sales force and trade promotion to induce
intermediaries to carry, promote, and sell the
products to end users. Pull strategymanufacturer uses
advertising and promotion to persuade
consumers to ask intermediaries for theproduct, thus inducing the intermediaries to
order it.
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Role of Marketing Channels
Performs the work of moving products from
producers to consumers, overcoming time,
place, and possession gaps.
Forward flowfunctions
Backward flowfunctions
Both directions
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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.
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Channel Levels
Zero-level channel
One-level channel
Two-level channel
Three-level channel
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Channel-Design Decisions
Analyze customers desired service output
levels
Establish objectives and constraints
Identify major channel alternatives
Evaluate the major alternatives
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Analyzing Customers Desired Service
Output Levels Lot size
Waiting and delivery time
Spatial convenience
Product variety
Service backup
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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
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Identifying Major Channel Alternatives
Types of intermediaries
Merchants
Facilitators
Number ofintermediaries
Exclusive
Selective
Intensive
Terms and
responsibilities of
channel members
Price policy Conditions of sale
Distributors territorial
rights
Mutual services and
responsibilities
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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.
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Channel-Management Decisions
Selecting channel members
Training and motivating channel members
Evaluating channel members
Modifying channel arrangements
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Channel Integration and Systems
Vertical marketing system
Horizontal marketing system
Multichannel marketing system
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Vertical Marketing System (VMS)
Producer, wholesaler(s), and retailer(s) acting
as a unified system.
Types:
Corporate VMS
Administered VMS
Contractual VMS
Wholesaler-sponsored voluntary chains Retailer cooperatives
Franchise organizations
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Horizontal Marketing Systems
Two or more unrelated companies put
together resources or programs to exploit an
emerging marketing opportunity.
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Integrated Multichannel Marketing
Systems Multichannel marketinga single firm uses two or
more marketing channels to reach one or morecustomer segments.
Integrated marketing channel systemthe
strategies and tactics of selling through one channelreflect the strategies and tactics of selling throughother channels.
Benefits: Increased market coverage Lower channel costs
More customized selling
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Conflict, Cooperation, and Competition
Channel conflictgenerated when one
channel members actions prevent another
channel member from achieving its goal.
Channel coordinationchannel membersare brought together to advance the goals of
the channel.
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Types of Conflict
Vertical channel conflictbetween different
levels within the same channel.
Multichannel conflictmanufacturer has
established two or more channels that sell tothe same market.
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Causes of Channel Conflict
Goal incompatibility
Unclear roles and rights
Differences in perception
Dependence
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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
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Legal and Ethical Issues in Channel
Relations Exclusive dealing
Exclusive territories
Tying agreements
Dealers rights
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E-Commerce Marketing Practices
E-businessuse of electronic means and platforms
to conduct a companys business.
E-commercethe company or site transacts or
facilitates the online selling of products and services. E-purchasingcompanies buy goods, services,
and information from online suppliers.
E-marketingcompany efforts to inform buyers,
communicate, promote, and sell its offerings online.
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Internet Sources of Information
Supplier Web sites
Infomediaries
Market makers
Customer communities
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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.
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M-Commerce
Mobile commerce
Using cellular phones or personal digital
assistants to wirelessly connect to the
Internet.
Success will be driven by:
Convenience
Ease of use Trust
Widespread availability
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Copyright 2009 Pearson Education, Inc.Publishing as Prentice Hall