Designing and Managing Integrated Marketing Channels 15 Designing and Managing Integrated Marketing Channels Marketing Management, 13th ed

Chapter Questions What is a marketing channel system and value network? What work do marketing channels perform? How should channels be designed? What decisions do companies face in managing their channels? How should companies integrate channels and manage channel conflict? What are the key issues with e-commerce? Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-2

Philips Emphasizes Value Delivery Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-3

What is a Marketing Channel? A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption. Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-4

Channels and Marketing Decisions 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 advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries. Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-5

Aldi Adjusted Its Strategy for the U.S. Market Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-6

Buyer Expectations for Channel Integration Ability to order a product online and pick it up at a convenient retail location Ability to return an online-ordered product to a nearby store Right to receive discounts based on total online and offline purchases Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-7

Categories of Buyers Habitual shoppers High value deal seekers Variety-loving shoppers High-involvement shoppers Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-8

Types of Shoppers Service/quality customers Price/value customers Affinity customers Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-9

Channel Member Functions Gather information Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-10

Figure 15.2 Marketing Channel Flows Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-11

Figure 15.3 Consumer Marketing Channels Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-12

Figure 15.3 Industrial Marketing Channels Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-13

Designing a Marketing Channel System Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-14

Channel Service Outputs Lot size Waiting/delivery time Spatial convenience Product variety Service backup Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-15

Identifying Channel Alternatives Types of intermediaries Number of intermediaries Terms and responsibilities Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-16

Number of Intermediaries Exclusive Selective Intensive Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-17

Terms and Responsibilities of Channel Members Price policy Condition of sale Distributors’ territorial rights Mutual services and responsibilities Video icon links to snippet on Hasbro’s product bundling for different channel members. Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-18

Figure 15.4 The Value-Adds vs. Costs of Different Channels Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-19

Figure 15.5 Break-Even Chart for the Choice Between a Company Sales Force and Manufacturer’s Sales Agency Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-20

Channel-Management Decisions Selecting channel members Training channel members Motivating channel members Evaluating channel members Modifying channel members Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-21

Channel Power Coercive Reward Legitimate Expert Referent Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-22

Channel Integration and Systems Vertical marketing systems Corporate VMS Administered VMS Contractual VMS Horizontal marketing systems Multichannel systems Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-23

What is Channel Conflict? Channel conflict occurs when one member’s actions prevent another channel from achieving its goal. Types of channel conflict Vertical Horizontal Multichannel Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-24

Causes of Channel Conflict Goal incompatibility Unclear roles and rights Differences in perception Intermediaries’ dependence on the manufacturer Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-25

Table 15.3 Strategies for Managing Channel Conflict Adoption of superordinate goals Exchange of employees Joint membership in trade associations Cooptation Diplomacy Mediation Arbitration Legal recourse Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-26

Coach Avoids Brand Dilution Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-27

e-Commerce Marketing Practices Pure-click Brick-and-click Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-28

Marketing Debate Does it matter where you are sold? Take a position: Channel images do not really affect the brand images of the products they they sell that much. or 2. Channel images must be consistent with the brand image. Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-29

Marketing Discussion Think of your favorite retailers. How have they integrated their channel system? How would you like their channels to be integrated? Do you use multiple channels from them? Why? Copyright © 2009 Pearson Education, Inc.  Publishing as Prentice Hall 15-30