BMGT 411: Chapter 13

Designing and Managing Integrated Marketing Channels

Chapter Questions

• What is a marketing channel system and value network?

• What work do marketing channels perform?

• What decisions do companies face in designing, managing, and integrating their channels?

• What key issues do marketers face with e-commerce and m-commerce?

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.

• The set of pathways a product or service follows after production, culminating in purchase and consumption of the final end user

Path to Supermarket

http://www.youtube.com/watch?v=CAbFLBM6uHM

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

Push Strategy Example: Paying for Shelf Space

http://www.youtube.com/watch?v=pDxSX-BAs0U

Pull Strategy Example: Advertising and Branding

Apple iPhone and Carriers

Multi-Channel Marketing

• When a single firm uses two or more marketing channels to reach customer segments

• 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

Table 13.1 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

Figure 13.1 Marketing Flows

Figure 13.2 Consumer Markets

Figure 13.2 Consumer Markets

Figure 13.2 Consumer Markets

Figure 13.2 Consumer Markets

Figure 13.2 Consumer Markets

Figure 13.2 Industrial Markets

Reverse-Flow Channels

Designing a Marketing Channel System

• Analyze customer needs: based on price, product assortment, and convenience, as well as shopping goals

• Establish channel objectives: Maximizing the desired level of output while also reducing costs

• Identify major channel alternatives: The types of intermediaries, the number needed, and terms and responsibilities of each

• Evaluate major channel alternatives: Comparing the costs of each channel and customer expectations to decide on the best one

Identifying Channel Alternatives

! Types of intermediaries: ! Merchants or Retailers: Buy take title of goods and resell

! Example: Mass Market Stores, Grocery Stores, etc ! Agents, Brokers, Sales Agents: Negotiating on the producers behalf,

but not taking ownership of the product ! Travel agencies, Financial Consultants

! Facilitators: Assist in getting the product to market, but do not take ownership nor assist in the sales ! Trains, Trucking, Warehousing, etc !

! Number of intermediaries ! Terms and responsibilities

Identifying Channel Alternatives

! Number of intermediaries: ! Exclusive: Severely limiting the intermediaries, controlling the service

levels and outputs ! Ex. Product’s like Tiffany, sold only in their stores

! Selective: Gaining adequate market coverage by being selective about who carries your product ! Ex. Whole Foods Vendors

! Intensive Distribution: Offering product in as many places as possible, often in convenience goods ! Ex. Soft Drinks

Figure 13.3 The Value-Adds versus

Costs of Different Channels

C

B

A

Channel-Management Decisions

• Selecting channel members: Negative experience at intermediary can cause a negative reaction at the company

• Training channel members: The power has shifted in most cases from producers to intermediaries

• Evaluating channel members: Constant evaluation of most profitable intermediaries, reducing and adding intermediaries by Modifying channel members over time

• Consolidation of stores

• Shifting to direct selling

P&G eStore

Different Types of Companies and Intermediaries

• Wal Mart

• Starbucks

• Amazon

• Giant Eagle

Channel Conflict (Page 208)

• What types of conflict arise in channels?

• What causes conflict?

• Goal incompatibility

• Unclear roles and rights

• Differences in perception

• Intermediaries’ dependence on manufacturer

• What can marketers do to resolve it?

E-Commerce

• Pure Click: No Physical Stores

• Brick and Click: Existing companies adding an online component

• M-Commerce: Selling directly to customers on smartphones and tablets

• Have any of you purchased something on your smartphone?

The Limits of Physical Space

eCommerce