CHANNEL INTEGRATION AND SYSTEM

Streamlining the different channel activities and information flow…

Different types of channel integration

Vertical Marketing Systems

Horizontal Marketing Systems

Vertical Marketing Systems

The producer, wholesaler(s), and retailer(s) in a unified system. Eliminate the conflict that results when independent members pursue their own objectives. VMSs achieve economies through: •Size•Bargaining power•The elimination of duplicated services

There are three types of VMS:•Corporate•Administered•Contractual

Corporate Vertical Marketing Systems

Combines successive stages of production and distribution under single ownership.

Consists of either a manufacturer who has integrated vertically to reach the consumer, or a retailer who has integrated vertically to create a self-supply network.

Administered Vertical Marketing Systems

Coordinates successive stages of production and distribution through the size and power of one of the members. Building a planned, professionally managed, vertical marketing systemDepartment within the company called distributor-relations planning.

Contractual Vertical Marketing Systems

Independent firms at different levels of production and distribution integrating their programs on a contractual basisThey are of three types:•Wholesaler-sponsored voluntary chains•Retailer cooperatives•Franchise organizationsThe traditional system is the manufacturer-sponsored retailer franchiseA new system is the service-firm-sponsored retailer franchise

Marketing Insight: The importance of channel stewards

The ability of a given participant in the distribution channel to create a go-to-market strategy that simultaneously addresses customers’ best interests and drives profits for all partners.

The New Competition in Retailing

No longer between independent business units but between whole systems of centrally programmed networks (corporate, administered, and contractual) To achieve the best cost economies and customer response.  

Horizontal Marketing Systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Integrating Multi-Channel Marketing Systems

Integrating Multi-Channel Marketing Systems

Multi-channel marketing occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

An integrated marketing channel system is one in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

Integrating Multi-Channel Marketing Systems continued…

By adding more channels, companies can gain three important benefits: Increased market coverage Lower channel costsMore customized selling

The gains from adding new channels come at a price: New channels typically introduce conflict and control problems.Two or more channels may end up competing for the same customers.

Integrating Multi-Channel Marketing Systems continued…

Companies need to think through their channel architecture. They must determine which channels should perform which functions.

Moriarty and Moran propose using the hybrid grid to plan the channel architecture.The grid shows several marketing channels (rows). Several demand-generation tasks (columns)The grid illustrates why using only one channel is not efficient.

Integrating Multi-Channel Marketing Systems continued…

Channels should be designed to work together effectively.