1. Designing & Managing
Integrated Marketing Channels
Submitted to-Mr. T.S.Shibin
Submitted by-Kirit Kene
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2. Following Contents in this Chapter
1. Marketing Channel system & Value Network.
2. Work Performing by the Marketing Channel.
3. How Should Channels be Designed?
4. What Decisions do companies face in managing their
channels?
5. Companies Integrate Channels & Manage Channel Conflict.
6. Key Issues with e-commerce & m-commerce.
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3. Marketing Channels
• Marketing channel:- Sets of interdependent organizations
involved in the process of making a product or service
available for use or consumption.
• Most producers do not sell their goods directly to the final
users; between them stands a set of intermediaries performing
a variety of functions. These intermediaries, constitute a
marketing channel.
• Some Intermediaries such as,
- Merchants.
- Agents.
- Facilitators.
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4. Importance of Channels
• Marketing channels must not just serve markets , they must also
make markets.
• Push Strategy- It uses the manufacturer’s sales force , trade
promotion money, or other means to induce intermediaries to
carry, promote & sell the product to end users. Push strategy is
particularly appropriate when there is low brand loyalty in a
category, brand choice is made in the store.
• Pull Strategy-Manufacturer uses advertising, promotion & other
forms of communication to persuade consumers to demand the
product from intermediaries, thus including the intermediaries to
order it. Marketing
Strategy
Push
Strategy
Pull
Strategy 4

5. Multichannel Marketing
• Hybrid or Multichannel marketing occurs when a single firm
uses two or more marketing channels to reach customer segment.
• Ex:- LIC multichannel distribution using the internet, insurance
advisors & bancassurance.
HP uses:-
1. Sales force – large accounts.
2. Outbound telemarketing – medium size accounts.
3. Direct mail – small accounts.
4. Retailers – still smaller accounts.
5. Internet – specialty item orders.
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6. • To manage hybrid channels,
company must make sure that
these channels:-
1. Work well together.
2. Match each target customer’s preferred way of doing business.
• Features expected by customers in a hybrid channel:-
1. Ability to order online and pick it up from a convenient retail
store.
2. Ability to return the ordered product back to a nearby retail
store.
3. Right to discounts and promotional offers.
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7. Value Networks
• Demand-chain planning:- When a firm first thinks of market
and then design supply chain backwards from market to firm.
• Value networks is a system of partnerships and alliances that a
firm creates to source, augment and deliver its offerings to the
end user.
• A value network includes:-
1. Firm’s suppliers.
2. Its supplier’s supplier.
3. Its intermediate customers.
4. End customers.
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8. • Various insights of demand-chain
planning:-
1. Company can determine whether more money is upstream or
downstream this will help in integrating backward or forward.
2. Company is more aware of disturbances anywhere in supply
chain that might cause costs, price or supplies to change
suddenly.
3. Companies can go online with their business partners to carry
on faster and more accurate communications, transactions and
payments to reduce costs and speed up information and increase
accuracy.
• Managing value networks requires investment in IT(Information
and Technology) and soft wares.
• SAP and Oracle ERP (enterprise resource plan) systems to
manage cash flows, manufacturing, human resources, purchasing
and other functions within a unified framework.
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9. The Role of Marketing channels
Channel Functions & Flows
• A Marketing channel performs the work of moving goods from
Producers to consumers.
• Functions like storage & movement, title & communications is a
forward flow of activity from company to customer.
• Ordering & Payment this functions constitute in backward flow
from customers to the company.
• Still others information, negotiation, finance & risk taking occur
in both directions.
• Selling a product & services require three channels, a sales
channel, a delivery channel & a service channel.
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10. Table 1. Channel Member
Functions• Gather information about potential & current customers,
competitors & other actors & forces in the marketing
environment.
• Develop & disseminate presuasive communication to stimulate
purchasing.
• Negotiate & reach agreements on price & other terms so that
transfer of ownership or possession can be affected.
• Place orders with manufacturers.
• Acquire the funds to finance inventories at different levels in the
marketing channel.
• Assume risks connected with carrying out channel work.
• Provide for the successive storage & movement of physical
products
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11. Table 1. Channel Member
Functions conti…..
• Provide for buyers payment of their bills through banks & other
financial institutions.
• Oversee actual transfer of ownership from one organization or
person to another.
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12. 1. Physical
FlowSuppliers Transporters Manufacturer Transporters Dealers Transporters
Customers
2. Title
Flow
Suppliers Manufacturer Dealers Customers
3. Payment Flow
Suppliers Banks Manufacturer Banks Dealers Banks Customers
Fig- Marketing Flows in the Marketing
Channel for Forklift Trucks. 12

13. Suppliers Transporters Manufacturer Transporters Dealers Transporters
4. Information
Flow
Customers
5. Promotion
Flow
Suppliers
Advertising
Agency
Manufacturer
Advertising
Agency
Dealers Customers
Fig- Marketing Flows in the Marketing Channel
for Forklift Trucks. 13

14. Channel Level
• The producer & the final customer are part of every channel.
 Zero level is also called a direct marketing channel consists of
a manufacturing selling directly to the final customer.
 Ex:- door-to-door sales, telemarketing, manufacturer own stores
IOCL, BPCL, HPCL etc.
 One-level channel contains one selling intermediary, such as
retailer.
 A two-level channel contains two intermediaries those are
wholesaler & retailer.
 A three-level channel contains three intermediaries, i.e.
wholesaler, jobber, retailer.
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15. a) Consumer Marketing
Channels
Manufacturer Manufacturer Manufacturer Manufacturer
0-level 1-level 2-level 3-level
Consumer Consumer
Retailer
Wholesaler
Retailer
Consumer
Wholesaler
Jobber
Retailer
Consumer
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16. Industrial marketing
channels
• An industrial-goods manufacturer can use its sales force to sell
directly to industrial customers, or it can sell to industrial
distributors who sell to industrial customers.
• It also sell through manufacturer’s representatives or it’s own
sales branches directly or indirectly to industrial customers
through industrial distributors.
• Channel normally describe a forward movement of products
from source to user.
• But there are reverse flow channels which are important in
following cases:-
1. Reuse of products or containers (cold drink bottles).
2. Recycle of products (paper).
3. Disposal of products and packaging.
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17. b) Integrated
Marketing Channels0-level 1-level 2-level 3-level
Manufacturer Manufacturer Manufacturer Manufacturer
Industrial
Consumer
Industrial
Consumer
Industrial
Consumer
Industrial
Consumer
Industrial
distributers
Manufacturer’s
representative
Manufacturer’s
Sales branch
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18. Service Sector Channels
• Internet & other technologies advance, service industries such as
banking, insurance, travel, & stock buying & selling are
operating through new channels.
• Marketing channels also keep changing in “person marketing”.
• Ex- Social community websites, mass media, TV ads etc.
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19. Channel-Design Decisions
Designing a marketing channel requires:-
1. Analyzing customer needs.
2. Establishing channel objectives.
3. Identifying Major Channel alternatives.
4. Evaluating major channel alternatives.
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20. Channel-Design Decisions
Analyzing Customer Needs & Wants
• Lot size-The number of units the channel permits a typical
customer to purchase on one occasion.
• Waiting & delivery time- The average time customers wait for
receipt of goods. Customers increasingly prefer faster delivery
channels.
• Spatial Convenience-The degree to which the marketing channel
makes it easy for customers to purchase the product.
• Product Variety-Customer prefer a greater variety because more
choices increases the chance of finding what they want, also many
choice creates a negative effect.
• Service Backup- Services like credit, delivery, installation, repairs
provided by the channel. The greater the service backup, the
greater the work provided by the channel.
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21. Channel-Design Decisions
conti…..
Establishing Objectives & Constraints
• Marketers should state their channel objectives in term of
targeted service output levels.
• Channel institutions should arrange their functional tasks to
minimize total channel costs and still provides desired level
of service outputs.
• Channel objectives vary with product characteristics :-
1. Perishable products - direct marketing.
2. Bulky products - channels that minimize shipping distance
and amount of handling.
3. Custom built machinery - company sales representatives.
4. Products requiring installations and regular check ups –
company owned or leased franchisees.
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22. Channel-Design Decisions
conti…..
Identifying and Evaluating major Channel Alternatives
A firm can choose from a wide variety channels for reaching
customers:-
1. Sales force – complex product and transactions.
2. Internet – less expensive but not effective with complex
products.
3. Distributors – can create sales but contact with customers is lost.
4. Manufacturer representatives – reach to different segment of
customers and delivers the right product at low cost. If fails then
leads to channel conflicts and excessive costs.
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23. Channel-Design Decisions
conti…..
Identifying Major Channel Alternatives
Channel alternatives differ in three ways:
i) Types of Intermediaries
ii) Number of Intermediaries
iii) Terms & Responsibilities of Channel Members.
Types of Intermediaries:- Agents, wholesalers, dealers are the
Intermediaries.
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24. Number of Intermediaries
• A firm can decide on number of intermediaries to use at each
level by using these three strategies :-
1. Exclusive distribution.
2. Selective distribution.
3. Intensive distribution.
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25. Exclusive Distribution
• It’s appropriate when manufacturer wants to maintain a strict
control over service level and outputs offered by resellers & it
often includes exclusive dealing arrangements.
• Requires a closer partnership with intermediaries.
• Used in distribution of automobiles, earth movers etc.
• Example:- Gucci
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26. Selective Distribution
• Relies on more than a few but less than all of intermediaries.
• A company can gain adequate market coverage with less cost
and more control.
• Ex-Woodland
Terms and Responsibilities of
Channel Members
• Each channel member must be treated respectfully and must be
given opportunity to be profitable.
• Main policies are:-
1. Price policies.
2. Condition of scales.
3. Territorial rights.
4. Mutual services and responsibilities. 26

27. • Price policies:- A producer should establish a price-list and
schedule of discounts and allowances.
• Conditions of sales:- Refers to payment terms and producer
guarantees. Provision for trade discounts on bulk orders or
purchases. Guarantee against defective merchandise or price
declines.
• Distributor’s territorial rights:- Definition of distributor's
territories and terms under which distributor will enfranchise
with other distributors.
• Mutual services and responsibilities:- Example of McDonald’s –
McDonald’s provides:-
1. Franchisee with a building.
2. Promotional support.
3. Record keeping system.
4. Training.
5. General administrative and technical assistance.
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28. Evaluating Major Channel
Alternatives
• Each channel alternative needs to be evaluated against economic,
control & adaptive criteria.
• Economic Criteria:- Each channel alternative will produce a
different level of sales & costs.
• Control & Adaptive Criteria:- Using a sales agency can pose a
control problem. Agents may concentrate on the customers who
buy the most, not necessarily those who buy the manufacturer’s
goods. They might not master the technical details of the
company’s product or handle its promotion materials effectively.
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29. High
High
Low
Low
Internet
Telemarketing
Retail stores
Distributors
Value-added
partners
Retail stores
Direct marketing
channels
Indirect channels
Direct sales
channels
Cost per Transaction
Value
-
Add
of
sale
Fig:-The Value-Adds versus Costs of
Different Channels
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30. Fig-Break-Even Cost chart for the
choice between a Company Sales
Force & a Manufacturer’s Sales
Agency
Level of Sales (rupees)
Selling
Costs
(rupees)
Manufacturer’s
Sales agency
Company
sales force
SB
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31. Channel-Management
DecisionsAfter a channel has been chosen, company must :-
1. Select.
2. Train.
3. Motivate.
4. Evaluate individual intermediaries for each channel.
Selecting Channel Members
To select a channel member producer should determine:-
1. No. of years in business.
2. Other lines carried out.
3. Growth and profit record.
4. Financial strength.
5. Cooperativeness.
6. Service reputation.
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32. Channel Management Decisions
Conti…..
Training and Motivating Channel Members
• A company should view its intermediaries as end-users.
• Needs and wants of intermediaries are compulsory to
stimulate them to top-level performance.
• For ex.:- Microsoft.
• Channel power:- Ability to alter behavior of intermediaries
so that they can think out-of-box.
• Powers a manufacturer posses to elicit cooperation from
intermediaries:-
1. Coercive power:- Threatening intermediaries to terminate
relationship if they fail to cooperate.
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33. 2. Reward power:- Offering extra benefits on performing specific
act or function.
3. Legitimate power:- Request for behavior that is warranted under
contract.
4. Expert power:- Having a special knowledge that intermediaries
value and doesn’t posses.
5. Referent power:- The manufacturer is so highly respected that
intermediaries are proud to be associated with it.
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34. Channel Partnerships
• Efficient Consumer Response (ECR) opted by manufacturer and
intermediaries to streamline supply chain and cut costs.
• ECR organizes relationship between manufacturer and
intermediaries in two areas:-
1. Demand side management:- Collaborative activities to stimulate
demand from consumer side by promoting joint marketing and
sales activities.
2. Supply side management:- Collaborative practices to optimize
supply.
3. Enablers & integrators:- Collaborative information technology &
process improvement tools to support joint activities that reduce
operational problems & allow standardization.
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35. Evaluating Channel Members
• Manufacturers regularly check performance against standards
such as:-
Sales quota, inventory levels, customer delivery time, treatment
of damaged and lost goods and cooperation in promotional and
training programs.
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36. Modifying Channel Design
• No channel strategy remains effective over the whole product life
cycle. In competitive markets with low entry barriers, the optimal
channel structure will inevitably change over time.
• Channel Evolution:-New firm typically starts as a local
operation selling in a fairly circumscribed market, using a few
existing intermediaries.
• Channel modification Decisions:- A producer must periodically
review & modify its channel design & arrangements.
• Global channel Considerations:- International markets pose
distinct challenges, including variations in customers shopping
habits, but opportunities at the same time.
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37. Channel Integration & Systems
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• A horizontal marketing system is one in which two or more
unrelated companies put together resources or programs to exploit
an emerging market opportunity.
• Each one lacks capital, know how production, marketing
resources to venture alone.
• Companies might work with each other on temporary or
permanent basis.

38. Channel Integration & Systems
Conti…..
Vertical Marketing System
• The producer, wholesaler and retailer acts a unified system.
• One channel member, the channel captain owns the others or
franchises them has so much power that they all cooperate.
• VMS arose as a result of strong channel members’ attempt to
control behavior and eliminate the conflict.
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39. Vertical Marketing System
• Corporate Vertical Marketing System:- It combines successive
stages of production and distribution under single ownership.
• Administered Vertical Marketing System:- It coordinates
successive stages of production and distribution through size
and power of one of the members.
• Contractual Vertical Marketing System:- It consists of
independent firms at different levels of production and
distribution, in order to obtain more economies or sales impact
what they had achieved alone.
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Channel Integration & Systems
Conti…..

40. Channel Integration & Systems
Conti…..
• Wholesalers Sponsored Voluntary Chain:- Wholesalers organize
voluntary chains of retailers to help them standardize their
selling practices and help them achieve buying economies in
order to compete with large chain organizations.
• Retailer Cooperatives:- Retailers take the initiative and organize
new business entity to carry on wholesaling with some
production. Members concentrate their purchases through
retailer co-op and plan their advertising jointly. Profits pass back
to members in proportion to their purchase.
• Franchisee Organization:- A channel member called franchisor
might link several successive stage in the production-distribution
process.
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41. The New Competition in Retailing:-
• Many independent retailers that have not joined VMSs have
developed specialty stores serving special market segments.
Horizontal Marketing Systems
• In this system two or more unrelated companies put together
resources or programs to exploit an emerging marketing
opportunity.
Integrating Multichannel Marketing
Systems
• Most companies today have adopted multichannel marketing.
• Ex- Disney sells it’s DVD through five main channels, i.e.
Blockbuster, Disney stores etc.
• An Integrated marketing channel system is one in which the
strategies & tactics of selling through one channel reflect the
strategies & tactics of selling through one or more other
channels. 41

42. Conflict, Cooperation and
Competition
• Channel conflict is generated when one channel members’
action prevent another channel from achieving its goals.
• Channel coordination occurs when channel members are
brought together to advance goals of the channel as opposed to
their own potentially incompatible goals.
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43. Types of conflict & Competition
• Horizontal channel conflict:- It occurs between channel
members at the same level.
• Vertical channel conflict:- It occurs between different levels
of the channel.
• Multichannel conflict:- It exists when the manufacturer has
established two or more channels that sell to the same market.
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44. Causes of Channel Conflict
• Conflicts may arise from:-
1. Goal incompatibility :- Manufacturers want to achieve rapid
market penetration through low price policy.
2. Unclear Roles and Rights :- HP may sell personal computers
to large accounts through its own sales force, but its licensed
dealers may also be trying to sell to large accounts.
3. Differences in Perception:- Disputes between manufacturers
and distributors about optimal advertising strategy.
4. Intermediaries Dependence on Manufacturer :- Fortune of
exclusive dealers depend totally upon manufacturers’ products
and pricing decisions which creates high potential for conflict.
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45. Managing Channel Conflict
• Various mechanisms of managing conflicts are:-
1. Strategic Justification:- A convincing strategic justification
that they serve distinctive segments & do not compete as much
as they might think can reduce potential for conflict among
channel members.
2. Dual Compensation:- Dual compensation pays existing
channels for sales made through new channels.
3. Superordinate Goal:- Channel members come to an
agreement on fundamental goals they are jointly seeking,
weather it is survival, market share, high quality or customer
satisfaction.
4. Exchange of Employees:- A useful step is to exchange
persons between two or more channel level.
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46. 5. Joint Memberships:- The manufacturer and the
intermediaries come together in good cooperation which may
lead to better understanding between them.
6. Co-option:- It is an effort by one organization to win the
support of leaders of other organization by including them in
advisory council, board of directors, which reduces the
chances of conflicts.
7. Diplomacy, Mediation or Arbitration:- when conflict is
chronic, the companies may need to resort to diplomacy,
mediation or arbitration.
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47. i. Diplomacy:- It takes place when each sends a person or
groups to meet with its counterparts to resolve the conflict.
ii. Mediation:- It means resorting to a neutral third party
skilled in conciliating the two parties interest.
iii. Arbitration:- It occurs when both the parties agree to
present their arguments to one or more arbitrators and accept
their decisions.
8. Legal Recourse:- when none of the above methods prove
effective, company or channel partners may choose to file a
law suit.
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48. Dilution & Cannibalization
• Marketers must be careful not to dilute their brands through
inappropriate channels, particularly luxury brands whose images
often rest on exclusivity & personalized service.
Legal & Ethical Issues in Channel Relations
• Companies are generally free to develop whatever channel
arrangements suit them.
• The legality of certain practices, exclusive dealing, exclusive
territories, tying agreements & dealers right.
• Exclusive distribution only certain outlets are allowed to carry a
seller’s products, requiring that these dealers not handle
competitors product called as exclusive leading.
• Exclusive dealing often includes exclusive territorial agreements.
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49. Legal & Ethical Issues in
Channel Relations
• Companies are generally free to develop whatever channel
arrangements suit them.
• The legality of certain practices, including exclusive dealing,
exclusive territories, tying agreements, & dealer’s right.
• Requiring that these dealers not handle competitors products is
called exclusive dealing.
• Exclusive dealing often includes exclusive territorial agreements.
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50. Legal & Ethical Issues in
Channel Relations Conti…..
• Producers of a strong brand sometimes sell it to dealers only if
they will take some or all of the rest of the line. This pratice is
called full-line forcing.
• Such tying agreements are not necessarily illegal, but they do
violate the law if they tend to lessen competition substantially.
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51. E-Commerce Marketing
Practices
• E-commerce uses a web site to transact or facilitate the sale of
products & services online.
• Online retailers compete in three key aspects of a transaction
1) Customer interaction with the website
2) Delivery
3) Ability to address problems when they occur
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52. Pure-Click Companies
• Several kinds of Pure Click companies: search engines,
Internet service providers, commerce sites, transaction sites,
content sites.
• Sell all types of products
• Ex- Flipkart, Make My Trip.com, Snap Deal etc.
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53. E-commerce Success Factors
 Companies must set up & operate their e-commerce Web sites
carefully.
 Customer Service is critical.
 To increase customer satisfaction & entertainment & information
value based shopping experiences.
 Ensuring security & privacy online remains important.
 Online retailers are also trying new technologies , mobile
marketing to attract new shoppers.
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54. B2B E-Commerce
• Although business-to-consumer (B2C) web sites have attracted
much attention in the media, even more activity is being
conducted on business-to-business (B2B) sites.
• Which are changing the supplier-customer relationship in
profound ways.
• Ex- The National Small Industries Corporation Ltd. Govt.of
India.
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55. Brick-and-Click Companies
• Many Brick-and-mortar companies may have initially debated
whether to add an online e-commerce channel for fear of channel
conflict with their offline retailers, agents, or their own stores
most eventually added the Internet as a distribution channel after
seeing how much business generated online.
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56. M-Commerce Marketing
Practices
• The widespread penetration of cell & smart phones, there are
currently more mobile phones than personal computers in the
world, allows people to connect to the Internet & Place online
orders on the move, many see a big future is now called as m-
commerce.
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57. •Thank You
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