Marketing Management V57 Word File on Top 10 Concepts for Chapter 15 Designing and Managing Integrated Marketing Channels

1. Marketing Management V57
Prof. Bong De Ungria
Summary of Top 10 Concepts in
Designing and Managing
Integrated Marketing Channels
By: Raymund C. Piñon
Submitted: May 10, 2012
1. Marketing is a system of profitably creating, delivering and communicating
superior customer value to satisfy customers’ needs, wants and demands much
better than competition. To be able to do this, we must consider the 7 tasks of
marketing, the 6th of which is DELIVERING and COMMUNICATING
CUSTOMER VALUE.
2. Marketing channels are independent organizations that are involved in the process
of making products and services available for use and consumption. They are also
called intermediaries. They perform functions that facilitate the movement of
goods and services from manufacturer to final end-user. Channels are important
because they account for 30% to 50% of price margins, they convert potential
buyers to profitable customers, and they affect all other marketing mix decisions a
firm needs to consider in marketing their products and services like pricing,
promotions, etc.
3. The first step in the process of designing and managing integrated marketing
channels is to understand customers’ needs. Consumers choose where they will
buy from based on price, product assortment, convenience and personal shopping
goals. Marketers using different channels must be aware that different consumers
have different needs during the buying process.
4. Design aspects of channels also consider the different flows and levels in
marketing channels involving different intermediaries playing different
facilitating roles in the process of making products and services available for use.
The 5 marketing flows in channels are: physical flow, title flow, payment flow,
information flow and promotions flow. Also consider the differences in required
levels for consumer channels and industrial goods channels.
5. 20th century marketing requires that we go beyond thinking of channels merely as
conduits or supply chains, which is sees markets only as destinations, but to move
to more progressive customer-centric views as represented by concepts such as
Demand Chain Planning - which emphasizes what customers are looking for,
instead of focusing on what we are selling - to a more advanced view of delivery
systems such as the Value Networks. A Value network is a system of partnerships
and alliances that a firm creates to source, augment and deliver its offerings. This
concept takes view of companies as being at the center of a value network that
orchestrates these alliances in order to deliver superior value to the target

2. customers.
6. In making decisions about channel design, we must consider three issues:
a. What desired service output level do our customers have? This involves:
i. Lot sizes
ii. Waiting and delivery time
iii. Spatial convenience
iv. Product variety
v. Service back up
b. What will be our channel objectives? This involves:
i. Stating channel target service output levels
ii. Organizing channel tasks to deliver outputs at minimal total
channel cost
iii. Choosing segments to serve and best channels to serve them
iv. Observing what competitors are doing
v. Adapting channel objectives to larger environmental context
vi. Varying objectives to suit product characteristics
c. How do we identify and evaluate major channel alternatives? That is, we
choose a mix of channels that reach different segments of buyers and
deliver the right products at the least cost. Also we must consider 3
elements of channel alternatives in evaluating channels:
i. What types of business intermediaries are available?
ii. How many intermediaries are needed?
1. Exclusive distribution - for limited number
2. Selective distribution – few but less than all
3. Intensive distribution – all products in as many outlets
iii. What terms, and what are the responsibilities of each channel
member?
Finally we can evaluate major channel alternatives using
i. Economic criteria
ii. Control criteria
iii. Adaptive criteria
7. Channel management decisions follow after choosing a channel system. This
requires a company to
a. Select individual channel members
b. Train and motivate channel members. In motivating channel members, we
are accorded tools to obtain desired channel cooperation, such as:
i. Exercise of channel power
ii. Forging long-term partnerships by clarifying expectations
iii. Streamlining the supply chain and cutting costs adopting ECR –
Efficient Consumer Response practices
c. Evaluate individual channel members
d. Modify channel design and arrangement over time

3. Also in managing channels, we must consider how much effort to devote to trade
push and market pull strategies. Ideally, these efforts must be coordinated to
yield synergy.
8. Some of the recent developments in channels include Vertical Marketing Systems
(VMS), Horizontal Marketing Systems (HMS) and Integrated Multi-Channel
Marketing Systems
a. Vertical Marketing Systems are producers, wholesalers and retailer acting
as a unified system. Strong channel members control channel behavior and
eliminate conflict. They achieve economies of scale via size, bargaining
power and elimination of duplicate services. Some examples of VMS are:
i. Corporate VMS
ii. Administered VMS
iii. Contractual VMS
b. Horizontal Marketing Systems are two or more unrelated companies that
put together resources or programs to exploit an emerging marketing
opportunity.
c. Integrating Multi-Channel Marketing Systems
i. Multi-channel marketing
1. Companies using two or more channels to reach one or
more customer segment
ii. Integrated marketing channel system
1. strategies and tactics of selling through one channel reflects
the strategies and tactics of selling through other channels
d. Benefits of multi-channel marketing systems are: increased marketing
coverage, lower channel costs and more customized selling.
e. Competition in retailing is no longer between independent business units
but between whole systems of centrally-planned networks competing
against one another to achieve the best economies and customer response
9. Some of the disadvantages of multi-channel marketing systems are: channel
conflict and problems with control. Some of the more common causes of channel
conflict are: goal incompatibility, unclear roles and rights, differences in
perception and intermediaries’ dependence on the manufacturer. The challenge is
not to eliminate conflict, but to manage them through:
a. Adoption of super-ordinate goals
b. Joint membership in trade associations
c. Exchange of employees
d. Co-optation
e. Diplomacy, mediation or arbitration
f. Legal recourse
10. E-commerce has gained significance as companies have grown to adopt brick-
and-click channels. In designing an integrated marketing channel system,
companies must take advantage of the strengths of online and offline selling and
can work synergistically to bring about better value delivery at lower cost.

4. Finally, marketers must consider the emergence of m-commerce of the use of cell
phones, PDAs and other devices in planning their integrated marketing channels
design.