Marketing Management II

1. Channels of Marketing
Course: MBA
Subject: MM II
Unit: 4

2. Designing and Managing Integrated Marketing
Channels
Sets of interdependent organizations involved in
the process of making a product or service
available for use or consumption.
They perform important functions viz., info gathering,
stimulating purchasing through communications, agreeing
on prices etc, ordering manufacturers, financing inventories
at various levels, lot of risk assumption, storing and
movement of products, complete payment formalities for
buyers and transferring ownerships.

3. Designing and Managing Integrated Marketing
Channels …
• There can be channels of various levels viz., zero,
single, double, triple etc. A lot depends upon the
organization and the nature of the business.
• Service sector will not have many channels linking
the company with the end user, but due to spread of
activity, a franchise network does happen at times. A
hotel will have different channel than a mobile
service provider.

4. Designing and Managing Integrated Marketing
Channels …
• Channel design decisions and considerations
Customer expectations viz., lot size, waiting time, spatial
convenience, product variety and service backup.
Establishing objectives and constraints. This requires keeping
in mind strengths and weaknesses of different types of
channel members or intermediaries Economic conditions also
determine the number and expanse of channel links

5. Designing and Managing Integrated Marketing
Channels …
• Channel design decisions and considerations…
Channel alternatives identification. This goes into elements
like types of available business intermediaries, numbers of
intermediaries needed, and the terms and responsibilities of
each channel member.
Evaluating the various alternatives. Each channel alternative
needs to be evaluated against economic, control and adaptive
criteria.

6. Designing and Managing Integrated Marketing
Channels …
• Channel Management Decisions
After channel alternatives are identified, individual members
or parties are to be selected, trained, motivated and
evaluated on a continuous basis. Selection can be done on
the basis of no of years in business, other lines carried,
financial performance and qualitative assessments. Training
of channel members involves regularly updating them of
products and services rigorously and certifying it also from
time to time.

7. Designing and Managing Integrated
Marketing Channels …
• Channel Management Decisions….
Motivating Channel members requires actions beyond
training. It requires understanding their needs and wants and
meeting them regularly. Besides that exercising power in
various forms also plays a significant role. These forms of
power may be coercive, reward, legitimate, expert and
referent power. One or more forms of power may be used in
conjunction.
Evaluating Channel members against standards like sales-
quota attainment, average inventory levels, customer
delivery time, treatment of damaged and lost goods and
cooperation in promotional and training programs.

8. Designing and Managing Integrated
Marketing Channels …
• Channel Management Decisions….
Modifying Channel arrangements implies changing or re-
orienting existing channel/s and their arrangements. This
normally happens when as a result of evaluation it as found
that channel is not working as planned ,consumers are
changing, market expansion is not as anticipated, competition
emerges, innovations demand change or PLC stage of the
product/s changes

9. Designing and Managing Integrated
Marketing Channels …
• Channel dynamics
Channels will not remain static and will continue to move in
various directions. Wholesaling and retailing are undergoing
rapid developments and this is constantly giving dynamism to
channel management. All this has generated vertical,
horizontal and multi-channel marketing systems.
A conventional marketing channel consists of producer,
wholesaler(s) and retailer(s).

10. Designing and Managing Integrated
Marketing Channels …
• Channel dynamics….
A Vertical marketing System (VMS) consists of producer,
wholesaler(s) and retailer)s) in unity wherein one of the
member virtually owns all others.This channel member can
be the producer or any wholesaler or even a retailer.
Retailing in its new format has posed serious challenge to VMS
and company’s have taken it as a challenge.

11. Designing and Managing Integrated
Marketing Channels …
• Channel dynamics….
Horizontal marketing System (HMS) where two or more
unrelated companies come together and exploit an existing
marketing opportunity. A bank and an educational institution
coming together for educational loans or automobile
company and bank coming together for car loans etc.
Multi-Channel Marketing System (MMS) where an
organization uses two or more marketing channels to reach
same or different customer segments.

12. Designing and Managing Integrated
Marketing Channels …
• Conflict, Cooperation and Competition
Conflict can be vertical, horizontal as well as multi-channel.
Vertical conflict implies clash between the different levels
whereas horizontal conflict implies clash at the same levels.
Multi-channel conflict happens when the company has
established two or more channels that sell to the same
market.
Causes of such conflicts are either goal incompatibility or
unclear roles and rights or both. It is not always possible to
resolve all conflicts.

13. Designing and Managing Integrated
Marketing Channels …
• Conflict, Cooperation and Competition…
Managing Channel conflict It is not easy to resolve every
conflict and conflict may be constructive also at times which
helps in adapting to changing environments. But every time it
may not be useful. Companies therefore not always eliminate
conflict but at times manage them to their advantage also if
the situation favors such an action.

14. Designing and Managing Integrated
Marketing Channels …
• Legal and Ethical issues in Channel Relations
Exclusive dealing
Exclusive territories
Tying Agreements
Dealers rights

15. Sources:-
• Koshy and Kotler, Marketing Management.