Marketing Management A South Asian Perspective

Chapter 14: Designing and Managing Integrated Marketing Channels

How should companies integrate channels and

manage channel conflicts?

Channel Integration and Systems

Vertical Marketing Systems

VMS includes the producer, wholesaler(s) and retailer(s) acting as a unified system

There are three types of VMS:1. Corporate VMS2. Administered VMS3. Contractual VMS

New competition in retailing

Many independent retailers have not joined VMS, but have developed specialty stores serving special segments. This results in polarization in retailing causing problems for the manufacturer.

Horizontal Marketing Systems

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

An integrated marketing channel is one in which the strategies and tactics of selling through one

channel reflect the strategies and tactics of selling through one or more other channels

Three benefits from adding more channels:1. Increased market coverage

2. Lower channel cost3. More customized selling

But new channels typically introduce conflict and problems with control and cooperation.

Conflict, Cooperation and Competition

The interests of independent business entities do not always coincide. Channel conflict is generated when one channel member’s actions prevent another from achieving its goals.

Channel coordination occurs when channel members are brought together to advance the goals of the channel.

Types of Conflicts and Competition

Horizontal channel conflict

(between channel

members at the same level)

Vertical channel conflict

(between different levels of

channel)

Multichannel conflict(when

manufacturer has established two

or more channels that sell to the same market)

Causes of Channel Conflict

•Goal incompatibility

•Unclear roles and rights

•Difference in perception of market environment

•Intermediaries’ dependence on the manufacturer

Managing Channel Conflict

•Strategic justification•Dual compensation•Superordinate goals•Employee exchange•Joint membership•Co-optation•Diplomacy, mediation and Arbitration•Legal recourse

Dilution and Cannibalization

Marketers must be careful not to dilute their brands through inappropriate channels, particularly luxury brands.

Legal and Ethical Issues in Channel Relations

Excusive arrangements are legal as long as they do not substantially lessen competition or tend to monopoly.

Excusive territories, whereby producer tries to keep a dealer from selling outside its territory is a legal issue.

Tying agreements also violate the law if they lessen competition

thank you

Priti VermaLSR