Marketing Management

Part 5 - Delivering Value
Chapter 13 - Designing and Managing Integrated Marketing Channels
I. Chapter Overview/Objectives/Outline
Overview
Value network and marketing channel decisions are among the most complex and challenging decisions facing a firm. Each channel system creates a different level of sales and costs. Once a firm selects a particular marketing channel, the firm usuallymust adhere to it for a substantial period. The chosen value network or channel will significantly affect and be affected by the other elements in the marketing mix.
Middlemen typically are able to perform channel functions more efficiently than the
manufacturers. The most important channel functions and flows are information, promotion,
negotiation, ordering, financing, risk taking, physicalpossession, payment, and title. These marketing functions are more basic than the particular retail and wholesale institutions that may exist at any time, and when a channel member no longer provides value-added service it can and often is replaced by another channel member or a new means of distribution.
Manufacturers face many channel alternatives for reaching a market. They can choose sellingdirect or using one, two, three, or more intermediary channel levels. Channel design calls for
determining the service outputs (lot size, waiting time, spatial convenience, and product variety), establishing the channel objectives and constraints, identifying the major channel alternatives (types and number of intermediaries, specifically intensive, exclusive, or selective distribution), andthe channel terms and responsibilities. Each channel alternative has to be evaluated according to economic, control, and adaptive criteria.
Channel management calls for selecting particular middlemen and motivating them with a
cost-effective trade relations mix. The aim is to build a “partnership” feeling and joint distribution programming. Individual channel members must be periodically evaluatedagainst their own past sales and other channel members’ sales. Channel modification must be performed periodically because of the continuously changing marketing environment. The company has to evaluate adding or dropping individual middlemen or individual channels and possibly modifying the whole channel system.
Marketing channels are characterized by continuous and sometimes dramatic change,especially with the changes brought by the growth of the Internet as a major marketing tool and channel of distribution. For example, the new competition in retailing no longer involves competition between individual firms but rather between retail systems. Technology advances have also precipitated new channel functions while eliminating others. Thus, new organizations have entered while othershave been eliminated. Three of the most significant trends are the growth of vertical, horizontal, and multichannel marketing systems. All channel systems have a potential for vertical, horizontal, and multichannel conflict stemming from such sources as goal incompatibility, unclear roles and rights, differences in perception, and high dependence. Managing these conflicts can be sought throughsuperordinate goals, exchange of persons, co-optation, and joint membership in trade associations, diplomacy, mediation, and arbitration. Marketers should continue to explore and respond to the legal and moral issues involved in channel development decisions.
Learning Objectives
0 Recognize and understand the role and function of intermediaries.
1 Understand the concepts related to ofchannel levels.
2 Learn how service outputs can determine channel design.
3 Learn how to evaluate channel alternatives.
4 Understand the major channel management decisions.
5 Develop awareness of channel dynamics in a changing marketing environment.

Chapter Outline
I. Introduction - notes the emergence of the value network view of the individual businesses. Deals...