HOW SHOULD COMPANIES INTEGRATE CHANNELS AND MANAGE CHANNEL CONFLICTS ??

ADVENT OF VERTICAL MARKETING CHANNELS

CONVENTIONAL MARKETING CHANNEL : Consists of an independent producer, wholesaler(s), and retailer(s). Each is a separate business channel has no substantial control over the others .

So that’s a problem as every member is looking to maximize its own profit and is not concerned about the

system as a whole

VERTICAL MARKETING SYSTEM : By contrast, it includes the producer , wholesaler(s), and retailer(s) acting as a unified system

To solve this ,, comes the concept of :

CORPORATE VMS : Combines successive stages of production and distribution under single ownership

ADMINISTERED VMS: Co-ordinates successive stages of production and distribution through size and power of members .

CONTRACTUAL VMS : Independent firms at different levels of production.

3 Types of VMS are :

And then there are Independent Retailers too which have not joined any VMS

Another Channel development is a HORIZINTAL MARKETING SYSTEM

INTEGRATING MULTI-CHANNEL MARKETING

3 BENEFITS OF ADDING MORE CHANNELS FOR THE COMPANY :

1 Increased Market Coverage

Increased Customers for the company

3 BENEFITS OF ADDING MORE CHANNELS FOR THE COMPANY :

2 Lower Channel Costs

3 BENEFITS OF ADDING MORE CHANNELS FOR THE COMPANY :

3 More Customized Selling

Adding a Technical Sales force

CHANNEL CONFLICT

Channel Conflict is generated when one channel member’s action prevents other channel member to achieve its Goal

1. HORIZONTAL CHANNEL CONFLICT : Occurs between channel members at the same level .

Some Pizza Inn franchisees complained about other cheating on ingredients, providing poor services and hurting the overall brand image .

2. VERTICAL CHANNEL CONFLICT : Occurs between different level s of channels.

Walmart is the buyer for many manufacturers and is able to command reduced prices or quantity discounts from these & other suppliers.

2. MULTI CHANNEL CONFLICT :When two or more channels sell to the same market.

Big Bazaar boycotted Cadbury and Kellogs due to the price issues.

But why do we have a Channel Conflict

CAUSES Goal Incompatibility Unclear Roles & Rights Differences in perceptionIntermediaries’ dependence on manufacturer

STRATEGIC JUSTIFICATION : Developing special versions of products for different channel members –Branded variants .

DUAL COMPENSATION : Dual Compensation pays existing channels for sales made through new channels

SUPERORDINATE GOALS: Channel members can come to an agreement on the fundamental or sub-ordinate goal that they are jointly seeking .

EMPLOYEE EXCHANGE : To exchange persons between two or more channel members.

JOINT MEMBERSHIPS : Marketers can encourage joint memberships in trade associations.

CO-OPTATIONS : Is an effort by an organization to win the support of the leaders of another by including them in advisory councils , Board of Directors , and the like. .

These slides were Created by Jalaj Garg, IIT Guwahati, during a Marketing internship by Prof. Sameer Mathur, IIM Lucknow. ( see www.IIMInternship.com)