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)
