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Designing and managing integrated
marketing channels
SHUBHAM VERMA
IIT GUWAHATI
How should companies integrate
channels and manage channel conflict ?
Two type of marketing systems
• Vertcal
• Horizontal
Types of marketing systems
• Vertical Marketing System -> Producer , Wholesaler and
retailer act as unified system
• Horizontal Marketing System -> Two or more unrelated
companies put together resources or programs to exploit
an emerging opportunity
Vertical marketing systems
Corporate
VMS
Contractual
VMSAdministered
VMS
Wholesaler
sponsored
voluntary chains
Retailer
coopretivesFranchise
oraganisations
3 types of VMS
Corporate VMS -> Combines successive stages of
production and distribution under single ownership
Administered VMS -> Coordinates successive
stages of production and distribution through
through size and power of members
Contractual VMS ->Independent firms at different
level of production
What is integrated marketing
channel system ?
A channel system in which the strategies and
tactics of selling through one channel reflect
the strategies and tactics of selling through
one or more other channels.
Example of Disney andDisney sells DVDs through 5
main channels :
1) Movie Rental Stores such as
Blockbuster
2)Disney Stores
3)Retail Stores such as Best
Buy
4)Online retail stores such as
amazon.com
5)Disney catalog and other
catalog sellers
3 benefits of adding more
channels
More customers
Lower Channel cost
More force , Customized Selling
Integration helps(use the para above diag)
Channel Conflict
Channel Conflict is
generated when one
channel member’s
action prevent other
channel to achieve it’s
goal
Horizontal Channel conflict -> Occurs at same level
When Pizza Inn franchises complained about cheating on
ingredient and poor service
Vertical channel conflict -> occurs at different levels
Command of big retailers like Walmart on prices of Disney
products.
Multichannel conflict -> When two or more channels sell to
same market
Big Bazar boycotted Cadbury and Kellogs due to price issues.
Causes of conflict :
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries’ dependence
on manufacturer
Strategies to manage Channel conflict
• Strategic Justification -> Justifying that different channels serve different segments and do not need
to compete
• Dual Compensation - > Paying existing channels to sell through new channels
• Superordinate Goals -> Make the channels agree that their main motive is high quality and
satisfaction
• Employee Exchange -> Exchange persons between two channels
• Joint Membership -> Encouraging joint working
• Co-potation -> Effort of one organization to win support of other