how should companies integrate channels and mange channel conflict

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