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Designing and managing integrated
marketing channels
SHUBHAM VERMA
IIT GUWAHATI
How should companies integrate
channels and manage channel conflict ?
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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
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Vertical marketing systems
Corporate
VMS
Contractual
VMSAdministered
VMS
Wholesaler
sponsored
voluntary chains
Retailer
coopretivesFranchise
oraganisations
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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
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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.
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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
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3 benefits of adding more
channels
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More customers
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Lower Channel cost
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More force , Customized Selling
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Integration helps(use the para above diag)
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Channel Conflict
Channel Conflict is
generated when one
channel member’s
action prevent other
channel to achieve it’s
goal
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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.
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Causes of conflict :
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries’ dependence
on manufacturer
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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
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