Key Concepts

Marketing Management at Royal Philips
Electronics
One of the world’s biggest electronics companies and
Europe’s largest, with sales of over $36 billion.
Secret of RPE’s success is
Distribution

Marketing Channels and Value Networks
• Marketing channels—sets of interdependent organizations involved in the process of making a product or service available for use or consumption.
• Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

Push
Sales force and trade promotion
Pull
Advertising and promotion

Commonalities Among All Channel
Functions
• They use up scarce resources
• They can often be performed better through specialization
• They can be shifted among channel members

Consumer and Industrial Marketing
Channels

• Analyze customers’ desired service output levels
• Establish objectives and constraints
• Identify major channel alternatives
• Evaluate the major alternatives

Analyzing Customers’ Desired Service
Output Levels
Lot size
Waiting and delivery time
Spatial convenience
Product variety Service backup

Establishing Objectives and
Constraints
• State channel objectives in terms of targeted service output levels.
• Objectives vary with product characteristics.
• Environmental factors:
• Competitors’ channels
• Economic conditions
• Legal regulations and restrictions

Identifying Major Channel
Alternatives
• Types of intermediaries
• Merchants
• Facilitators
• Number of intermediaries
• Exclusive
• Selective
• Intensive
• Terms and responsibilities of channel members
• Price policy
• Conditions of sale
• Distributors’ territorial rights
• Mutual services and responsibilities

Determine whether own sales force or a sales agency will produce more sales.
Estimate the costs of selling different volumes through each channel.

The Value-Adds vs. Costs of Different
Channels

• Selecting channel members
• Training and motivating channel members
• Evaluating channel members
• Modifying channel arrangements

Channel Integration and Systems
Vertical marketing system
Horizontal marketing system
Multichannel marketing systems

Vertical Marketing Systems (VMS)
Corporate VMS
Administered VMS
Contractual VMS

Wholesaler-sponsored voluntary chains
Retailer cooperatives
Franchise organizations

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Integrated Multichannel Marketing
Systems
Multichannel marketing
Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.
Integrated marketing channel system
Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

Channel conflict
Generated when one channel member’s actions prevent another channel member from achieving its goals.
Channel coordination
Channel members are brought together to advance the goals of the channel.

Vertical
Multichannel

Goal incompatibility
Unclear roles and rights
Differences in perception
Dependence

Strategies for Managing Channel
Conflict
• Adoption of superordinate goals
• Exchange of employees
• Joint membership in trade associations
• Co-optation
• Diplomacy, mediation, or arbitration
• Legal recourse

.
Legal and Ethical Issues in Channel
Relations
Exclusive dealing
Exclusive territories
Tying agreements
Dealers’ rights

Impact of Internet on Marketing
Practices
E-business
E-commerce
E-purchasing
E-marketing

Breakthrough Marketing: Amazon
Started as a bookseller, now a $10 billion company!

• Search engines
• Internet service providers (ISPs)
• Commerce sites
• Transaction sites
• Content sites
• Enabler sites

Supplier Web sites
Infomediaries
Market makers
Consumer communities

• Strategies for gaining acceptance from intermediaries when selling through intermediaries and online:
• Offer different brands or products on the
Internet.
• Offer offline partners higher commissions to cushion the negative impact on sales.
• Take orders on the Web site but have retailers deliver and collect payment.

Convenience – 24/7
Ease of use
Trust
Availability