how should comapnies integrate channels and manage conflicts
TRANSCRIPT
Marketing Management A South Asian Perspective
Chapter 14: Designing and Managing Integrated Marketing Channels
VMS includes the producer, wholesaler(s) and retailer(s) acting as a unified system
There are three types of VMS:1. Corporate VMS2. Administered VMS3. Contractual VMS
New competition in retailing
Many independent retailers have not joined VMS, but have developed specialty stores serving special segments. This results in polarization in retailing causing problems for the manufacturer.
An integrated marketing channel is one in which the strategies and tactics of selling through one
channel reflect the strategies and tactics of selling through one or more other channels
Three benefits from adding more channels:1. Increased market coverage
2. Lower channel cost3. More customized selling
But new channels typically introduce conflict and problems with control and cooperation.
The interests of independent business entities do not always coincide. Channel conflict is generated when one channel member’s actions prevent another from achieving its goals.
Channel coordination occurs when channel members are brought together to advance the goals of the channel.
Types of Conflicts and Competition
Horizontal channel conflict
(between channel
members at the same level)
Vertical channel conflict
(between different levels of
channel)
Multichannel conflict(when
manufacturer has established two
or more channels that sell to the same market)
Causes of Channel Conflict
•Goal incompatibility
•Unclear roles and rights
•Difference in perception of market environment
•Intermediaries’ dependence on the manufacturer
Managing Channel Conflict
•Strategic justification•Dual compensation•Superordinate goals•Employee exchange•Joint membership•Co-optation•Diplomacy, mediation and Arbitration•Legal recourse
Dilution and Cannibalization
Marketers must be careful not to dilute their brands through inappropriate channels, particularly luxury brands.
Legal and Ethical Issues in Channel Relations
Excusive arrangements are legal as long as they do not substantially lessen competition or tend to monopoly.
Excusive territories, whereby producer tries to keep a dealer from selling outside its territory is a legal issue.
Tying agreements also violate the law if they lessen competition