【中国经济管理大学MBA讲义】科特勒《营销管理》第13版《Chapter13》

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Chapter 13 - Designing and Managing Integrated Marketing Channels
I. Learning Objectives
After reading this chapter, students should:
q Know what a marketing channel system and a value network are
q Know what work marketing channels perform
q Know how channels should be designed
q Know what decisions companies face in managing their channels
q Know how companies should integrate channels and manage channel conflict
II. Chapter Summary
Most producers do not sell their goods directly to final users. Between producers and final users stands one or more marketing channels, a host of marketing intermediaries performing a variety of functions.
Marketing-channel decisions are among the most critical decisions facing management. The company’s chosen channel(s) profoundly affects all other marketing decisions.
Companies use intermediaries when they lack the financial resources to carry out direct marketing, when direct marketing is not feasible, and when they can earn more by doing so. The most important functions performed by intermediaries are information, promotion, negotiation, ordering, financing, risk taking, physical possession, payment, and title.
Manufacturers have many alternatives to reach a market. They can sell direct or use one-, two-, or three-level channels. Deciding which type(s) of channel to use calls for analyzing customer needs, establishing channel objectives, and identifying and evaluating the major alternatives, including the type and number of intermediaries involved in the channel.
Effective channel management calls for selecting intermediaries and training and motivating them. The goal is to build a long-term partnership that will be profitable for all channel members.
Marketing channels are characterized by continuous and sometimes dramatic change. Three of the most important trends are the growth of vertical marketing systems, horizontal marketing systems, and multichannel marketing systems.
All marketing channels have the potential for conflict and competition resulting from such sources as goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent relationships. Companies can manage conflict by striving for superordinate goals, exchanging people among two or more channel levels, co-opting the support of leaders in different parts of the channel, encouraging joint membership in and between trade associations, employing diplomacy, mediation or arbitration, or pursuing legal recourse.
Channel arrangements are up to the company, but there are certain legal and ethical issues to be considered with regard to practices such as exclusive dealing or territories, tying agreements, and dealers’ rights.
III. Chapter Outline
I. Marketing Channels and Value Networks
A. The Importance of Channels:
1. Marketing channel system is a particular set of marketing channels employed by an organization  
2. Channels may absorb 30% to 50% of ultimate selling price to consumer
3. Greater use today of “hybrid” channels (direct, online, and indirect)
4. Customers expect more channel integration (buy from any of the hybrid channels and obtain from any of the others)
5. Push strategy - manufacturer uses sales force and promotions to induce intermediaries to carry, promote, and sell (i.e. push) products and services to end users
6. Pull strategy - opposite of push strategy. Manufacturer persuades end users to enter channel and request products and services from intermediaries
7. Many marketing-progressive organizations use both push and pull strategies
B. Value Networks - a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings
1. Demand chain planning defined - design the value chain starting with the market and working backward up the chain
2. Using a demand chain planning approach allows an organization to:
a) Estimate optimal profit areas within the chain, which can provide input into integration strategies
b) Keep abreast of chain dynamics in advance
c) Leverage technology to optimize communication and transaction activity within the chain
C. Channel Functions and Flows
1. Main function is to overcome time, place, and possession gaps that separate the producers and their goods and services from those who need and want them
2. All channels have three things in common:
a) They use up scarce resources
b) They demonstrate better performance by specialization
c) They can shift functions among members
3. Forward flow of activity - organization to the end user (e.g. physical delivery, title, promotion)
4. Backward flow of activity - end user to the organization (e.g. ordering, payment, returns)
5. Interactive flow of activity - simultaneous exchange of physical, transactional or communication (e.g. negotiation, risk taking, information)
D. Channel Levels
1. Zero-level (or direct marketing channel) - sell direct to end user with no intermediary
2. One-level or one intermediary - retailer
3. Two-level or two intermediaries – jobber, retailer
4. Three-level or three intermediaries - wholesaler, transporter, retailer
5. Reverse-flow channels - bring back products for reuse, refurbish for resale, recycle, and disposal. Different intermediaries may perform one or more of these functions
E. Service-Sector Channels - focus on location and minimizing levels. Adapting to new channels such as the Internet
II. Channel-Design Decisions
A. Analyze Customers’ Desired Service Output Levels
1. Lot size - number of units channel allows customer to purchase at one time
2. Waiting time - average time customers wait for delivery of goods in respective channel
3. Spatial convenience - ease of purchase
4. Product variety - large variety increases chance of consumer filling need
5. Service backup - the greater the number of ancillary services surrounding the purchase of a product, the more effort required of the channel
B. Establish Objectives and Constraints based on:
1. Targeted service output levels
2. Markets chosen to serve
3. Product characteristics as service levels will vary (e.g. perishable goods require expedient delivery, bulk products require minimal handling, non-standard products require informative selling)
4. Strengths and weaknesses of intermediaries
5. Competition’s channels
6. Environmental changes
C. Identifying Major Channel Alternatives
1. Types of intermediaries
2. Number of intermediaries
a) Exclusive distribution - one or a select few
b) Selective distribution - more than a few, less than all
c) Intensive distribution - as many outlets as possible
3. Terms and responsibilities of channel members - trade relations mix
a) Price policies - must be equitable and efficient
b) Conditions of sale - terms and guarantees
c) Territorial rights of distributors
d) Mutual services and responsibilities
D. Evaluate the Major Alternatives
1. Economic criteria - sales versus costs
2. Control and adaptive criteria - degree of intermediary commitment
III. Channel-Management Decisions
A. Selecting Channel Members - evaluate experience, number of lines carried, growth and profit record, solvency, cooperativeness, and reputation
B. Training Channel Members - prepare the channel-member employees to perform more effectively and efficiently. This may also provide a competitive advantage
C. Motivating Channel Members - coercive, reward, legitimate, expert, or referent power.  Producers vary in channel power
1. More sophisticated companies try to form partnerships
2. Can evolve into long-term distribution programming
D. Evaluating Channel Members - sales quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs
E. Modifying Channel Arrangements - system will require periodic modification to
1. Correct inefficiencies
2. Adapt to change in consumer buying patterns
3. Manage market expansion
4. Thwart new competition
5. Implement innovation
6. Adjust activity to changes in product life cycle
IV. Channel Integration and Systems
A. Vertical Marketing Systems (VMS)
1. Corporate and administered VMS - corporate (under single ownership), administered (one member emerges as dominant in channel)
2. Contractual VMS - program integration
a) Wholesaler-sponsored voluntary chains
b) Retailer cooperatives
c) Franchise organizations
d) Manufacturer-sponsored retailer franchise (Ford dealers) or manufacturer-sponsored wholesaler franchise (Coca-Cola bottlers)
3. The new competition in retailing - between systems, not individuals
B. Horizontal Marketing Systems  
1. Two or more unrelated firms put together resources or programs  
2. Each firm lacks the capital, technology, marketing resources or other variables to take on the venture alone
3. Can be permanent or temporary
C. Multi-Channel Marketing Systems
1. Multi-channel marketing - single firm uses two or more marketing channels to reach one or more customer segments. Advantages: increased market coverage, lower cost, and customized selling
2. Planning channel architecture - companies thinking through their channel architecture and its efficiency, and developing new means
3. Roles of individual firms in a multi-channel system: insiders, strivers, complementers, transients, and outside innovators
D. Conflict, Cooperation, and Competition
1. Types of conflict and competition
a) Vertical channel conflict
b) Horizontal channel conflict
c) Multi-channel conflict
2. Causes of channel conflict
a) Goal incompatibility
b) Unclear roles and rights
c) Differences in perception
d) Overdependence
3. Managing channel conflict (responses)
a) Adoption of superordinate goals
b) Exchange of people between channel levels
c) Co-optation - winning support at different levels
d) Joint membership in and between trade associations
e) Diplomacy, mediation, and arbitration
E. Legal and Ethical Issues in Channel Relations
1. Exclusive dealing
2. Exclusive territories
3. Tying agreements
4. Dealers’ rights

V. Summary
IV. Opening Thought
Most students are not familiar with channels of distribution, except, perhaps, from the retailer whom they have bought products. Therefore, the instructor has to ensure that they clarify the various channels of distribution during this chapter’s lecture. Examples of the various channels for products familiar to the students can help illustrate the complexity of the process.
Second, because marketing channel decisions are mostly hidden from the final consumer, the instructor should make every effort to diagram the decision-making process for each level of channel distribution. Starting with the retail price of the product, then subtracting each distribution level margin or markup shows the effects of distribution to or for the product.
Managing channels of distribution will be new to most students, as will the definitions of channel conflict and channel support. The instructor can best serve the student by fully diagramming a particular product from a channel-of-distribution perspective and talking about channel roles, conflicts, training, and motivation.
V. Teaching Strategy and Class Organization
PROJECTS
1. At this point in the semester-long marketing plan project, students should present their channel decisions for getting their product or service to the consumer. In evaluating this section, the instructor should consider the completeness of the projects to the material contained in this chapter.
2. Progressive companies have begun developing a value network system to get products in the hands of consumers. A value network includes a firm’s suppliers, its suppliers’ suppliers, its immediate customers, and their end customers. Students should identify a company that has successfully set up a value network, then compare and contrast the components of the value system to a competitor that does not have one. Students should be able to identify the components of the value network that produced the augmented offering.
ASSIGNMENTS
Small Group Assignments
1. Get students to work in small groups to analyze and draft the supply chain network of two or three large Chinese-based marketing organizations The analyses should include how the network interfaces help to add value to the customer and help the marketing firms improve efficiencies and increase profits.
2. Many small Chinese marketing firms often take a slow and steady approach to channel development for their pioneering product. Students should conduct research and find two or three other examples of start-up firms, entrepreneurs, and others engaged in a one-channel distribution approach for their products. After completing the research, students should comment on what they see as advantages or disvantages such an approach offers the firms. Does such a strategy increase the “buzz” for the product (exclusivity) or ultimately frustrate consumers who try to find the product in their local retailers and cannot?
Individual Assignments
1. Today, more successful companies are using a hybrid channel system to increase their effectiveness of reaching the consumer. The text uses the examples of IBM, HP, and Singapore Airlines and notes that channel integration and its features are what the consumer prefers. Students should choose or find one additional example of a firm using the hybrid system, and comment on how they see this system delivering value to the consumer. Student answers should be directed toward the three features of channel integration found in the text.
Think-Pair-Share
1. Channel members add value to the consumer’s purchase of certain products and services. Table 13.1 (Channel Member Functions) details key channel member functions. Yet some firms have abandoned channel partners and tried to reach the consumer on a one-to-one basis. Select a product or firm that (a) is maintaining its channel members, and (b) a firm that has decided to sell directly to the consumer thus bypassing channel intermediaries. Comment on these two systems in terms of the information contained in the chapter.
END-OF-CHAPTER SUPPORT
MARKETING DEBATE
Which is better?  
Distribution channel versus Direct channel
VI.   Case Study
1. Marketing in China: MNC’s Channels Reform in China
1) Why do multinational corporations reform their channels in China?
2) Compare the different ways for multinational corporations to reform their channels in China.
2. Marketing in China: Rural Distribution in China
1) What are the difficulties of establishing distribution channels in China’s rural areas?
2) What are the features of a rural marketing channel?
3) What are the reasons for the rapid development of Yiwu Commodity City?
3. Chapter Case: Amazon
1) What have been the key success factors for Amazon?
2) Where is Amazon vulnerable? What should it watch out for?
3) What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing?
4. To prepare case studies based on the following materials from Chapter 13 and to present these:
• Mini Case: Philips Electronics
• Innovative Marketing: Dell
VII. Main Topic(s)
A. “Measuring Channel Performance”
This provides a discussion of distribution/channel strategy in the contemporary marketing setting, along with the role and value of effective channel strategy in the overall marketing process and strategy. It is useful to update the examples utilized so that students will be able to identify readily with this concept, based on their general knowledge of the companies and products involved in the lecture/discussion.
Teaching Objectives
· To stimulate students to think about the critical issues, advantages and disadvantages, for a firm when it develops or modifies its channel strategy.
· To consider points in proceeding with a modification of the distribution strategy.
· To understand the role of various channel and distribution strategies and policies in helping the firm achieve a balanced position vis á vis the customer and the competition.
Discussion
Introduction
One of the more important functions in today’s complicated marketing environment is how to measure the performance of channel members. Whether the analysis involves an independent or vertical marketing environment, the problem is similar. There are means for following and measuring the results of this activity, and this discussion will focus on one such method.
Before beginning the formal evaluation of the channel, there are several considerations.  
· Degree of manufacturer control over the channel members. If there is a strong contractual relationship, there will be a much greater expectation for information on performance.
· Importance of channel members. If the manufacturer uses many intermediaries, the evaluation will be more comprehensive than a manufacturer using fewer intermediaries. For example, major appliance dealers receive more comprehensive analysis from manufacturers largely due to the number and degree of service and support involved, versus a tire dealer. Major tire dealers in the past tended to be company stores, so the companies did less analysis on the independents.
· Nature of the product. Obviously, the more complex the product, the more the evaluation needed. Since complexity also usually means more after-sale services, the criteria tends to be focused more on issues of target-market satisfaction.
· The number of channel members. Intensive distribution normally involves cursory examination, but for selective distribution the analysis tends to be much more thorough.
Performance Evaluation
Performance evaluation clearly will be more comprehensive than day-to-day monitoring efforts. Accordingly, there are typically three levels in developing a performance audit vehicle:
· Develop measurement criteria.
· Evaluate channel members against the criteria.
· Take corrective actions, as needed.
The measurement criteria for the channel member should include the following:
· Sales performance. This critical measurement includes both sales to the channel member and member’s sales to its customers. This may or may not be a reliable measure, depending on the perishability of the product. For example, convenience stores tend to get much information from their franchisees. The key variables here are current versus historical sales, comparisons to quotas, and cross-comparisons to other channel members. The 80/20 rule is important in the last measure.
· Inventory maintained. This major indicator provides information on the degree to which the member maintains stock or meets stocking requirements as specified in any agreements between the manufacturer and the channel member. It is important to understand whether this agreement is formal or informal. Also, while this is an area which often is difficult to perform, there are six key questions that can help with the measurement:
o Total inventory level
o Breakdown by units/types/prices
o Comparisons between the member estimates and purchases of related and competitive lines
o Condition of the inventory-holding facilities
o Quality of inventory control and record-keeping
· Selling capabilities. It is worthwhile to evaluate the abilities of the channel member by appraising their salespeople. One way to do this is to cross-check this information with other members of the channel. You should check the number of salespeople working with the manufacturer’s line, the technical knowledge and competence of the salespeople, and the level of interest they have in the manufacturer’s products.
· Attitudes of the channel member. Usually this is not done until there is a drop in performance. The best way to handle it is to survey the attitudes through face-to-face contact and also to solicit feedback from the member’s clients, salespeople, the competition, and related sources.
· Competition faced by the member. This refers to competition from other intermediaries and from other product lines carried by the manufacturer’s direct-channel members. The questions might include: How does the member fare against the competition? Then, the issue is of more support required from the manufacturer. To probe further, it would be appropriate to ask for names of the competitors and how they rank them. This will help one determine the degree to which the member understands the competitive arena.
· General growth prospects for the channel member. This measurement provides one with a gauge of how aware and sophisticated the member is regarding the general and area economies and the potential growth in each of them.
· Macroenvironmental forces affecting the channel member. Performing a SWOT analysis as if one were the channel partner provides insight into their world, which should be used in determining specific strategies with that respective member. For example, if a supplier is heavily dependent on human labor, and growth has created a scarcity of human resources, the supplier faces several alternatives, each of which will affect the organization.
· Other Criteria. Includes financial status, character, reputation, and reliability and quality of services.
Applying these performance criteria involves three different approaches:
1. First, there is a separate performance evaluation, utilized primarily when there is intensive distribution and a limited sales, inventory, and selling capability. The goal here is easy and fast assessment, but it offers little insight into the operations of the business.
2. Second, the multiple criteria are combined informally. The goal here is to combine the criteria into an overall judgment. There are, however, some pros and cons:  
· One advantage of this approach is that it is not only fairly informal but also flexible in use and application.
· This measure adds in the element of experience, but it can be arbitrary when the member does well in one area but not in other areas.
· In addition, it is tough to use the same comparisons between channel members, and there is no one quantitative index to show overall performance.
3. The third measure is the multiple criteria combined informally. The steps here are:
· Complete all criteria operational measures.
· Assign weights in terms of importance.
· Evaluate on the basis of a scale of one to 10.
· Multiply the score by the weight to achieve a product for each factor.
· Sum the factors to obtain an overall status.
The advantage of the third method is that it uses weights and measures to provide an explicit and overall quantitative index. While this may be viewed as a bit artificial in some ways, it also is easier to start with a number and then develop ameliorating qualitative data to make a final conclusion.
A discussion on how the Internet and wireless technology advances have impacted channel management may include:
· The Internet has provided organizations with great cost-reduction opportunities. Any digital entity such as information and transactions can be managed over the Internet, thereby reducing or eliminating functions required to manage the information or transaction. But it also means that new channel activities are required to manage the Internet applications.
· The Internet provides a vehicle for organizations to find new solutions and suppliers. It also, through reverse auctions, has provided buyers with more power over suppliers. Tendency to commoditize products and services by the buyer using reverse auctions places pressure on suppliers to further differentiate them from their competitors.   
· Suppliers not prepared to begin using new technology when an influential buyer demands this are at a competitive disadvantage (e.g. Wal-Mart demanding its suppliers use radio frequency identification on all of their shipments).
· Consumers access manufacturer information more readily on the Internet, and this has given them additional leverage over intermediaries in the same channel.
· New organizations enter the channel to provide Internet- and wireless-enabling technologies.
· Channel members who fail to retrofit their technology from print to digital will leave the channel. Even if they convert, buyers of their services may be able to perform some of the functions themselves.
· The Internet has made it easier for end users to pull information from the channel. Push techniques using the Internet can sometimes be treated as spam, unless marketing techniques employing proper permission are implemented.
VIII.  Background Article(s)  
Issue: Channel Management in the New Economy
A. Source: “Five Tips for Achieving Channel Management Success and Better Understanding End-Customer Needs,” PRN Newswire, April 2002, p. 14.
For many business-to-business companies selling through complex channels, relationships with end customers have been limited due to the role of the intermediary. Recent studies indicate that many marketing managers do not realize that effective channel-management strategy not only provides collaboration and visibility into the channel, but can also reach and serve customers by leveraging new technology. Marketers and information officers should consider the following before undertaking the search for a solution:
1. Give channel partners a role in creating the solution, so they become part of its success. Often this is done with little input from the partners. If partners are involved from the beginning, they will have a better understanding of the system, an easier time adopting it, and a vested stake in making it work.   
2. Add e-commerce through the channel to increase sales and visibility into end-customer preferences. Incorporating e-commerce through channel partners to end customers can greatly supplement sales activity and brand awareness, as well as provide transactional capabilities and visibility into buying activities. Even if the sale is completed offline, a point-of-sale feature can help track customer purchases and partner activity, such as which partner made the sale, at what price, to whom, and with what frequency.
This can then be integrated into the customer relationship marketing (CRM), leads management, and partner profiling systems so that the company can better assess the effectiveness of past and future marketing campaigns and product configurations, as well as gain insight into the buying habits of end customers. A centralized commerce system in which a master catalog drives channel partner storefronts and catalogs allows partners to present fresh and pertinent product information with a minimal amount of cost and resources.
3. Encourage partners to update product and pricing information. Empower partners to easily and cost-efficiently maintain their own profiles, online catalogs, and even co-branded storefronts. End customers will benefit from real-time, tailored updates regarding specific products, prices, or services. To make this process as easy and time-efficient as possible, the channel management solution should allow the partners to manage by exception, i.e. to receive notification of changes and to choose when these changes apply to them.
4. Monitor end-customer satisfaction. Many organizations with a channel network do not have access to the true end-customer experience. A channel management solution should incorporate the ability to execute customer surveys either via email or through a website, which can help evaluate partner performance, product and market needs, and more.
5. Keep tabs on partners and make it easier for them to close sales. Every channel management program should do what it says—manage channels. While giving power to the partners can increase efficiency, marketing managers should also remember to promote communication with partners through easy-to-use online tools such as partner surveys and other aggregate reporting systems.
B. Source: “Top 10 Tips for Managing Indirect Sales Channels”, Business Wire, June 18, 2002.
In today’s economy, companies generate a staggering percentage of revenues by way of indirect sales channels. One study reported that 60% of the U.S. GDP is sold through indirect channels. In such an environment, executives must develop and maintain strong relationships with channel partners to maximize market share and quell the competition. A recent white paper lists over 100 strategies to help companies become more “channel-centric” and to implement a sound channel management program. The following are the Top 10 tips which have emerged from this and other sources:
1. Approach channel management as a critical process that directly impacts overall company performance. Remember that the channel is a unique and autonomous audience, demanding its own set of tactical considerations. By ignoring channel management or simply sweeping it under the customer relationship marketing/management (CRM) “carpet”, you risk alienating trusted sales partners and forgoing significant revenue.
2. Companies limit the effectiveness of their channels through apathy and subtle sabotage. Overcoming these “sales prevention programs” requires a change of attitude, where the roles and rules governing a channel are clearly understood and mapped appropriately with the sales process.   
3. Don’t expect your partners to support your products if it requires too much change in the way they do business; or to sell your product if they are not already entrenched in your market.
4. Never forget that the market is glutted with products. Do not inundate the channel with product inventory unless you are prepared to support the products with planned activities and aggressive programs to pull them through to your end users. Provide solid sales tools and training programs that will enable your channel partners to create services and downstream revenues surrounding your products.
5. Ask yourself if your product is strategic to the channel’s business model. Find out if your partners are emphasizing your products in their selling efforts. Reward them for doing so.
6. Channels switch customers to known product brands greater than 60% of the time. Accordingly, practice simultaneous branding, in which you brand products to both end users and the channel at the same time. Channels must be alerted to the reasons customers will request your brand, and how it will resolve their problem. Accordingly, be sure to allocate a significant portion of your marketing budget toward the introduction of new products into the channel.
7. Make sure you have a process defined to address channel conflict issues. They will arise. Bear in mind that a little channel conflict can sometimes be good as long as you manage that conflict and respond to the channel’s needs, clearly explaining the reasons behind the decisions.
8. Automate channel management to cut costs and make it easy for partners to do business with you. However, be sure that your system is configured to execute “your” specific processes (do not take a “cookie cutter” approach to automation). Minimize risk with a phased approach, implementing one process at a time, starting with the processes that can provide the greatest impact.
9. Make sure that your channel management systems provider has the expertise and real-world knowledge to help you in the upfront planning and strategy work, before applying technology.
10. Achieve long-lasting channel relationships by scrutinizing your end-to-end process for delivering products to your customers. Make adjustments to compensate for the important role your partner plays. Evaluate your channel business proposition, which details the reasons to do business with you. If it’s not compelling, make changes.