Page 438 - Marketing Management

Designing and Managing

Integrated Marketing

Channels

Successful value creation needs successful value delivery. Holistic marketers
are increasingly taking a value network view of their businesses. Instead of limiting their focus to
their immediate suppliers, distributors, and customers, they are examining the whole supply
chain that links raw materials, components, and manufactured goods and shows how they move
toward the final consumers. Companies are looking at their suppliers’ suppliers upstream and at
their distributors’ customers downstream. They are looking at customer segments and considering
a wide range of new and different means to sell, distribute, and service their offerings.

Convinced that DVDs were the home video medium of the future, Netflix founder Reed
Hastings came up with a form of DVD rental distribution in 1997 different from the brick-
and-mortar stores used by market leader Blockbuster. Netflix’s strong customer loyalty and
positive word of mouth is a result of the service’s distinctive capabilities: modest subscrip-
tion fees (as low as $9 a month), no late fees, (mostly) overnight mail delivery, a deep
catalog of over 100,000 movie titles, and a growing library of over 12,000 movies and television
episodes. The service also has proprietary software that allows customers to easily search for obscure
films and discover new ones. To improve the quality of its searches, Netflix sponsored a million-dollar
contest that drew thousands of entrants. The winning team consisted of seven members with diverse
backgrounds and skills whose solution was estimated to make Netflix’s
recommendations twice as effective.With new competition from Redbox’s
Companies today must build and manage a continuously
thousands of DVD-rental kiosks in McDonald’s and other locations, Netflix
evolving and increasingly complex channel system and value
is putting more emphasis on streaming videos and instantaneous delivery
network. In this chapter, we consider strategic and tactical
mechanisms.But it still sees growth in DVD rentals from its over 11 million issues with integrating marketing channels and developing
subscriber base. Netflix’s success has also captured Hollywood’s atten- value networks. We will examine marketing channel issues from
tion. Its online communities of customers who provide and read reviews the perspective of retailers, wholesalers, and physical
and feedback can be an important source of fans for films. 1 distribution agencies in Chapter 16.

Marketing Channels

and Value Networks

Most producers do not sell their goods directly to the final users; between them stands a set of in-
termediaries performing a variety of functions. These intermediaries constitute a marketing chan-
nel (also called a trade channel or distribution channel). Formally, marketing channels are sets of
interdependent organizations participating in the process of making a product or service available
for use or consumption. They are the set of pathways a product or service follows after production,
culminating in purchase and consumption by the final end user. 2
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