Introduction
This chapter is a short yet one of the most critical chapters in understanding marketing design channel strategies. Channel integration talks about establishing a synergy between various channels.
In the previous chapters, I have taken you through the importance of marketing channels, various channels in existence, and how can organizations design and manage marketing channels.
In this chapter, I will walk you all through how various channels players come together to bring about maximum benefit to the organization.
Marketing channels do not exist in silos. Various channels need to interact with each other, exploit the weakness of one channel by the other and ensure that the bundled price of running the entire gamut of channels falls below the profit that the organization is making.
What is Marketing Channel integration?
Marketing channel integration can be defined as the strategies and plans designed by the organization to deliver a standard message across various channels the brand might be using.
As repeatedly iterated in the earlier chapters, companies want to reach out to all forms of customers. Whether the customers want a brick-and-mortar experience or want a quick browse through the website, organizations must ensure that the customers' satisfaction is not compromised in access to either.
At the same time, there is an inherent cost associated with the maintenance of these channels. The profits these channels get to the organization must be greater than those associated with maintaining the channel.
However, not all channels express the same degree of profitability. Some are more profitable, and some are less profitable, and thus a sought of strategy is needed to get a perfect balance and optimum profit.
This inter-relation that exists between the channels is known as channel integration. Together these channels deliver the holistic message of the organization to the customer. It helps build a cohesive narrative and helps improve the brand image.
A similar analogy can be drawn for the various players in the marketing channel systems, and their integration will be seen here.
Importance of Marketing Channel Integration
Given that the in-detail explanation of marketing channel integration and its need has been seen in the above section, in this part, I would quickly walk you through the importance of it to summarize what has been inadvertently mentioned in various instances.
- Reaches the customer holistically and in a 360-degree manner
- Places one's products in a better reach when compared to a competitor.
- Provides for a better financial assessment needed for the organization to reach the customer
- The degree of integration reduces the risks and uncertainties of channels in isolation
With this in the back of our heads, we now move on to the core of the chapter. How is the integration of the individual players in the marketing channel done?
The different methods of performing channel integration
Marketing channel consists of many independent players, as seen in chapter 1. Integration of these players can be done as two different systems:
Vertical Marketing Systems:
In this method, the producer, wholesaler and retailer act as a unified system. The owner of the enterprise is usually seen as the leader of this channel, and the other elements work under the direction of this leader and are typically known as the channel captain or channel steward.
Channel leader ensures that the product or service they are offering is expanding and capturing the market share and ensures that all the channel members perform to their optimum level.
There are three different types of vertical marketing systems:
- Corporate Vertical Marketing system: the channel steward, in this case, will also be the one taking care of every aspect of channel functions. From production to distribution, it is under one unit
- Administered Vertical Marketing system: There is a high degree of administration and coordination by the successive stages of production and distribution. The channel steward usually conducts the administration
- Contractual Vertical management system: independent firms looking after various aspects of channel distribution and marketing will be put under contractual obligations to perform their tasks.
Horizontal Marketing Systems:
This is an exciting method of integrating marketing channels. In vertical channel integration, we saw that all related aspects of product production and delivery elements were integrated. However, in a horizontal marketing system, unrelated companies act as marketing channels for others.
Shopping malls, for example, sign MOU's banks to place the bank's ATM's in their place. Here, the bank's not-so-traditional banking service location is leveraged to bring about integration to expand customer access.
Conclusion to Channel Integration
This brings us to the close of a short chapter on channel integration. The need of designing an integrated marketing channel and how the various elements of channel integration can be attained has been talked about in-depth.