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Marketing Basics - Kotler Philip

Distribution of horizontal marketing systems

Another phenomenon inherent in distribution channels was the willingness of two or more companies to join forces in joint development of emerging marketing opportunities. An individual company either does not have enough capital, technical knowledge, production capacities or marketing resources for acting alone, or it is afraid to take risks, or sees considerable benefits for itself in joining forces with another company. Firms can cooperate on a temporary or permanent basis, or can create a separate joint company. For example, Dr. Pepper did not have the capacity to dispense its non-alcoholic drink, and she decided to engage bottling companies working with Coca-Cola on a licensed basis.

Distribution of multichannel marketing systems

To cover the same or different markets, firms are increasingly resorting to the use of multi-channel marketing systems . For example, Chicago-based John Smith, a furniture retailer, sells the entire assortment of furniture through its own furniture stores, as well as through its Homemaker branch, which has a chain of storehouses with showrooms. Buyers can purchase most furniture products through both the one and the second channels, and buying through the second channel will usually cost them less. One more example. Firm "J. K. Penny "owns a network of department stores, a network of active sales stores and a network of specialized stores.

Many companies use multichannel marketing systems to serve different customers7. For example, General Electric Corporation sells large household appliances through independent dealers (department stores, discount stores and catalog retailers), and directly to large housing contractors. Independent dealers, of course, would like to terminate General Electric’s direct trade with builders. However, in justification of its actions, General Electric refers to the fact that sales to builders and retailers require completely different marketing approaches.

Collaboration, Conflict, and Distribution Channel Competition

Between the participants of one channel, as well as between different channels, a different degree of cooperation, and conflicts, and competition can be observed.

Collaboration typically occurs between members of a single channel. Manufacturers, wholesalers and retailers help each other, and their cooperation usually brings more profit to everyone than each of them could earn separately. Thanks to cooperation, they get the opportunity to feel sharper, better serve and better satisfy the target market.

However, conflicts often arise within the channel . Sometimes this is a conflict between firms located at the same level. For example, many Ford dealerships in Chicago complain that some of their colleagues in the same city pursue aggressive pricing and advertising policies, increasing their sales. A number of Pizza Inn privilege holders are unhappy that some of their colleagues do not follow the recipe and do not serve visitors well, thereby damaging the image of the firm as a whole. In such cases, the channel’s leader needs to develop clear guidelines that could be enforced and operational measures be taken to resolve the conflict as soon as possible.

Representatives of different levels of the same channel may also come into conflict. For example, several years ago a conflict arose between General Motors and its dealers, when the corporation tried to enforce its installations in the areas of maintenance, pricing and advertising. And the Coca-Cola company had a conflict with the owners of the bottling plants who agreed to pour the Dr Pepper drink.

Competition arises between firms and systems trying to serve the same target markets. For example, department stores, discount stores and catalog retailers are competitors in the struggle for the money of buyers of household appliances. As a result of such competition, the consumer should get a wider choice of products, a range of prices and services. There is competition between different complex systems serving a specific market. For example, consumers can purchase food through traditional distribution channels, corporate networks, voluntary retailers 'chains sponsored by retailers, retailers' cooperatives, and catering systems that hold trade privileges.