1 © Arvind Rangaswamy, All Rights Reserved October 25, 2003 e-Marketing (EMBA) Online Marketing Strategy (Distribution) Arvind Rangaswamy Web address:

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© Arvind Rangaswamy, All Rights Reserved

October 25, 2003

e-Marketing (EMBA)

Online Marketing Strategy (Distribution)

Arvind Rangaswamy

Web address: www.arvind.infoemail: [email protected]

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Roles for Today’s Marketing Manager

Select target markets to pursue (and specify target markets not to pursue)

Define the brand

Optimize the channel mix

Articulate and measure the value of marketing investments

Enhance customer relationships

Identify and develop new businesses

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Roles of Marketing Channels:Delivering Service Output Levels

Lot size (Aggregate/Disaggregate) Convenience (Spatial, Ordering, …) Waiting time Variety and assortment Personalization/customerization Service (Pre-sale and Post-sale) Price discovery? Liquidity?

The Internet is altering the relative roles of intermediaries and manufacturers in providing these service output levels.

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Primary Benefit of Intermediaries: Increased Channel Efficiency

C

C

C

1

2

3

4

5

6

7

8

9

(a) Number of contactsM x C = 3 x 3 = 9

1

2

3

4

5

6

(b) Number of contactsM + C = 3 + 3 = 6

M = Manufacturer C = Customer D = Distributor

D

M

M

M

C

C

C

M

M

M

Source: Textbook

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Intermediaries Also Generate Value

Market Information Monitoring sales trends, inventory levels, competitive behavior

Promotional Effort Banner ads, sales promotions, traditional advertising support, personal selling

Transactional Activities Bargaining on price and terms, order processing, credit, inventory and assortments

Storage and Transportation Warehousing, transportation to buyer, sorting and packaging into desired forms

Facilitation Activities Credit card processing, invoicing, shipping confirmations

Installation and Service Technical support, customer service lines, warranty work, repair, spare parts, etc.

Adapted From: Harper W. Boyd, Jr., Orville C. Walker, Jr., and Jean-Claude Larreche, Marketing Management, 2nd ed., Burr Ridge, IL: Irwin 1995, and George S. Day, Market Driven Strategy: Processes for Creating Value, New York: The Free Press, 1990, 220–221

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Yes, you can eliminate intermediaries.

No, you cannot eliminate their functions and still serve the same customer needs!

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The 2Is and Distribution

Match distribution channel with segment needs more precisely

Customer service is tailored across channels

Tight linkages between firm, suppliers and customers facilitate collaborative relationships that enhance logistics, inventory planning and market responsiveness

IndividualizationIndividualization InteractivityInteractivity

DistributionDistribution

Source: Textbook

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Customer Contact Channels

Direct sales force Web site Telesales/call center Catalog e-Mail Retail outlets Kiosk? PDA/cell phone?

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As a Channel, Internet Separates Choice from Purchase For Digital Products

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Impact of Online Channelon Offline Sales

2000 2001 2002 2003 2004 2005 Online sales $44.8B $73.9B $111B $156B $207B $269B Web-influenced offline sales $12.9B $33.8B $73B $146B $268B $378B

Source: Forrester Research, Sept 2000

Currently, most retailers are not able to track customers across web site, catalog, and store.

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New Types of IntermediationDue to Internet

eTailing: The Internet as a new retail channel

Multi-channel Marketing

New types of Intermediaries (major new channel opportunities of the Net)

Infomediary/Metamediary (Matchmakers and Bundlers)

Marketmakers (e.g., B2B exchanges)

“Speediaries” (e.g., Akamai, FedEx)

…..

Emerging Wireless channels

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eTailing: Key Questions

Is there any enduring advantage to being a category killer?

Narrow (e.g., fridgedoor.com, uglies.com) versus large assortments (Amazon, eBay, Techsavvy.com; grainger.com)

Is there an enduring advantage in stressing service over price?Service (e.g., amazon.com) versus Price (buy.com and half.com)

Is there any enduring advantage of auctions?

Auctions (e.g., eBay and onsale) versus fixed price (e.g.,Half.com)

Is there an enduring advantage for clicks+bricks?

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Managing Multi-channel Contacts

Multi-channel marketing is not the same as multiple channel marketing.

Implement a customer-centric business and IT architecture before large-scale deployment of multi-channel marketing.

Ensure consistency of brand and customer experience across channels.

Deploy resources across channels commensurate with the value of each targeted segment.

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Multi-Channel Brand Managementat Victoria’s Secret

Store Catalog

Web site

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Multi-channel Promotions atVictoria’s Secret

Stores URL on shopping bags Catalogs in stores Brand ads include URLs

Catalogs Callouts for web site Scent strip for Victoria’s Secret Beauty

Web site Sign up for catalog online e-mail to customers for store-specific promotions Order from catalog online Store locator

Source: Anne Marie Blaire, Victoria’s Secret, June 2000

Note: Products purchased at the web site cannot be returned at a store and vice versa.

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TraditionalMultiple-Channel Management

Source: Adapted from New York Times. 2000. Know thy customer, 14 February.

WebWeb Tele-centerTele-center Direct SalesDirect Sales RetailerRetailer ResellerReseller DistributorDistributor

Direct ChannelsDirect Channels

Customers and Prospects


Indirect ChannelsIndirect Channels

CompanyCompany

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Multi-Channel ManagementDriven by CRM Systems

Source: New York Times. 2000. Know thy customer, 14 February.

WebWeb Tele-centerTele-center Direct SalesDirect Sales RetailerRetailer ResellerReseller DistributionDistribution

Direct ChannelsDirect Channels



Indirect ChannelsIndirect Channels

Customer RelationshipManagement

Customer RelationshipManagement

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© Arvind Rangaswamy, All Rights ReservedSource: Adapted from Gates, Bill. 1999. Business @ the speed of thought. New York: Warner Books.

Network Infrastructure

Emerging Channel Structures areFlatter but More Complex

Chips

Sales and Distribution

Databases

Financial Systems

Network Integrators

Application Software

Operating Systems

Retail Stores Online stores Dealers Mail Order

IBM Microsoft Oracle Others

Baan JD Edwards SAP Others

Cisco 3 Com Lucent Others

Entex INS Vanstar Wang

Word Siebel Others

DOS and Windows OS/2 Mac Unix Linux

Computer Compaq Dell IBM Hewlett Packard

Others

Intel Architecture Motorola AMD Others

Meta -m

ediar y(e.g .,

Acc en

tur e)

Cu

stomers

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Marketing channels are now being subjected to irreversible and major technology-induced transformations:

Undertake channel experiments (with both current and new partners) to design channels that deliver better value to your customers.

If you focus on doing what is right for your customers long-term (and not necessarily what is good for your current channel members), your channel structure will be realigned appropriately in the “converging economy.”

Action Guidelines

Documents

1 © Arvind Rangaswamy, All Rights Reserved October 25, 2003 e-Marketing (EMBA) Online Marketing Strategy (Distribution) Arvind Rangaswamy Web address: