Part 4Part 4

Additional Perspectives on Marketing Channels

Chapter 15Chapter 15

Electronic Marketing Channels

Electronic Marketing Electronic Marketing

ChannelsChannels

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Objective 1:

TechnologyInternet

Computers

Impact on

Design & Management of Marketing Channels

1515Electronic Marketing Electronic Marketing ChannelsChannels

The use of the Internet to make products & servicesavailable so that the target market with access to

computers or other enabling technologies can shop& complete the transaction for purchase via

interactive electronic means

Objectives 2 & 3:

Not physical availabilityWeb-TV, PDAs

Actually purchasing products through the useof PCs, Web-TV, PDAs

1515Structure of ElectronicStructure of ElectronicMarketing ChannelsMarketing Channels

ThreeKey

Phenomena

1. Disintermediation versusreintermediation

2. Information flow versus product flow

3. Virtual channel structure versus physical channel structure

1515Disintermediation andDisintermediation andReintermediationReintermediation

Disintermediation Reintermediation

Intermediaries becomesuperfluous because producers

gain exposure to vast numbers of customers in cyberspace

Shifting, changing, or addingmiddlemen to the channel

Objective 4:

Amazon.comAuto-By-Tel Corp.

Peapod, Inc.Dell

Computer Corp.

1515Disintermediation Disintermediation versusversusReintermediationReintermediation

No matter how technologically sophisticated the Internet becomes or how much it is hyped, the laws of economics as they relate to channel structure do not change.

Efficiency in the performance of distribution tasks is what ultimately determines what form channel structure will take.

=The Internet has not eliminated middlemen,

or caused total disintermediation.

1155Internet LimitsInternet Limits

Objective 5:

Product FlowProduct Flow

• Cannot be digitized

• Processed slowly, often by people

• Is basis for all other flows—negotiation, ownership, information, &promotion

1515Developments & TrendsDevelopments & Trends

Objective 6:

• Online shopping to $36 billion from mid-1990s to the end of 2002

• Online shopping has become a routine shopping choice

• PCs, peripherals, software, & booksaccounted for a significantportion of total retail spending onthese products

• Online shopping to $36 billion from mid-1990s to the end of 2002

• Online shopping has become a routine shopping choice

• PCs, peripherals, software, & booksaccounted for a significantportion of total retail spending onthese products

ElectronicMarketingChannels

Profile of Online ShoppersProfile of Online Shoppers 1515

HighestPercentages

• Age range of 25 to 54

• Income level range $35,000 toabout $99,999

• College graduates & those withpostgraduate educationmake up 54%

• Professional/managerial occupations make up 32%

• Age range of 25 to 54

• Income level range $35,000 toabout $99,999

• College graduates & those withpostgraduate educationmake up 54%

• Professional/managerial occupations make up 32%

1155

Future of Online ShoppingFuture of Online Shopping

Online Sales as a Percentage of Total Retail Sales, 1999–2002

Year Online as % of

Retail Sales

% Change from Previous Year

1999 0.700

2000 0.925 32.1

2001 1.125 21.6

2002 1.300 19.7

1515Advantages & Advantages & DisadvantagesDisadvantages

Objective 7:

Advantages ofElectronic

Marketing Channels

1. Global scope & reach2. Convenience/rapid transaction processing3. Information processing efficiency & flexibility4. Data-based management & relationship capabilities5. Lower sales & distribution costs

1515

Disadvantages ofElectronic

Marketing Channels

1. Lack of contact with actual products & delayedpossession

2. Fulfillment logistics not at Internet speed or efficiency3. Clutter, confusion, & cumbersomeness of Internet4. Nonpurchase motives for shopping not addressed5. Security concerns of customers

Advantages & DisadvantagesAdvantages & Disadvantages

1515ImplicationsImplications

Objective 8:

• Objectives & strategies of the firm & electronic

marketing channels

• Role of electronic marketing channels in the

marketing mix

• Channel design & electronic marketing channels

• Channel member selection & electronic marketing

channels

• Channel management & electronic marketing channels

• Evaluation & electronic marketing channels

1515Objectives & Strategies of the Objectives & Strategies of the FirmFirm

Role of distribution more complex because

of electronic marketing channels

=Channel manager must consider whether

Internet-based channels fundamentally affect

the firm’s decision about the priority

given to distribution

1515

The Internet arms large numbers of customers with more information about products & services

to level the playing field

The fourth P, place (distribution), may assume a

larger role relative to the other three variables for

more & more firms

The Marketing MixThe Marketing Mix

Channel DesignChannel Design 1515

The channel manager of retailers, industrial, and B2B markets should provide “channel-surfing” consumers with whatever channels or combinations of channels

they desire

=

A facet of the development of an

effective multichannel marketing strategy

Channel Member SelectionChannel Member Selection 1515

Complexity grows as channel member selection may include the need to avoid conflict with conventional

channel members

=

The need to select members carefully

Channel ManagementChannel Management 1515

Multichannel challenge of conventional and

electronic channels

=

The fundamental issues of motivating channel members, building cooperation, managing conflict, &

coordinating elements of the marketing mix requires manager’s full attention

EvaluationEvaluation 1515

Likely to change Unlikely to change

Specific criteria for Performance expectations,

performing evaluations & criteria, & measurement of

technological means for how well they are being met

doing so by channel members