Electronic Marketing Channels

1. Part 4: Additional Perspectives on Marketing Channels Electronic Marketing Channels

2. Electronic marketing channels • Structure of electronic channels • Disintermediation and reintermediation • Internet limits • Developments and trends • Advantages and disadvantages • Implications

3. Electronic Marketing Channels 1 Technology Devices with Internet Access Increased Impact on Design & Management of Marketing Channels

4. Electronic Marketing Channels Not physical availability The use of the Internet to make products & services available so that the target market with access to computers or other enabling technologies can shop & complete the transaction for purchase via interactive electronic means Actually browse and purchasing products through the use of PCs, Web-TV, PDAs, smartphones, e-readers, tablets, etc.

5. Structure of ElectronicMarketing Channels 2 Disintermediation versus reintermediation Information flow versus product flow Virtual channel structure versus physical channel structure Three Key Phenomena

6. Disintermediation andReintermediation 3 Disintermediation Intermediaries become superfluous because producers gain exposure to vast numbers of customers in cyberspace Examples: None

7. Disintermediation andReintermediation 3 Reintermediation Shifting, changing, or adding middlemen to the channel Examples: Amazon.com Autobytel Inc. Peapod

8. Disintermediation versusReintermediation 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.

9. Internet Limits 4 Product Flow • Cannot be digitized • Processed slowly, often by people • Is basis for all other flows—negotiation, • ownership, information, & promotion

10. Developments & Trends 5 • Online shopping rose from $25 billion in 2000 to more than $175 billion in 2010 • Online shopping has become a routine • shopping choice • PCs, peripherals, software, & books • accounted for a significant • portion of total retail spending on • these products Electronic Marketing Channels

11. Profile of Online Shoppers • Age range of 18 to 32 • Income level range $50,000 to • about $100,000 Highest Percentages

12. Future of Online Shopping Online Sales as a Percentage of Total Retail Sales

13. Electronic Channels on Social Network Sites • By 2009, almost ½ of Americans had a Facebook or MySpace account • Among American, age 18-33, almost ¾ were registered with Facebook or MySpace • Businesses are now rapidly engaging in F-commerce (Facebook Commerce)

14. Advantages & Disadvantages 6 Advantages of Electronic Marketing Channels Global scope & reach Convenience/rapid transaction processing Information processing efficiency & flexibility Data-based management & relationship capabilities Lower sales & distribution costs

15. Advantages & Disadvantages Disadvantages of Electronic Marketing Channels Lack of contact with actual products & delayed possession 2. Fulfillment logistics not at Internet speed or efficiency Clutter, confusion, & cumbersomeness of Internet Non-purchase motives for shopping not addressed Security concerns of customers

16. Implications 7 • 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

17. Objectives & Strategies of the Firm 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

18. The Marketing Mix 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

19. Channel Design 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

20. Channel Member Selection Complexity grows as channel member selection may include the need to avoid conflict with conventional channel members = The need to select members carefully

21. Channel Management 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

22. Evaluation Unlikely to change Performance expectations, criteria, & measurement of how well they are being met by channel members Likely to change Specific criteria for performing evaluations & technological means for doing so

23. Discussion Question #1 The Internet electronically links many thousands of manufacturers to millions of consumers, thereby eliminating the need for middlemen in the twenty-first century. Who needs intermediaries if customers can go online and manufacturers all have Web site that can be visited by customers from literally all corners of the earth? Shopping trips, malls, stores, indeed, the bricks and mortar of current channel structure will eventually become obsolete—a relic of earlier centuries. Do you agree or disagree with this scenario? Discuss.

24. Discussion Question #3 Office Depot has almost 1,000 office superstores and a giant catalog of office supplies that it offers via mail order. Yet Office Depot also enables its customers to shop on the Internet. Its Web site offers virtually all of the products Office Depot carries in its stores and catalog and guarantees next-day delivery to most locations in the United States with no delivery charge on orders over $50. Online order tracking is available, and customized ordering, which takes into account the historical patterns of an individual customer’s product purchases, is also a feature of Office Depot’s Internet-based channel. What do you see as the advantages of Office Depot’s multichannel strategy? Are there any disadvantages?

25. Discussion Question #5 One of the potentially powerful advantages of m-commerce is the ability of sellers to target offers to consumers when they are in close proximity to the seller. This is made possible based on smartphone technology that tracks the exact geographical locations of their users. For example, if a consumer is near a Staples Office Superstore, a text message can be automatically sent to the consumer’s smartphone about a special offer on, say, print cartridges and paper. The technology that has made such m-commerce based proximity marketing possible was developed by startups such as ShopKick, Where, and Loopt, as well as by giants such as AT&T’s ShopAlerts. Although available to anyone with a smartphone, the proximity alerts will only be sent to consumers who have signed up for the program. Do you think this type of m-commerce is an important channel option for consumers and sellers? Why or why not?