Chapter 15Chapter 15

Electronic Marketing Channels

Electronic Channels

• Any channel that involves the use of the Internet as a means of reaching the customer– B2C

– B2B

Market Potential for Electronic Channels

• How many customers are likely to shop online?

• What are the demographics of customers who like to shop online?

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%

CONSUMER REASONS FOR/AGAINST ONLINE SHOPPING,

Top reasons for not making an online purchase(among those not doing so), and service output(s)affected:

Percent of respondents(multiple responsespossible)

Product returns might be difficult (customer service) 39%

Desired product not available or in stock online(assortment/variety)

32

Worried about timely delivery of gifts for holidays(wait/delivery time)

31

Privacy concerns (customer service) 26

Don't want to pay shipping/handling costs (spatialconvenience)

20

Enjoy holiday shopping at malls/stores (general; allservice outputs)

17

Total cost of buying online is higher than at stores (allservice outputs; signifies intensity of demand for onlineservice outputs is too low to merit price)

16

Source: adapted from Catherine Finamore (2000), "The Connected Consumer," E-Retail Intelligence Update, PricewaterhouseCoopers, January, pp. 5-8.

1515Advantages & Advantages & DisadvantagesDisadvantages

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

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 become“unnecessary” because

producers gain exposure to vast numbers of customers in

cyberspace

Shifting, changing, or addingmiddlemen to the channel

Amazon.comAuto-By-Tel Corp.

Peapod, Inc.Dell Computer Corp.

1515Channel Management Channel Management ImplicationsImplications

• 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

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

Dual Distribution with Electronic Channels

• Conflicts may arise– Domain conflict

• Free riding

– Goal conflict

– Perceptual differences