CHAPTER 15Electronic Marketing Channels

Part 4: Additional Perspectives on Marketing Channels

Objective Structure of Electronic

Marketing Channels

ThreeKey

Phenomena

1. Disintermediation versusreintermediation

2. Information flow versus product flow

3. Virtual channel structure versus physical channel structure

2

Objective Disintermediation and

Reintermediation3

Disintermediation

Intermediaries are unnecessary because

producers gain exposure to vast

numbers of customers

Example: Dell

Reintermediation

Shifting, changing, or adding middlemen to

the channel

Example: Amazon.com

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.

Objective Internet Limitations

• Cannot be digitized

• Processed slowly, often by people

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

4

Product Flow

Trends of Online Shopping

Year Online as % of

Retail Sales

% Change from Previous

Year

2002 1.3 19.7

2010 8.0 0.0

2011 9.0 12.5

2012 10.0 11.1

2013 10.0 0.0

Online Sales as a Percentage of Total Retail Sales

Objective Advantages & Disadvantages6

Advantages

1. Global scope & reach

2. Convenience/rapid transaction processing

3. Information processing efficiency & flexibility

4. Data-based management & relationship capabilities

5. Lower sales & distribution costs

1. Lack of contact with products/delayedpossession

2. Fulfillment cannot meet Internet speed or efficiency

3. Clutter, confusion, & cumbersome

4. Non-purchase motives are not addressed

5. Security concerns

Disadvantages

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?

Discussion Question #3

E-Commerce Implications:Objectives & Strategies of the Firm

Role of product distribution is more complex because of electronic marketing channels

Therefore

The channel manager must consider whether

Internet-based channels fundamentally affect

the firm’s distribution decisions

The Internet arms customers with more information about products & services

leveling the playing field

Distribution may assume a larger role relative to the other three P’s

E-Commerce Implications:The Marketing Mix

E-Commerce Implications:Channel Design

For an effective multichannel marketing strategy the channel manager should

provide “channel-surfing” consumers with whatever channels or combinations

of channels they desire or risk losing their business.

E-Commerce Implications:Channel Member Selection

Member selection complexity grows as decisions may include the need to avoid

conflict with conventional channel members and different channel partners.

E-Commerce Implications:Channel Management

The fundamental issues of motivating

channel members, building cooperation,

managing conflict, & coordinating

elements of the marketing mix in a

multichannel system requires a

manager’s full attention.

E-Commerce Implications:Evaluation

Unlikely to change

Performance

expectations,

criteria, and

measurement of

how well they are being

met by channel

members

Likely to change

Specific criteria for

performing

evaluations and the

technological means

for doing so

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?

Discussion Question #5