Electronic marketing channels Week 13 Instructor: Jungwan Lee

Electronic marketing Auto-By-Tel.com Autoweb.com Auto dealers pay monthly fees to web sites operators who then refer consumers to the dealers. The dealer respond to consumers with their best offers via e0mail and phone. The consumer then picks out the best deal from his computer screen and visits the dealer to take delivery of the car.

New jargons Electronic marketing channel Doing business on the WWW Electronic commerce Internet commerce Internet shopping Shopping on-line Shopping in cyberspace Electronic distribution

What is electronic marketing channel? ..the use of the Internet to make products and services available so that the target market with access to computers or other enabling technologies can shop and complete the transaction for purchase via interactive electronic means.

Structure of electronic marketing channels Disintermediation versus re-intermediation The information flow versus the product flow Virtual channel structure versus physical channel structure

Case study1-reintermediation Amazon.com versus Barns & Nobles 예스24.com versus 교보문고.com Book publisher->wholesale book distributor->virtual retailer->consumer Book publisher->retail superstore->consumer

Case study2-reintermediation Auto-By-Tel corp. and channel structure Conventional channel: manufacturer->dealer->consumer Internet channel: manufacturer->dealer->Internet Auto Broker->consumer

Case study3-disintermediation Dell computer corp.

Implication of case studies Both consumer and auto dealers who have used the Internet channel like the arrangement. The car buyers have access to a vast array of information and choice of dealers via the Internet and the dealers have access to a much wide customer base and lower selling costs because they can reduce advertising costs and sales commissions. While the jury is still out, this Internet based channel, even though it involves a lengthening of channel structure rather than shortening, appears to be gaining acceptance as an effective and efficient way of selling cars.

Information flow versus the product flow Product flow-some limitation Negotiation flow Ownership flow Information flow Promotion flow

Virtual channel structure versus conventional channel structure Who is winner?

Advantages of electronic marketing channels Global scope and reach- information flow Convenience/rapid transaction processing Information processing efficiency and flexibility- ex) airline tickets Data-based management and relationship capabilities->e-crm, cyber money, cookies, log-in, e-mail marketing… Lower sales and distribution costs- ex) Dell computer corp., Virtual Vineyards

Disadvantages of electronic marketing channels Lack of contact with actual products and delayed possession Fulfillment logistics not at Internet speed or efficiency-> majority of products and services still require old-fashioned nuts and bolts logistic challenges Clutter, confusion, and cumbersomeness of Internet-> Amazon pay 44milion on AOL, Search engines Nonpurchase motives for shopping not addressed Security concerns of customers

Why do people shop? Personal motives- play the role of shopper, diversion from daily life, self-gratification, learning new trends, physical activities, sensory stimulation Social motives- gaining social experience outside the home, communication with others having similar interests, peer group attraction, status and authority, pleasure of bargaining Source by Edward M. Tauber

Profiles of online shoppers Age range of online shoppers 20s, 30s, 40s Educational attainment Above college Geographical areas Suburbs of major metropolitan areas

Reasons for using the Internet for shopping More convenience More choice/variety Save money More fun

Shopping patterns on the Internet Products purchased Compueter related goods, books, travel, clothing, music.. Frequency of online shopping 2-4 times, $100-200/year

Reasons given by retailers for not using the Internet Product not appropriate for Internet sales- limitation of product flow Don’t see significant opportunity Too expensive-entry costs Technology not ready Selling online conflicts with core business channel

Retailer’s objectives for Internet channels Market expansion Customer retention Differentiation Cost reduction Competitive positioning

Implications for marketing channel strategy Objectives and strategies of the firm and electronic marketing channels-> pure channel, multi channels, supportive channel ex) Dell computer- differential advantage based on distribution strategy Role of electronic marketing channels in the marketing mix-> product, price, promotion by perfect information flow, however place may gain a sustainable competitive advantage via electronic marketing channels. Channel design and electronic marketing channels->channel design decisions must now include consideration of the Internet as a marketing channel.

Implications for marketing channel strategy (continued) Channel member selection and electronic marketing channels->less than 10% of manufacturers currently use the Internet as an electronic marketing channel->disintermediation versus more intermediaries Channel management and electronic marketing channels-> more challenging Evaluation and electronic marketing channel