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

Structure of Electronic Marketing Channels 2 Disintermediation versus reintermediation Information flow versus product flow Virtual channel structure versus physical channel structure Three Key Phenomena

Disintermediation and Reintermediation 3 Disintermediation Reintermediation Intermediaries are unnecessary because producers gain exposure to vast numbers of customers Shifting, changing, or adding middlemen to the channel Example: Dell Example: Amazon.com

Disintermediation versus Reintermediation 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.

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

Trends of Online Shopping Online Sales as a Percentage of Total Retail Sales 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

Advantages & Disadvantages 6 Advantages Disadvantages Global scope & reach Convenience/rapid transaction processing Information processing efficiency & flexibility Data-based management & relationship capabilities Lower sales & distribution costs Lack of contact with products/delayed possession 2. Fulfillment cannot meet Internet speed or efficiency Clutter, confusion, & cumbersome Non-purchase motives are not addressed Security concerns

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?

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

E-Commerce Implications: The Marketing Mix 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: 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

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?