Chapter 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 Shoppers 15 • Age range of 25 to 54 • Income level range $35,000 to about $99,999 • College graduates & those with postgraduate education make up 54% • Professional/managerial occupations make up 32% Highest Percentages

CONSUMER REASONS FOR/AGAINST ONLINE SHOPPING, Source: adapted from Catherine Finamore (2000), "The Connected Consumer," E-Retail Intelligence Update, PricewaterhouseCoopers, January, pp. 5-8.

Advantages & Disadvantages 15 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

Advantages & Disadvantages 15 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 Nonpurchase motives for shopping not addressed Security concerns of customers

Structure of Electronic Marketing Channels 15 Disintermediation versus reintermediation Information flow versus product flow Virtual channel structure versus physical channel structure Three Key Phenomena

Disintermediation and Reintermediation 15 Disintermediation Reintermediation Intermediaries become “unnecessary” because producers gain exposure to vast numbers of customers in cyberspace Shifting, changing, or adding middlemen to the channel Amazon.com Auto-By-Tel Corp. Peapod, Inc. Dell Computer Corp.

Channel Management Implications 15 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

Objectives & Strategies of the Firm 15 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

The Marketing Mix 15 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

Channel Design 15 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 Selection 15 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