1. University of Washington EMBA Program “Channel Strategy & Market Mediation” (Place!) Instructor: Elizabeth Stearns

2. Strategy Formulation Program Formulation Contention Differing Perspectives Marketing Finance Human Resources R&D Operations Sales Project Planning Consensus Execution Coordination Creativity The Strategy Development and Implementation Process

3. The Marketing Toolbox Product Marketing Mix Place (Distribution) Service Promotion (Communications) Price

4. Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns Price List Price Discounts Allowances Payment Period Credit Terms Promotion (Communications) Sales Promotion Advertising Salesforce Public Relations Direct Marketing Channels Coverage Assortments Locations Inventory Transport Product Place (Distribution) Target Market Marketing Mix

5. Designing Offers for Customers Offer CostValue Price Time Effort Risk Brand Equity Product DeliveryServices Technical Innovation Sales Relation- ship

6. Distribution (Place) Classic Definition: Distribution is the means by which we make the product available to the customer

7. Channels of Distribution (Place) Contemporary Definition Distribution embraces the sequence of intermediaries (sets of interdependent organizations) involved in the process through which marketing flows move (e.g., physical possession, ownership, money, information, risk, negotiation, payment) –Make available The Right Product (Service Outputs  Assortment Utility) At the Right Place (Spatial Convenience  Place Utility) At the Right Time (Temporal Utility)

8. Functions in Marketing Channels Logistics: Carry Inventory Generate Demand/Convey the Offer Logistics: Distribute the Physical Product or Service Provide After Sale Service Extend Credit

9. Key Channel Decisions Logistics Issues – Inventory – Transportation Selection Issues: – Channels (vertical): how long; direct versus multi-level – Coverage (horizontal): intensive, selective, exclusive – Locations

10. Inventory When to order How much to order Just-in-time Inventory When to order How much to order Just-in-time Costs Minimize Costs of Attaining Logistics Objectives Costs Minimize Costs of Attaining Logistics Objectives Warehousing Storage Distribution Warehousing Storage Distribution Order Processing Submitted Processed Shipped Order Processing Submitted Processed Shipped Logistics Functions Transportation Water, Truck, Rail, Pipeline & Air Logistics Systems ©2000 Prentice Hall

11. Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items Air High cost, ideal when speed is needed or to ship high-value, low-bulk items Transportation Modes ©2000 Prentice Hall

12. 1. Speed. 2. Dependability. 3. Capability. 4. Availability. 5. Cost. Checklist for Choosing Transportation Modes ©2000 Prentice Hall

13. Rail34223 Water45141 Truck22314 Pipeline51552 Air13435 Source: See Carl M. Guelzo; Introduction to Logistics Management Englewood Cliffs, NJ: Prentice Hall, 1986), p. 46. (Door-to- door delivery time) (Meeting Schedules on Time) (Ability to Handle Various Products) (No. of Geographic Points Served) (Per Ton- Mile) Speed Dependability Capability Availability Cost ©2000 Prentice Hall Rating Transportation Modes

14. Online Marketing Channels Electronic Presence Corporate Website Marketing Website Electronic Presence Corporate Website Marketing Website Advertising Online Place Ads in Special Sections of Online Services Place Ads in Certain Internet Newsgroups Buy Online Ads That Pop Up While Consumers are Surfing Advertising Online Place Ads in Special Sections of Online Services Place Ads in Certain Internet Newsgroups Buy Online Ads That Pop Up While Consumers are Surfing Participating in Forums, Newsgroups & Web Communities Forums: Discussion Groups on Commercial Online Services Newsgroups: Internet Version of Forums Web Communities: Sites Where Members Exchange Views Online Participating in Forums, Newsgroups & Web Communities Forums: Discussion Groups on Commercial Online Services Newsgroups: Internet Version of Forums Web Communities: Sites Where Members Exchange Views Online Using E-Mail and Webcasting Customers Send Questions, Suggestions & Complaints Via E-Mail Webcasting: Automatic Downloading of Information to PC’s Using E-Mail and Webcasting Customers Send Questions, Suggestions & Complaints Via E-Mail Webcasting: Automatic Downloading of Information to PC’s ©2000 Prentice Hall

15. Challenges for Online Marketers Limited Consumer Exposure & Buying Skewed User Demographics & Psychographics Chaos & Clutter (metamediary opportunity?) Security ©2000 Prentice Hall

16. Channel Design: Considerations Who is our customer? What kind of benefits (service outputs) do we want to deliver to end users/purchasers? What activities must be performed in order to generate and deliver these service outputs? Which organization is best able to provide the service outputs efficiently and effectively?

17. First, the basics: Why do mediators exist? Mediator Marketers Customers Marketers (nxm) contact points (n+m) contact points

18. Disintermediation Internet Marketers Customers X

19. Disintermediation As a Myth You can eliminate a mediator, but you cannot eliminate the mediator’s functions (promotion, inventory, receivables, assumption of risk, etc.). All you end up doing is shifting the functions either up the channel to marketers, or down the channel to customers. Disintermediation is merely an evolution! Some disappear, and others are born.

20. Metamarkets: Markets in our minds Metamarkets are clusters of related activities that customers engage in to satisfy a distinct set of needs. Boundaries of metamarkets are derived from activities that are closely related in the minds of customers, and not from the fact that they are created or marketed by firms in related industries. Metamarkets can be organized around major assets, major interests, major life events, or major business processes.

21. Examples of metamarkets Consumer metamarkets –Home ownership –Parenting –Wedding –Cooking –Healthy living –Self development –Active travel Business metamarkets –Corporate Travel & Entertainment –Logistics management –Procurement –Human resource management

22. Why friction happens Customers need to search and evaluate a plethora of vendors in a deconstructed world. Meanwhile, marketers need to spend increasing sums of money for share of customer attention. The inefficiencies are compounded by the fact that there is a disconnect between how customers think about buying, and how marketers think about selling in an exchange. This disconnect creates friction in exchanges.

23. Understanding the disconnect Customers think in terms of activities, while sellers think in terms of products. Activities that are logically related in cognitive space may be spread across very diverse markets in the marketplace. The boundaries of activity-centric markets are very different from the boundaries of product-centric markets.

24. Example - The automobile metamarket Newspaper classifieds Auto magazines Used car dealers New car dealers Insurance companies Financing Companies Consumer Reports Mechanics Spares dealers Service shops Auto manufacturer advertising Peers and experts Evaluating Buying Staying informed Financing Repairing Insuring Servicing Reselling Negotiating Cognitive space Marketplace

25. Metamediaries and the auto metamarket Evaluating Buying Staying informed Financing Repairing Insuring Servicing Reselling Negotiating Cognitive space New car dealers Spares dealers Used car dealers Financing firms Warranty firms Mechanics Newspaper association Auto mfrs. Insurance companies Marketplace Metamediary Marketspace Metamediaries mediate between and among buyers and sellers in metamarkets.

26. Buyer Community Seller Community Edmunds.com: An auto metamediary Edmunds. comEdmunds. com AutobyTel PriceAutoOutlet.com GEICO JC Whitney Warranty Gold CarFinance.com ADP Auto manufacturers

27. Metamediaries galore... Cooking Weddings Automobiles Home Improvement Parenting

28. Summary An understanding of changing market dynamics is important in strategic and implementation decisions for distribution and logistics activities. Rethinking boundaries around customer activities and business processes, can create new markets called metamarkets that look very different from traditional markets. Metamarkets realign traditional markets with customer activities and business processes. This presents exciting new mediation opportunities for metamediaries.

29. Thank You!