Part 4 Additional Perspectives on Marketing Channels

Chapter 15 Electronic Marketing Channels

15 Objective 1: Technology Internet Computers Impact on Design & Management of Marketing Channels

15 Electronic Marketing Channels The use of the Internet to make products & services available so that the target market with access to computers or other enabling technologies can shop & complete the transaction for purchase via interactive electronic means Objectives 2 & 3: Not physical availability Web-TV, PDAs Actually purchasing products through the use of PCs, Web-TV, PDAs

15 Structure of Electronic Marketing Channels Three Key Phenomena 1.Disintermediation versus reintermediation 2.Information flow versus product flow 3.Virtual channel structure versus physical channel structure

15 Disintermediation and Reintermediation DisintermediationReintermediation Intermediaries become superfluous because producers gain exposure to vast numbers of customers in cyberspace Shifting, changing, or adding middlemen to the channel Objective 4: Amazon.com Auto-By-Tel Corp. Peapod, Inc. Dell Computer Corp.

15 Disintermediation versus Reintermediation N o 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.

15 Internet Limits Objective 5: Product Flow Cannot be digitized Processed slowly, often by people Is basis for all other flows—negotiation, ownership, information, & promotion

15 Developments & Trends Objective 6: Online shopping to $36 billion from mid-1990s to the end of 2002 Online shopping has become a routine shopping choice PCs, peripherals, software, & books accounted for a significant portion of total retail spending on these products Electronic Marketing Channels

Profile of Online Shoppers 15 Highest Percentages 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%

15 Future of Online Shopping Online Sales as a Percentage of Total Retail Sales, 1999–2002 YearOnline as % of Retail Sales % Change from Previous Year

15 Advantages & Disadvantages Objective 7: Advantages of Electronic Marketing Channels 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

15 Disadvantages of Electronic Marketing Channels 1.Lack of contact with actual products & delayed possession 2.Fulfillment logistics not at Internet speed or efficiency 3.Clutter, confusion, & cumbersomeness of Internet 4.Nonpurchase motives for shopping not addressed 5.Security concerns of customers Advantages & Disadvantages

15Implications Objective 8: 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 Channel management & electronic marketing channels Evaluation & electronic marketing channels

15 Objectives & Strategies of the Firm 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

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 The Marketing Mix

Channel Design 15 The channel manager of retailers, industrial, and B 2 B 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

Channel Management 15 Multichannel challenge of conventional and electronic channels = The fundamental issues of motivating channel members, building cooperation, managing conflict, & coordinating elements of the marketing mix requires manager’s full attention

Evaluation15 Likely to change Unlikely to change Specific criteria for Performance expectations, performing evaluations & criteria, & measurement of technological means for how well they are being met doing so by channel members