Electronic Marketing Channels EMC:

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Chapter 15

• Electronic Marketing Channels (EMC)

Online channels
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Major Topics for Ch. 5
15

• What is it?
• Trends in EMC
• Structure of EMC
• Advantages and Disadvantages of EMC
• Implications of EMC

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Electronic Marketing Channels
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Topic 1
Computers
Technology
Internet
Impact on Design Management of Marketing
Channels
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Electronic Marketing Channels
Topics 2
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Not physical availability
Internet, Web-TV, PDAs
The use of online media to make products
services available so that the target market with
access to enabling technologies can shop
complete the transaction via interactive
electronic means
Actually purchasing products through the use of
PCs, Web-TV, PDAs
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Developments Trends in EMC
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Online shopping to 107 billion from
mid-1990s to the end of 2006 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
2006 U.S. Census on E-commerce
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Still, Online Shopping is Relatively Small (2006
Figure)
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• E-commerce
• In Manufacturing 1,568 Billion ?31.2 of Total
  Shipment
• In Wholesaling 1,148 Billion ? 20.6 of Total
  Sales
• In Retailing 107 Billion ? 2.7 of Total Retail
  Sales

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Online Retail Sales
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Online Sales as a Percentage of Total Retail
Sales, Holiday Seasons
Source A.C. Nielsens Holiday E-spending Report
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Channel Migration
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Holiday Shopping across Channels
2004
2003
Source A.C. Nielsens Holiday E-spending Report
www.internetretailer.com
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Structure of ElectronicMarketing Channels
Topic 3
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• 1. Reintermediation versus disintermediation
• Information flow versus
• product flow
• Virtual channel structure versus
• physical channel structure

Three Key Phenomena


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1. Disintermediation andReintermediation

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Disintermediation
Reintermediation
Shifting, changing, or adding middlemen to the
channel
Intermediaries become superfluous because
producers gain exposure to vast numbers of
customers in cyberspace
Amazon.com Auto-By-Tel Corp. Peapod, Inc.
Dell Computer Corp.
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Disintermediation versusReintermediation
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• No matter how technologically sophisticated
  the Internet becomes, 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.
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2. Marketing Channel Flows
1
Product Flow
Negotiation Flow
Ownership Flow
Information Flow
Ex) Pharmaceutical
Promotion Flow
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Pharmaceutical Industry
Physical Distribution Flow
Demand Generation Flow
Insurer/ HMO
Manufacturer
Manufacturer
PBM
Distributor
Pharmacy
Doctor
Pharmacy
patient
patient
Pharmacy Benefit Manager
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Internet Limits
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• Five Channel Flows
• Some can not be
• handled by internet

• Ex) Product Flow in Channel
• Cannot be digitized
• Processed slowly, often by people
• Is basis for all other flowsnegotiation,
• ownership, information, promotion

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Internet Limits (Contd)
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Objective 5

• 3. Virtual (Online) Channel Structure Versus
  Conventional (Store) Channel Structure
• Different Market Segments
• Different Product or Services
• Complements rather than Replaces Each Other

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Advantages Disadvantages of EMC
Topic 4
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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

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Advantages Disadvantages of EMC
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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

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Implications of EMC
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Topic 5

• Objectives strategies of the firm EMC
• Role of EMC in the marketing mix
• Channel design EMC
• Channel member selection EMC
• Channel management EMC
• Evaluation EMC

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Objectives Strategies of the Firm
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• Role of distribution more complex because
• of electronic marketing channels
• How to Integrate Online with Offline channels

Offline only ? Online only ? Offline Online
Ex) My research project
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The Marketing Mix
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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
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Channel Design
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The channel manager 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
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DUAL DISTRIBUTION WITH EMC CHANNEL STRUCTURE
OPTIONS
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DUAL DISTRIBUTION WITH EMC CHANNEL STRUCTURE
OPTIONS
(b) Manufacturer sells through third-party
online reseller (e.g, Callaway Golf selling
through buy.com)
Manufacturer (Callaway Golf)
Independent Internet Sales Channel (buy.com)
Standard Channel (pro shops, bricks mortar
sports/golf outlets)
Consumers
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DUAL DISTRIBUTION WITH ONLINE SELLING CHANNEL
STRUCTURE OPTIONS
(c) Manufacturer sells through some standard
channels that do operate their own online store,
and some that do not
Manufacturer (Simon Schuster, Publisher)
Standard Channel (bricks mortar bookstores)
Barnes Noble
Barnes Noble bricks mortar bookstores
Barnes Noble Internet Sales Channel (bn.com)
Consumers
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Channel Member Selection
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Complexity grows as channel member selection may
include the need to avoid conflict with
conventional channel members The need
to select members carefully Ex) Case of Dell in
B2B side of the business
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Channel Management
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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 managers full attention
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Evaluation
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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 Ex) Store
Traffic Measure
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What drive sales impact of online channel
addition?
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• Steve Kim (ISU) and Sam Min (CSULB)
• Question For store-based retailers, does adding
• online channel lead to more
  sales?

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Likely Suspects
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• Channel Disruption (Potential for Displacement)
• Timing Chronological Time and Order of addition
• Incumbent Retailer Resource Scale of Offline
  channel
• Incumbent Retailer Resource Retailers Brand
  Equity

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Analysis Results
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• Channel Disruption (Potential for Displacement)
  Search good Experience good
• Timing Chronological Time (0) and Order of
  channel addition ()
• Incumbent Resource Scale of Offline channel(-)
• Incumbent Resource Retailer Brand Equity ()