ARELLANO UNIVERSITY
Distribution Management
Chap. 15. Electronic Marketing
Channels
Professor: Dr. Ronaldo A. Poblete, CFMP
Learning Objectives
Electronic marketing channels
Structure of electronic channels
Disintermediation and
reintermediation
Internet limits
Developments and trends
Advantages and disadvantages
Implications
Electronic Marketing
1 Channels
Technology Devices with
Internet Access
Increased Impact on
Design & Management of Marketing Channels
Electronic Marketing
Channels
Not physical availability
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
Actually browse and purchasing products through the use
of PCs, Web-TV, PDAs, smartphones, e-readers, tablets, etc.
Structure of Electronic Marketing
Channels
2
1. Disintermediation versus
reintermediation
Three 2. Information flow versus
Key product flow
Phenomena
3. Virtual channel structure
versus
physical channel structure
Disintermediation and
3 Reintermediation
Disintermediation
Intermediaries become
superfluous because
producers gain exposure
to vast numbers of
customers in cyberspace
Examples: None
Disintermediation and
3 Reintermediation
Reintermediation
Shifting, changing, or
adding middlemen to the
channel
Examples: Amazon.com
Autobytel Inc.
Peapod
Disintermediation versus
Reintermediation
No matter how Efficiency in the
technologically performance of
sophisticated the distribution tasks is
Internet becomes or what ultimately
how much it is hyped, determines what form
the laws of economics channel structure will
as they relate to take.
channel structure do
not change.
The Internet has not eliminated middlemen,
or caused total disintermediation.
Internet Limits
4
Product Flow
• Cannot be digitized
• Processed slowly, often by people
• Is basis for all other flows—negotiation,
ownership, information, & promotion
Developments & Trends
5
• Online shopping rose from $25 billion
in 2000 to more than $175 billion in
2010
Electronic • Online shopping has become a routine
Marketing shopping choice
Channels
• PCs, peripherals, software, & books
accounted for a significant
portion of total retail spending on
these products
Profile of Online Shoppers
• Age range of 18 to 32
Highest
Percentages
• Income level range
$50,000 to
about $100,000
Future of Online Shopping
Online Sales as a Percentage of Total Retail Sales
Year Online as % of % Change from
Retail Sales Previous Year
2002 1.3 19.7
2010 8.0 0.0
2011 9.0 12.5
2012 10.0 11.1
2013 10.0 0.0
Electronic Channels on Social Network
Sites
• By 2009, almost ½ of Americans had
a Facebook or MySpace account
• Among American, age 18-33, almost
¾ were registered with Facebook or
MySpace
• Businesses are now rapidly engaging
in F-commerce (Facebook Commerce)
6
Advantages & Disadvantages
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
Advantages & Disadvantages
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. Non-purchase motives for shopping not addressed
5. Security concerns of customers
Implications
7
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
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
The Marketing Mix
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
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
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
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
Evaluation
Unlikely to change Likely to change
Specific criteria for
Performance expectations, performing evaluations &
criteria, & measurement of technological means for doing
how well they are being met so
by channel members
Discussion Question #1
The Internet electronically links many thousands of
manufacturers to millions of consumers, thereby
eliminating the need for middlemen in the twenty-first
century. Who needs intermediaries if customers can
go online and manufacturers all have Web site that
can be visited by customers from literally all corners of
the earth? Shopping trips, malls, stores, indeed, the
bricks and mortar of current channel structure will
eventually become obsolete—a relic of earlier
centuries.
Do you agree or disagree with this scenario?
Discuss.
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?
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?
