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The Internet As A Channel
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The Internet As A Channel


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  • 1. The Internet as Channel MKT628 – Prof Viar
  • 2. Channel as a Resource: Overview
    • What is a channel?
      • Purpose: to move stuff from supplier to buyer
      • Nature: interdependent firms as intermediaries
    • How is the Internet a channel?
      • Enables distribution
      • Enables and acts as intermediary
    • What are the effects of the Internet…
      • On channel characteristics?
      • As channel component, on mix elements?
      • Forms, flows, and functions
  • 3. The Internet and Distribution: The Future Through the Past
    • Traditional forms of channel structure
      • Manufacturer-->Consumer
        • Ex.: Land’s End
      • Manufacturer-->Retailer-->Consumer
        • Ex.: anything you buy at WalMart
      • Manufacturer-->Wholesaler-->Consumer
        • Ex.: Sam’s Club
      • Man.-->Whole.-->Ret.-->Con.
        • Ex.: Grocery stores
        • + ancillary members…
  • 4. Impact of the Internet: The Past, Present…
    • As the only channel member
      • Which companies can do this?
        • Depends on product type
          • E.g., digital are most direct
        • Depends on channel relationships
          • Producer and retailer (need strong producer)
          • Producer and consumer (nature of contacts )
      • Multi-channel strategies
    • As a channel component
      • Disintermediation (most hyped possibility)
      • Reintermediation (most likely possibility)
  • 5. Characteristics of Disintermediation
    • Elimination of one or more middlemen
      • e.g., Direct sales by producer to buyer
      • Related factors
        • More effective when producer has more power
        • More effective when retailer-consumer relationships are less important
          • I.e., less specific market (commodities)
          • More for B2C than B2B? (lower asset specificity)
        • In toto , when barriers to entry are lower
    • Likely victims of disintermediation
  • 6. Another Option: Reintermediation
    • Introduction of new middlemen
      • Infomediaries
      • Aka, “cybermediaries”
    • Characteristics of infomediaries
      • Constitute online brands (e.g., Travelocity)
      • Reflect new way to create relationships, matching products to buyers’ needs (e.g., CarPoint)
      • Occupy different niche in channel structures
        • From transferring product
        • To creating buyer/seller links
      • Function as service, not as product
        • For buyers and for sellers
  • 7. Mix Implications of the Internet as a Channel Resource
    • Channel and Product
      • A digital bias?
      • Issues for determining product strategy
        • Digital form as replacement or complement?
        • Effects on product assortment (virtual aggregation)
          • Coordination benefits for inventory and warehouse costs
        • Effects on product development
          • Supply chain coordination
    • Channel and Price
      • Shifts to power structure
        • To buyer, given transparency
        • Disintermediation effects
        • Reintermediation effects
  • 8. More Mix Implications
    • Channel and Place
      • Effects of the channel on the end of the channel
        • Online stores
          • Lower physical costs
          • Tax advantages
          • Virtual inventory advantages
        • The emergence of reverse netcentricity
        • Global distribution
    • Channel and Promotion
      • Information as what gets transferred
      • Global reach
        • Target appropriateness issues (channel affects content)
        • Channel as means for contact (personalization, customization)
  • 9. Customer Acquisition Cost
  • 10. Do You Have a Problem with This?
    • Issues for marketers: feasibility
      • Channel relationships
        • Power and conflict
        • Leveraged cooperation
    • Issues for consumers: availability
      • Real v. ephemeral benefits
      • Product availability (Toys-R-Us at Xmas…)
    • Issues for policymakers: liability
      • Illegal consumption (e.g., drugs and alcohol)
    • Issues for technology: stability
      • Reliability of channel delivery (e.g., hackers)
      • System/process development (e.g., extranets as Internet EDI)
  • 11.
    • Questions?