The Internet as Channel MKT628 – Prof Viar
Channel as a Resource: Overview <ul><li>What is a channel? </li></ul><ul><ul><li>Purpose: to move stuff from supplier to b...
The Internet and Distribution: The Future Through the Past <ul><li>Traditional forms of channel structure </li></ul><ul><u...
Impact of the Internet: The Past, Present… <ul><li>As the only channel member </li></ul><ul><ul><li>Which companies can do...
Characteristics of Disintermediation <ul><li>Elimination of one or more middlemen </li></ul><ul><ul><li>e.g., Direct sales...
Another Option: Reintermediation <ul><li>Introduction of new middlemen </li></ul><ul><ul><li>Infomediaries </li></ul></ul>...
Mix Implications of the Internet as a Channel Resource <ul><li>Channel and Product </li></ul><ul><ul><li>A digital bias? <...
More Mix Implications <ul><li>Channel and Place </li></ul><ul><ul><li>Effects of the channel on the end of the channel </l...
Customer Acquisition Cost
Do You Have a Problem with This? <ul><li>Issues for marketers: feasibility </li></ul><ul><ul><li>Channel relationships </l...
<ul><li>Questions? </li></ul>
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The Internet As A Channel

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The Internet As A Channel

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

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