Distribution Management for e-marketing

1. The Internet for Distribution

2. • Distribution
• – Online Channel Intermediaries – Distribution
Channel Length and Functions – Channel
• Management and Power – Distribution
Channel Metrics

3. Distribution Channel Overview
• Distribution involves point of purchase decisions and
whether or not the customer receives a product or service
satisfactorily.
• A distribution channel is a group of interdependent firms
that work together to transfer product and information
from the supplier to the consumer.
PARTICIPANTS
1. Producers: Manufacturers and their suppliers, or
originators of the product or service.
2. Intermediaries: Firms that match buyers and sellers and
mediate the transactions among them (e.g., wholesalers
and retailers).
3. Buyers: Consumers or users of the product or service.

4. Online Channel Intermediaries
• A good way to understand online intermediaries
is according to their business models.
Channel Intermediaries Include
1. WHOLESALERS
2. RETAILERS
3. BROKERS
4. AGENTS

5. 1. Wholesalers buy products from the manufacturer and
resell them to retailers.
2. Both brick-and-mortar and online Retailers buy products
from manufacturers or wholesalers and sell them to
consumers
3. Brokers facilitate transactions between buyers and sellers
without representing either party. They are market makers
and typically do not take title to the goods.
4. Agents usually represent either the buyer or seller,
depending upon who hires and pays them. They facilitate
transactions between buyers and sellers but do not take
title to the goods. Manufacturer’s agents represent the
seller, whereas purchasing agents represent the buyer

6. E-Business Models

7. 1. Content Sponsorship
• Many ways companies use content to increase revenues
• we discuss selling content (e-commerce) and content
Sponsorship
• Companies create Web sites, attract a lot of traffic, and sell
advertising.
• Some firms use a niche strategy and draw a special interest
audience (e.g., iVillage.com for women), and others draw a
general audience (e.g., CNN .com or YouTube.com).
• Web properties using the content sponsorship model
include all the major portals: Google, Yahoo!, MSN, and so
on.

8. • Many online magazines and newspapers also use this model; indeed
much content on the internet is ad supported.
• This high number of users creates great content sponsorship
opportunities
• Many Web sites desire to sell advertising space, but it is difficult to get
enough traffic to compete with the portals and news sites.
• Google is the king of content sponsorship, serving online ads to an
estimated 410.2 million users in August 2012, and holding an ad
revenue share of 74. percent.
• Content sponsorship generates revenues in the business-to-business
(B2B) market (Web companies selling ad space to other companies).
• The product, of course, is ad space on a Web site, and the price for it
usually increases with audience size.
• This model has its roots in traditional media, where television,
magazines, and other media sell space and airtime.

9. 2. Infomediary Models• An infomediary is an online organization that aggregates and
distributes information, acting as a personal agent for Web users.
• One form of infomediary is a market research firms.
• Sometimes, the infomediary compensates the consumer for sharing
information.
• Web sites that require registration for downloading white papers and
then provide the user data to authors and others also fall into this
category.
• Product review sites, such as ePinions.com, are another type of
infomediary.
• These sites accumulate ratings and written reviews on Web pages that
provide information to other consumers and the reviewed companies.
• They often receive revenue through commissions by providing click-
throughs to online retailers where consumers can purchase the
products

10. • The benefit to the infomediary is that the
consumer information increases the value of its
ad inventory.
• The benefit to advertisers is that they can
market to a highly targeted audience that has
expressly opted into the system.
• Permission marketing allows advertisers to do
something never before possible—advertise
while the consumer is on a competitor’s site!

11. BROKERAGE MODEL AGENT MODEL
ONLINE RETAILING
(E-commerce, M-commerce,
Social commerce)
ONLINE
EXCHANGE
AGENT MODELS
REPRESENTING BUYERS
(PURCHASING AGENT)
SELLING AGENT
(AFFILIATE
PROGRAM)
ONLINE
AUCTION
AGENT MODELS
REPRESENTING
SELLERS
MANUFACTURER’S
AGENT
(CATALOG
AGGREGATOR)
SHOPPIN
G AGENT
BUYER
COOPERATIVE
REVERSE
AUCTION
DIGITAL
PRODUCTS
DIRECT
DISTRIBUTION
TANGIBLE
PRODUCTS
3. INTERMEDIARY MODELS

12. Distribution Channel Length
and Functions
• The length of a distribution channel refers to the number of
intermediaries between the supplier and the consumer.
• The shortest distribution channel has no intermediaries—
the manufacturer deals directly with the consumer, the way
Dell sells directly to customers in a direct distribution
channel.
• Most distribution channels incorporate one or more
intermediaries in an indirect distribution channel.
• A typical indirect channel includes suppliers, a
manufacturer, wholesalers, retailers, and end consumers.
• Intermediaries help to perform important functions.

13. • Disintermediation describes the process of eliminating
traditional intermediaries.
• Eliminating intermediaries can potentially reduce the
costs as with Fresh Direct.
• Taken to its extreme, disintermediation allows the
supplier to transfer goods and services directly to the
consumer in a direct channel.
• Complete disintermediation tends to be the exception
because intermediaries can often handle channel
functions more efficiently than producers.
• An intermediary that specializes in one function, such as
product promotion, tends to become more proficient in
that function than a nonspecialist.

14. • Much of the initial hype surrounding the internet focused on disintermediation and
the possibility that prices would plummet as the internet eliminated costly
intermediaries.
• First, the U.S. distribution system is very efficient.
• Second, using intermediaries allows manufacturing companies to focus on what
they do best.
• Third, many traditional intermediaries have been replaced with internet
• equivalents.
• In many cases, the online intermediaries are more efficient than their brick- and-
mortar counterparts.
• Consider the online storefront. Online retailers do not have to rent, maintain, and
staff expensive retail space in desirable shopping areas.
• An inexpensive warehouse provides an acceptable storage location for goods sold
online.
• On the other hand, online stores incur the costs of setting up and maintaining their
e-commerce sites.
• Although these charges can be significant, they do not outweigh the savings
realized by eliminating the physical store

15. FUNCTIONS IN DISTRIBUTION
CHANNELS
1.Transactional Functions
2.Logistical Functions
3.Facilitating Functions

16. 1. Transactional FunctionsA.Contact with Buyers
B.Marketing Communications
C.Matching Product to Buyer’s Needs
D.Negotiating Price
E.Process Transactions

17. 2. LOGISTICAL FUNCTIONS
A.Physical Distribution
B.Aggregating Product
C.Third-Party Logistics—Outsourced
Logistics
D.The Last Mile Problem

18. 3.FACILITATING FUNCTIONS
A. Market Research
B. Financing

19. Distribution System

20. Channel Management and
Power
• Once a channel structure is established, its
viability requires a certain measure of
coordination, communication, and control to
avoid conflict among its members.
• A powerful channel member must emerge to
assume the leadership and institute these
required measures e-marketers need to
understand power relationships among
channel players

21. • Whenever new information technology is introduced into a distribution
channel, it can potentially alter the power relationships among existing
channel players.
• Nowhere has this effect been more evident than with the internet.
• In many cases, buyer power significantly increased at the expense of the
supplier.
• In other cases, the power of the supplier has come out on top.
• Walmart gained power over its channels when it introduced electronic systems
to notify suppliers of a needed product.
• This shift caused a major power upheaval in channels where giant
manufacturers such as Procter & Gamble had previously been in control.
• A classic source of power for retailers and distributors has been geographic
location.
• Retailers have built power on the place (location), utility, and restricted access
to manufacturers.
• The internet neutralizes the importance of location and offers new sources of
supply for purchasing.

22. • Just as the internet increased the power of buyers by providing
access to more information and to more suppliers, it increased
the power of suppliers, as well.
• First, the supplier that takes the early lead online will receive
business from consumers and firms eager to shop in this
channel.
• But even in cases when multiple firms are online, suppliers can
gain power by establishing structural relationships with buyers.
• For example, Amazon establishes structural relationships with its
customers using its 1-Click ordering and collaborative filtering
technologies.
• Amazon customers switching to another site would have to
reenter their billing information and, more important, they
would lose access to Amazon’s recommendations.

23. • A type of business-to-business (B2B) commerce known as electronic data
interchange (EDI) is particularly effective for establishing structural relationships
between businesses.
• Electronic data interchange is the computerized exchange of information between
organizations, typically used to eliminate paperwork.
• A buyer logs onto the supplier’s computer system and types in an order.
• The order is electronically conveyed to the supplier and the buyer receives an
electronic bill.
• The internet puts a new face on EDI with the advent of open standards and
interoperable systems.
• First, the internet replaces expensive proprietary networks, yielding tremendous cost
savings. Second, business can use the same computer to interface with multiple
suppliers.
• Third, networks of suppliers and buyers can more easily exchange data using a Web-
based interface.
• Thus, EDI is based on three key variables: the openness of the system, the transport
method (internet or noninternet), and the type of technology used for implementation.
Combining these variables in different ways results in many types of EDI most
commonly used today, such as Application Program Interface (API) and Extensible
Markup Language (XML).
• The goal is to create a standards-based open system that runs over the internet so all
suppliers and buyers can seamlessly integrate their systems.

24. Distribution Channel Metrics
B2C Market
Important Metrics:
A. Revenues
B. ROI
C. Customer Satisfaction Levels
D. Customer Acquisition Costs
E. Conversion Rates
F. Average Order Value

25. • Affiliate sites and how many customers they refer to the e-
commerce sites, what proportion of these customers purchase
at site
• What sites their customers visit immediately prior to arriving
M-Commerce
• Click to call rate
• Secondary actions (What users do after viewing a mobile
site/promotional message)
• Click-through rate
• Search for store direction
• Text responses
• Time spent with an app
• Click to social network etc

26. B2B market
• The B2B market is big business.
• It is impossible to measure the amount of dollars that exchanges
hands in supply chains because it happens behind company walls.
• Most B2B business deals still happen via the telephone, fax, and
salespeople.
• The internet has proven to be a much more efficient way for firms
to improve the quality, efficiency, and timeliness of orders from
each other, spurring growth in e-procurement and process
improvement.
• Businesses use the Web to search for suppliers, but more often
they simply facilitate current relationships throughout online
ordering, shipment tracking, and more.

27. • Promotion – Integrated Marketing
• Communication (IMC) – Internet Advertising –
Marketing Public Relations – Sales Promotion
Offers – Direct Marketing – Personal Selling –
IMC Metrics