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© Arvind Rangaswamy, All Rights Reserved
October 25, 2003
e-Marketing (EMBA)
Online Marketing Strategy (Distribution)
Arvind Rangaswamy
Web address: www.arvind.infoemail: [email protected]
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© Arvind Rangaswamy, All Rights Reserved
Roles for Today’s Marketing Manager
Select target markets to pursue (and specify target markets not to pursue)
Define the brand
Optimize the channel mix
Articulate and measure the value of marketing investments
Enhance customer relationships
Identify and develop new businesses
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© Arvind Rangaswamy, All Rights Reserved
Roles of Marketing Channels:Delivering Service Output Levels
Lot size (Aggregate/Disaggregate) Convenience (Spatial, Ordering, …) Waiting time Variety and assortment Personalization/customerization Service (Pre-sale and Post-sale) Price discovery? Liquidity?
The Internet is altering the relative roles of intermediaries and manufacturers in providing these service output levels.
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© Arvind Rangaswamy, All Rights Reserved
Primary Benefit of Intermediaries: Increased Channel Efficiency
C
C
C
1
2
3
4
5
6
7
8
9
(a) Number of contactsM x C = 3 x 3 = 9
1
2
3
4
5
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(b) Number of contactsM + C = 3 + 3 = 6
M = Manufacturer C = Customer D = Distributor
D
M
M
M
C
C
C
M
M
M
Source: Textbook
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© Arvind Rangaswamy, All Rights Reserved
Intermediaries Also Generate Value
Market Information Monitoring sales trends, inventory levels, competitive behavior
Promotional Effort Banner ads, sales promotions, traditional advertising support, personal selling
Transactional Activities Bargaining on price and terms, order processing, credit, inventory and assortments
Storage and Transportation Warehousing, transportation to buyer, sorting and packaging into desired forms
Facilitation Activities Credit card processing, invoicing, shipping confirmations
Installation and Service Technical support, customer service lines, warranty work, repair, spare parts, etc.
Adapted From: Harper W. Boyd, Jr., Orville C. Walker, Jr., and Jean-Claude Larreche, Marketing Management, 2nd ed., Burr Ridge, IL: Irwin 1995, and George S. Day, Market Driven Strategy: Processes for Creating Value, New York: The Free Press, 1990, 220–221
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© Arvind Rangaswamy, All Rights Reserved
Yes, you can eliminate intermediaries.
No, you cannot eliminate their functions and still serve the same customer needs!
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© Arvind Rangaswamy, All Rights Reserved
The 2Is and Distribution
Match distribution channel with segment needs more precisely
Customer service is tailored across channels
Tight linkages between firm, suppliers and customers facilitate collaborative relationships that enhance logistics, inventory planning and market responsiveness
IndividualizationIndividualization InteractivityInteractivity
DistributionDistribution
Source: Textbook
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© Arvind Rangaswamy, All Rights Reserved
Customer Contact Channels
Direct sales force Web site Telesales/call center Catalog e-Mail Retail outlets Kiosk? PDA/cell phone?
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© Arvind Rangaswamy, All Rights Reserved
As a Channel, Internet Separates Choice from Purchase For Digital Products
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© Arvind Rangaswamy, All Rights Reserved
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© Arvind Rangaswamy, All Rights Reserved
Impact of Online Channelon Offline Sales
2000 2001 2002 2003 2004 2005 Online sales $44.8B $73.9B $111B $156B $207B $269B Web-influenced offline sales $12.9B $33.8B $73B $146B $268B $378B
Source: Forrester Research, Sept 2000
Currently, most retailers are not able to track customers across web site, catalog, and store.
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© Arvind Rangaswamy, All Rights Reserved
New Types of IntermediationDue to Internet
eTailing: The Internet as a new retail channel
Multi-channel Marketing
New types of Intermediaries (major new channel opportunities of the Net)
Infomediary/Metamediary (Matchmakers and Bundlers)
Marketmakers (e.g., B2B exchanges)
“Speediaries” (e.g., Akamai, FedEx)
…..
Emerging Wireless channels
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© Arvind Rangaswamy, All Rights Reserved
eTailing: Key Questions
Is there any enduring advantage to being a category killer?
Narrow (e.g., fridgedoor.com, uglies.com) versus large assortments (Amazon, eBay, Techsavvy.com; grainger.com)
Is there an enduring advantage in stressing service over price?Service (e.g., amazon.com) versus Price (buy.com and half.com)
Is there any enduring advantage of auctions?
Auctions (e.g., eBay and onsale) versus fixed price (e.g.,Half.com)
Is there an enduring advantage for clicks+bricks?
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© Arvind Rangaswamy, All Rights Reserved
Managing Multi-channel Contacts
Multi-channel marketing is not the same as multiple channel marketing.
Implement a customer-centric business and IT architecture before large-scale deployment of multi-channel marketing.
Ensure consistency of brand and customer experience across channels.
Deploy resources across channels commensurate with the value of each targeted segment.
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© Arvind Rangaswamy, All Rights Reserved
Multi-Channel Brand Managementat Victoria’s Secret
Store Catalog
Web site
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© Arvind Rangaswamy, All Rights Reserved
Multi-channel Promotions atVictoria’s Secret
Stores URL on shopping bags Catalogs in stores Brand ads include URLs
Catalogs Callouts for web site Scent strip for Victoria’s Secret Beauty
Web site Sign up for catalog online e-mail to customers for store-specific promotions Order from catalog online Store locator
Source: Anne Marie Blaire, Victoria’s Secret, June 2000
Note: Products purchased at the web site cannot be returned at a store and vice versa.
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© Arvind Rangaswamy, All Rights Reserved
TraditionalMultiple-Channel Management
Source: Adapted from New York Times. 2000. Know thy customer, 14 February.
WebWeb Tele-centerTele-center Direct SalesDirect Sales RetailerRetailer ResellerReseller DistributorDistributor
Direct ChannelsDirect Channels
Customers and Prospects
Customers and Prospects
Indirect ChannelsIndirect Channels
CompanyCompany
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© Arvind Rangaswamy, All Rights Reserved
Multi-Channel ManagementDriven by CRM Systems
Source: New York Times. 2000. Know thy customer, 14 February.
WebWeb Tele-centerTele-center Direct SalesDirect Sales RetailerRetailer ResellerReseller DistributionDistribution
Direct ChannelsDirect Channels
Customers and Prospects
Customers and Prospects
Indirect ChannelsIndirect Channels
Customer RelationshipManagement
Customer RelationshipManagement
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© Arvind Rangaswamy, All Rights ReservedSource: Adapted from Gates, Bill. 1999. Business @ the speed of thought. New York: Warner Books.
Network Infrastructure
Emerging Channel Structures areFlatter but More Complex
Chips
Sales and Distribution
Databases
Financial Systems
Network Integrators
Application Software
Operating Systems
Retail Stores Online stores Dealers Mail Order
IBM Microsoft Oracle Others
Baan JD Edwards SAP Others
Cisco 3 Com Lucent Others
Entex INS Vanstar Wang
Word Siebel Others
DOS and Windows OS/2 Mac Unix Linux
Computer Compaq Dell IBM Hewlett Packard
Others
Intel Architecture Motorola AMD Others
Meta -m
ediar y(e.g .,
Acc en
tur e)
Cu
stomers
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© Arvind Rangaswamy, All Rights Reserved
Marketing channels are now being subjected to irreversible and major technology-induced transformations:
Undertake channel experiments (with both current and new partners) to design channels that deliver better value to your customers.
If you focus on doing what is right for your customers long-term (and not necessarily what is good for your current channel members), your channel structure will be realigned appropriately in the “converging economy.”
Action Guidelines