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Part Three: Chapter 14 Consumer Channels

Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563.

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Part Three: Chapter 14 Consumer Channels

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  1. Internet Marketing & e-CommerceWard HansonKirthi KalyanamRequests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENTTHOMSON BUSINESS and ECONOMICS5109 Natorp BoulevardMason, OH 45040Phone: (800) 423-0563

  2. Part Three: Chapter 14Consumer Channels “For traditional manufacturers, channel conflict is the thorniest issue of all on the Internet.” Mary Modahl, Now or Never: How Companies Must Change Today to Win the Battle for Internet Consumers

  3. Consumer Channels and the Internet • Marketing channels are sets of interdependent organizations that make product or services available for purchase, consumption, use

  4. Consumer Channels and the Internet • Marketing channels are sets of interdependent organizations that make product or services available for purchase, consumption, use • Direct distribution channels generally are simplest and most straightforward

  5. Consumer Channels and the Internet • Marketing channels are sets of interdependent organizations that make product or services available for purchase, consumption, use • Direct distribution channels generally are simplest and most straightforward • But retail intermediaries can reduce effort for producers and consumers

  6. Consumer Channels and the Internet Typical business-to-consumer channels

  7. Consumer Channels and the Internet • Different consumer shopping needs are best met through different channels • Consumer desire for information can be easily met with direct online information • Consumer desire to touch and try on articles of clothing best met with intermediary retailer

  8. Consumer Channels and the Internet Using the iPACE framework in channel design: The impact of the Internet on channel services

  9. Consumer Channels and the Internet • Presales support • Selling through online intermediaries • Selling direct and channel conflict Existing Customers • Reaching new locations • Selling the “Long Tail” • Versioning Expanding Markets • Fixed price and auctions • Opaque liquidators Closeouts Additional online channel opportunities

  10. Existing Customers • Online, before the sale information creates more comprehensive, transparent view of the marketplace • Manufacturer’s web site offers detailed information, configuration possibilities but raises questions about credibility • Third-party sites offer greater credibility and more flexibility

  11. Existing Customers Online connections inform the consumer channel

  12. Existing Customers • Supporting online intermediaries • Web-ready merchandise • Supply chain coordination • Authorization policies for distribution • Minimum Advertised Prices (MAP)

  13. Existing Customers • Encouraging affiliate networks • Unique to online selling • Drive substantial portion of online sales

  14. Existing Customers Affiliates can generate sales leads for commissions

  15. Direct Sales • Advantages to direct online selling • Better able to meet consumer needs • Opportunity to expand into new profit pool • Improved customer knowledge • Hedge against uncertainty, crises at intermediary level

  16. Direct Sales • Main sources of channel conflict • Divergent goals • Disputes over responsibility • Differing perceptions of reality • Poor channel performance, retaliation • Stopping sale of products • Undermining products • Developing alternate supply sources

  17. Direct Sales Balancing direct sales benefits and channel conflict

  18. Direct Sales • Transition and internal opposition • Appeal of graduated approach • Online price setting can be key source of channel conflict (MSRP vs. MAP vs. innovative pricing plans) • Creating direct access agreement • Restructuring organization and reporting systems

  19. Direct Sales How Hewlett Packard transitioned to Internet direct sales

  20. Direct Sales • Lessons from Hewlett Packard transition to direct sales • Follow the customer • Learn by participating • Small, discrete, clear steps

  21. Direct Sales • Lessons from Hewlett Packard transition to direct sales • Follow the customer • Learn by participating • Small, discrete, clear steps • Manage the risk • Clear, consistent communications • Remain focused on customer • Direct selling prices crucial • Compartmentalize information

  22. Expanding Markets • Geographic expansion safer than new product or increasing consumption by current customers • Falling transactional costs online reduce distribution barriers • Broader selection, lower prices at traditional outlets through B2B expansion • Hidden costs from time differences, language barriers, legal implications

  23. Expanding Markets • Assortment expansion as Internet distribution resolves sales and distribution hurdles for some products • Selling the “Long Tail” • “Versioning” to allow core product to reach wider audience at differing price points

  24. Online Closeouts • Reduced inefficiencies in closeout markets through online auctions and closeout online retailers • Challenge of preventing cannibalization of regular channel sales

  25. Online Closeouts Traditional vs. Internet channel flow for closeout customers

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