Class Discussion Notes MKT 390 - 401

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Class Discussion Notes MKT 390 - 401

• February 20, 2001

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Distribution

• What is a distribution channel?
• A group of interdependent firms that work
  together to transfer product and information from
  supplier to consumer
• Intermediaries
• Firms that appear in the channel between supplier
  and consumer
• Benefits
• Matching buyers and sellers
• Mediating transactions
• Providing cost savings
• Search
• Monetary
• Transactions
• Energy

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Distribution

• Types of intermediaries
• Wholesalers
• Retailers (e-tailers)
• Brokers
• Agents
• New types of Internet intermediaries
• Infomediary
• Metamediary
• Virtual mall

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Distribution

• Functions of the distribution channel
• Transactional functions
• Contacting buyers
• The fourth channel
• Contact can be customized
• Wide range of sources
• Internet is always open
• Marketing communications
• Automated functions
• Communications can be closely monitored and
  easily changed
• Software can track behavior and target
  communications
• Enhanced promotional coordination

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Distribution

• Transactional functions contd
• Matching product to buyer needs
• Shopping agents
• Collaborative filtering agents
• Negotiating price
• Shopping agents
• Bidding
• Processing transactions
• Low cost processing due to labor savings

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Distribution

• Logistical functions
• Physical distribution
• Digital product distribution
• Aggregating product
• Category killers
• Virtual aggregation
• Outsourced logistics
• Product delivery
• Inventory
• Supply chain management
• Product configuration
• Sub-assembly
• Order processing
• Product return management

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Distribution

• Facilitating functions
• Market research
• Free government reports
• Accessibility at users fingertips
• Timely information
• Digital format for ease of use
• Richness of data
• Financing
• Secure electronic transactions (SET)
• US liability limitations
• Overseas concerns
• Line of credit

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Distribution

• The scope of the channel
• Distribution channel downstream from
  manufacturer to consumer
• Supply chain upstream from the manufacturer to
  the raw materials
• Value chain Totally integrated system of the
  previous two points

Supply chain
Distribution channel
Manufacturer
Consumer
Raw materials
Supplier
Wholesaler
Retailer
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Distribution

• Supply chain management
• 3 categories
• Material
• Information
• Financial
• Continuous replenishment
• Build to order
• Interoperability with enterprise resource
  planning systems (ERP)
• Length of distribution channels
• Direct
• Indirect
• Is the channel getting shorter since the
  Internet?
• Disintermediation
• New intermediaries

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Distribution

• Power relationships in the channel
• The Internet has increased the power of buyers
• Buyers have access to more information
• Buyers have access to more suppliers
• The Internet has increased the power of suppliers
• First mover strategy
• Establishing good customer relationships

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Distribution

• E-business models
• A business model defines revenue stream to the
  provider, benefits to the consumer and an
  architecture to deliver those benefits
• Types of e-business models
• Content sponsorship
• Create Web sites
• Attract traffic
• Sell advertising
• Direct selling
• Pros
• Cost savings due to elimination of middleman
• Cons
• High search costs
• Transaction time

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Distribution

• Types of e-business models contd
• Infomediary
• Online organization that aggregates and
  distributes information
• Market research firms
• Permission marketing
• Benefits to consumer
• Get paid for selling space on computer screen
• Benefits to infomediary
• Increase the value of ads
• Benefits to advertiser
• Highly targeted audience

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Distribution

• Types of e-business models contd
• Intermediary models
• Brokers
• Transaction fees
• Do not represent either party
• Do not take title to goods
• Exchanges and auctions
• Benefits to buyer
• Convenience
• Speed of ordering
• Transaction processing
• Lower prices
• Decreased search time
• Benefits to seller
• Interested customers
• Lower customer acquisition costs
• Lower transaction costs

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Distribution

• Brokers contd
• Types of brokers
• Online exchange
• Online auction
• Benefits to seller
• Unloading inventory
• Selling at market price
• Benefits to buyer
• Good deals
• Excitement

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Distribution

• Agents
• Represent the buyer or seller
• Transaction fees or commissions
• Do not take title to the goods
• Types of agents representing seller
• Selling agent
• Affiliate programs
• Manufacturers agent
• Represent more than one seller
• Catalog aggregators
• Benefits to B2B buyers
• Shorter order cycles
• Reduced inventories
• Increased control
• Lower order processing costs

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Distribution

• Types of agents contd
• Metamediary
• Represents multiple firms organized around and
  event or major purchase
• Commissions for referrals
• Benefits for buyers
• Reduced search time
• Provide assurance about vendors
• Facilitate transactions for a group of
  related purchases
• Relevant unbiased content
• Benefits for sellers
• Increased traffic
• Co-branding opportunities

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Distribution

• Types of agents contd
• Virtual mall
• Multiple online merchants
• Listing, transaction and setup fees
• Benefits for buyer
• Branding
• Digital wallets
• Frequent shopper rewards
• Gift registry
• Search capabilities
• Recommendation services

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Distribution

• Agents contd
• Types of agents representing buyer
• Shopping agents
• Conduct searches
• Display merchant and price listings
• Second generation shopping agents
• Measure value
• Reverse auction
• Buyer names price
• Benefit to seller
• Unloading excess inventory
• Reduces channel conflict
• Benefit to buyer
• Lower prices
• Bargaining power
• Cost to buyer
• Reduced choice

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Distribution

• Types of agents representing buyer contd
• Buyer cooperative
• Pools buyers together for price breaks
• Step function pricing strategy
• E-tailing
• Merchants set up an online storefront
• Bit vendors
• Sell and distribute digital products on the Web
• Significantly lower distribution costs
• Tangible products
• Distribution is inefficient
• Premium priced distribution services are passed
  on to the consumer
• Local regulations may add time and cost
• Growing market for home delivery