University of Washington EMBA Program
“Channel Strategy & Market Mediation”
(Place!)
Instructor: Elizabeth Stearns
StrategyFormulation
ProgramFormulation
Contention
DifferingPerspectives
Marketing
FinanceHuman Resources
R&D
Operations
Sales
Project Planning
Consensus Execution
CoordinationCreativity
The Strategy Development and Implementation Process
The Marketing Toolbox
Product
MarketingMix
Place(Distribution)
Service
Promotion(Communications)
Price
Product Variety Quality Design Features Brand Name Packaging Sizes Services Warranties Returns Price
List Price Discounts Allowances Payment Period Credit Terms
Promotion (Communications)
Sales Promotion Advertising Salesforce Public Relations Direct Marketing
Channels Coverage Assortments Locations Inventory Transport
Product
Place (Distribution) Target
Market
Marketing Mix
Designing Offers for Customers
Offer
CostValue
PriceTimeEffortRisk
BrandEquity
Product
Delivery Services
TechnicalInnovation
SalesRelation-ship
Distribution (Place)
• Classic Definition: Distribution is the means by which we make the product available to the customer
Channels of Distribution (Place)
Contemporary DefinitionContemporary DefinitionDistribution embraces the sequence of intermediaries (sets of interdependent organizations) involved in the process through which marketing flows move (e.g., physical possession, ownership, money, information, risk, negotiation, payment)
– Make available
• The Right Product (Service OutputsAssortment Utility)
• At the Right Place (Spatial ConveniencePlace Utility)
• At the Right Time (Temporal Utility)
Functions in Marketing Channels
• Logistics: Carry Inventory
• Generate Demand/Convey the Offer
• Logistics: Distribute the Physical Product or Service
• Provide After Sale Service
• Extend Credit
Key Channel Decisions• Logistics Issues
– Inventory– Transportation
• Selection Issues:
– Channels (vertical): how long; direct versus multi-level
– Coverage (horizontal): intensive, selective, exclusive
– Locations
InventoryWhen to order
How much to orderJust-in-time
InventoryWhen to order
How much to orderJust-in-time
CostsMinimize Costs ofAttaining Logistics
Objectives
CostsMinimize Costs ofAttaining Logistics
Objectives
WarehousingStorage
Distribution
WarehousingStorage
Distribution
Order ProcessingSubmittedProcessed
Shipped
Order ProcessingSubmittedProcessed
Shipped
Logistics
Functions Transportation Water, Truck, Rail, Pipeline & Air
Logistics Systems
©2000 Prentice Hall
RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
WaterLow cost for shipping bulky, low-value
goods, slowest form
WaterLow cost for shipping bulky, low-value
goods, slowest form
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
AirHigh cost, ideal when speed is needed or to
ship high-value, low-bulk items
AirHigh cost, ideal when speed is needed or to
ship high-value, low-bulk items
Transportation Modes
©2000 Prentice Hall
1. Speed.
2. Dependability.3. Capability.4. Availability.5. Cost.
Checklist for ChoosingTransportation Modes
©2000 Prentice Hall
Rail 3 4 2 2 3
Water 4 5 1 4 1
Truck 2 2 3 1 4
Pipeline 5 1 5 5 2
Air 1 3 4 3 5Source:Source: See Carl M. Guelzo; See Carl M. Guelzo; Introduction to Logistics Management Introduction to Logistics Management Englewood Cliffs, NJ:Englewood Cliffs, NJ:Prentice Hall, 1986), p. 46.Prentice Hall, 1986), p. 46.
(Door-to-door
deliverytime)
(MeetingScheduleson Time)
(Ability toHandleVarious
Products)
(No. ofGeographic
PointsServed)
(PerTon-Mile)
Speed Dependability Capability Availability Cost
©2000 Prentice Hall
Rating Transportation Modes
Online Marketing ChannelsOnline Marketing Channels
Electronic PresenceCorporate WebsiteMarketing Website
Electronic PresenceCorporate WebsiteMarketing Website
Advertising OnlinePlace Ads in Special Sections of Online Services
Place Ads in Certain Internet NewsgroupsBuy Online Ads That Pop Up While Consumers are Surfing
Advertising OnlinePlace Ads in Special Sections of Online Services
Place Ads in Certain Internet NewsgroupsBuy Online Ads That Pop Up While Consumers are Surfing
Participating in Forums, Newsgroups & Web CommunitiesForums: Discussion Groups on Commercial Online Services
Newsgroups: Internet Version of ForumsWeb Communities: Sites Where Members Exchange Views Online
Participating in Forums, Newsgroups & Web CommunitiesForums: Discussion Groups on Commercial Online Services
Newsgroups: Internet Version of ForumsWeb Communities: Sites Where Members Exchange Views Online
Using E-Mail and WebcastingCustomers Send Questions, Suggestions & Complaints Via E-Mail
Webcasting: Automatic Downloading of Information to PC’s
Using E-Mail and WebcastingCustomers Send Questions, Suggestions & Complaints Via E-Mail
Webcasting: Automatic Downloading of Information to PC’s
©2000 Prentice Hall
Challenges for Online Marketers
• Limited Consumer Exposure & Buying
• Skewed User Demographics & Psychographics
• Chaos & Clutter (metamediary opportunity?)
• Security
©2000 Prentice Hall
Channel Design: Considerations
• Who is our customer?
• What kind of benefits (service outputs) do we want to deliver to end users/purchasers?
• What activities must be performed in order to generate and deliver these service outputs?
• Which organization is best able to provide the service outputs efficiently and effectively?
First, the basics:Why do mediators exist?
Mediator
Marketers
Customers Customers
Marketers
(nxm) contact points (n+m) contact points
Disintermediation
Internet
Marketers
Customers
X
Disintermediation As a Myth
• You can eliminate a mediator, but you cannot eliminate the mediator’s functions (promotion, inventory, receivables, assumption of risk, etc.).
• All you end up doing is shifting the functions either up the channel to marketers, or down the channel to customers.
• Disintermediation is merely an evolution! Some disappear, and others are born.
Metamarkets: Markets in our minds
• Metamarkets are clusters of related activities that customers engage in to satisfy a distinct set of needs.
• Boundaries of metamarkets are derived from activities that are closely related in the minds of customers, and not from the fact that they are created or marketed by firms in related industries.
• Metamarkets can be organized around major assets, major interests, major life events, or major business processes.
Examples of metamarkets
•Consumer metamarkets– Home ownership– Parenting– Wedding– Cooking– Healthy living– Self development– Active travel
•Business metamarkets– Corporate Travel & Entertainment– Logistics management– Procurement– Human resource management
Why friction happens
• Customers need to search and evaluate a plethora of vendors in a deconstructed world.
• Meanwhile, marketers need to spend increasing sums of money for share of customer attention.
• The inefficiencies are compounded by the fact that there is a disconnect between how customers think about buying, and how marketers think about selling in an exchange.
• This disconnect creates friction in exchanges.
Understanding the disconnect
• Customers think in terms of activities, while sellers think in terms of products.
• Activities that are logically related in cognitive space may be spread across very diverse markets in the marketplace.
• The boundaries of activity-centric markets are very different from the boundaries of product-centric markets.
Example - The automobile metamarket
Newspaperclassifieds
Automagazines
Used cardealers
New cardealers
Insurancecompanies
FinancingCompanies
Consumer Reports
Mechanics
Sparesdealers
Serviceshops
Auto manufactureradvertising
Peers andexpertsEvaluating
Buying
Stayinginformed
FinancingRepairing
Insuring
Servicing
Reselling
Negotiating
Cognitivespace
Marketplace
Metamediaries and the auto metamarket
Evaluating
Buying
Stayinginformed
FinancingRepairing
Insuring
Servicing
Reselling
Negotiating
Cognitivespace
New car dealers
Sparesdealers
Used cardealers
FinancingfirmsWarranty
firmsMechani
cs
Newspaper
association
Automfrs.
Insurancecompanies
MarketplaceMetamediaryMarketspace
Metamediaries mediate between and among buyers and sellers in metamarkets.
BuyerCommunity
SellerCommunity
Edmunds.com: An auto metamediary
•Edmunds.com
AutobyTelPriceAutoOutlet.comGEICOJC Whitney
Warranty GoldCarFinance.comADPAuto manufacturers
Metamediaries galore...
Cooking
Weddings
Automobiles
Home Improvement
Parenting
Summary
• An understanding of changing market dynamics is important in strategic and implementation decisions for distribution and logistics activities.
• Rethinking boundaries around customer activities and business processes, can create new markets called metamarkets that look very different from traditional markets.
• Metamarkets realign traditional markets with customer activities and business processes. This presents exciting new mediation opportunities for metamediaries.
Thank You!