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!