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Marketing Strategy: Key Concepts 8
Use intermediaries who perform functions more efficiently. Functions include:
information flow
promotion
negotiation
ordering
financing
risk taking
physical possession
payment and title
Two key issues to support intermediaries
Improve exchange efficiency (5 mf. and 5 customers = 25 transactions with no intermediary; 10 transactions with one intermediary)
specialize in functions listed above
Types of utility provided by intermediaries:
Time
Place
Possession
Form
Channel decisions include:
direct selling versus using 1 or 2 or more intermediaries
Manufacturer -> Consumer
Manufacturer -> Retailer -> Consumer
Manufacturer -> Wholesaler -> Retailer -> Consumer
Manufacturer -> Distributor -> Wholesaler -> Retailer -> Consumer
Examples
analyze customers' desired service outputs (size, waiting time, spatial convenience, support etc.)
channel objectives and constraints (based on product characteristics, intermediaries, environment and competitors channels)
buyer behavior (consumer and channel)
buyer demographics
identify channel alternatives (exclusive (BMW) vs. selective (clothes lines) vs. intensive (orange juice))
competitors' channels
channel terms and responsibilities
Channel incentives (trade promotions etc.)
evaluate channel by economic, adaptive and control criteria
Direct to market =
Greater fixed cost
Greater effectiveness / control over contacts
Greater control over targeting
Indirect to market =
Greater variable cost
Less control / responsibility
Greater coverage
Knowledge of customer within channel
Issues in selecting channel partners:
What role do partner play?
What margin do we give?
Can / do they carry competing / complementary product, private labels
How do we incentivize
Do they pass on price cuts?
How do we control for cannibalization w/ other channels (direct)?
Lock-in to channel decisions
Channel decisions impact on other elements of the mix
Life cycle issues change channel strategy.
Early stage: Specialized channels
Growth stage: Alternative channels
Maturity stage: Mass channels
Early stage: high control, service and delivered price
Later stage: increasing conflict, range of providers, complexity of channel
Channel member relationships
Impact of trade promotions: distortion effects?
Zero sum Relationship w/ channel members?
Need to build symbiotic relationships with channel members.
Channel modification issues
Trends include vertical, horizontal and multi-channel conflict.
Internet has had significant impact re: building new channels and changing industries through disintermediation and information flow issues.
Legal and ethical issues:
Exclusive dealing
Exclusive territories
Tying agreements
Dealers' rights
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