Marketing Chanel Management
Lecture 1
Retail/channel -> way to get the product to customer -> place of the 4 p’s
- Marketing channel=path to the consumer
o A set of organizations have to work together
Middle men: reseller vs agent
- Reseller buys a product from manufacturer and gets all rights.
- Agent doesn’t actually buy the goods, but get a commission from selling.
E-commerce destroyed physical retailers
- Napkin model (why is e-commerce so disruptive?) ->
selection is important -> offer everything in one place ->
creates customer experience as you don’t have to look
far -> brings more consumers to platform -> more
sellers
Price:
- Pricing algorithm compares the lowest prices across the retail sector for
particular products – including those retailers selling in bulk and where
membership costs are needed (such as Costco).
- Moving towards individual pricing
Fulfillment:
- Network of Distribution Centers (DSs)
- Prime Subscription guarantees free 2-day delivery (or used to...)
Because of this, consumers want everything, right here, right now, at the lowest cost
and zero willingness to pay. Customers have changed and the retailers have to deal
with it. The only weak spot of e-commerce that you don’t have the product straight
away when you buy it -> fulfillment costs are growing (costs of getting the product to
consumer).
Walmart sees its store estate as key for successful e-commerce fulfilment ->
Networks of stores act as distribution centers.
Rethink stores:
- Range
- Price
- Proximity
-> experiential, social, frictionless, curated -> bring in experiences (e.g.
technology)
,Store renaissance -> online to offline
Access to customer = power (stores have data about customers
Routes to consumers -> omni=added complexities
E-commerce:
- Pureplay
- Omni-channel
- Quick commerce
- D2C
- Social commerce
Online also leads to visibility for a brand as there is so much
Pre-lecture 2
Direct channel -> don’t use any middlemen: sell directly
- Manufacturer remains owner
o Holds inventory
o Sets consumer price
- B&M (brick & morter) or online retailer
Indirect channel -> use other channels: middlemen/resellers/retailers:
- Independent/third parties
o Buy & own products
o Hold inventory
o Set consumer price (not the manufacturer)
- Physical or digital
3P marketplace (third party)(indirect channel):
- Agent
o Don’t buy/own products
o Do not hold inventory
o Don’t set price
o Bring together manufacturers & consumers -> facilitate transactions
- Blended version: e.g. amazon is an online retailer & 3Pmarketplace
Profit generation:
- Online retailer:
o Gross profit: cross margin * units sold
o Costs: inventory costs, fulfillment costs
- Market place:
o Gross profit: commission * units sold (& minimal step-in fee)
, o Costs: administrative costs
Why do manufacturers sell on marketplaces?
- Huge consumer traffic
o Long-tail products: demands are quite low
o Cross-border selling: international
- Quick launch
o Low set-up costs
o No digital worries
Why not?
- In the blended version amazon example: they learn from their marketplace
and include best-sellers in their own assortment.
Disadvantages for retailers when expanding marketplaces:
- No control over prices
- No control over fulfillment
o May lead to inconsistent delivery times, fees & return policies
- No control over product presentation
o May lead to inconsistent & misleading information about product
characteristics & availability
- Damaged retailer equity
Why direct? COGS (cost of goods sold) -> likely higher (gross) profit margin for
manufacturer.
Why indirect?
- Amount of sales might be higher (depends on value added by middlemen):
o Bulk breaking: allow buying in small lots
o Assortment convenience: offer a wide variety of goods
o Time convenience: reduce waiting time
- Distribution costs are lower for manufacturer:
o Less contact lines. Cheaper for manufacturer
o Cost of a contact line: non-routine transaction if directly with
manufacturer vs routine transaction with middlemen which is cheaper
You can do away with the middleman, but you can’t do away their functions.
Nowadays, a channel business model is a combination of all; direct, indirect, B&M
and online.
Multichannel:
- Avoid under-distribution:
Lecture 1
Retail/channel -> way to get the product to customer -> place of the 4 p’s
- Marketing channel=path to the consumer
o A set of organizations have to work together
Middle men: reseller vs agent
- Reseller buys a product from manufacturer and gets all rights.
- Agent doesn’t actually buy the goods, but get a commission from selling.
E-commerce destroyed physical retailers
- Napkin model (why is e-commerce so disruptive?) ->
selection is important -> offer everything in one place ->
creates customer experience as you don’t have to look
far -> brings more consumers to platform -> more
sellers
Price:
- Pricing algorithm compares the lowest prices across the retail sector for
particular products – including those retailers selling in bulk and where
membership costs are needed (such as Costco).
- Moving towards individual pricing
Fulfillment:
- Network of Distribution Centers (DSs)
- Prime Subscription guarantees free 2-day delivery (or used to...)
Because of this, consumers want everything, right here, right now, at the lowest cost
and zero willingness to pay. Customers have changed and the retailers have to deal
with it. The only weak spot of e-commerce that you don’t have the product straight
away when you buy it -> fulfillment costs are growing (costs of getting the product to
consumer).
Walmart sees its store estate as key for successful e-commerce fulfilment ->
Networks of stores act as distribution centers.
Rethink stores:
- Range
- Price
- Proximity
-> experiential, social, frictionless, curated -> bring in experiences (e.g.
technology)
,Store renaissance -> online to offline
Access to customer = power (stores have data about customers
Routes to consumers -> omni=added complexities
E-commerce:
- Pureplay
- Omni-channel
- Quick commerce
- D2C
- Social commerce
Online also leads to visibility for a brand as there is so much
Pre-lecture 2
Direct channel -> don’t use any middlemen: sell directly
- Manufacturer remains owner
o Holds inventory
o Sets consumer price
- B&M (brick & morter) or online retailer
Indirect channel -> use other channels: middlemen/resellers/retailers:
- Independent/third parties
o Buy & own products
o Hold inventory
o Set consumer price (not the manufacturer)
- Physical or digital
3P marketplace (third party)(indirect channel):
- Agent
o Don’t buy/own products
o Do not hold inventory
o Don’t set price
o Bring together manufacturers & consumers -> facilitate transactions
- Blended version: e.g. amazon is an online retailer & 3Pmarketplace
Profit generation:
- Online retailer:
o Gross profit: cross margin * units sold
o Costs: inventory costs, fulfillment costs
- Market place:
o Gross profit: commission * units sold (& minimal step-in fee)
, o Costs: administrative costs
Why do manufacturers sell on marketplaces?
- Huge consumer traffic
o Long-tail products: demands are quite low
o Cross-border selling: international
- Quick launch
o Low set-up costs
o No digital worries
Why not?
- In the blended version amazon example: they learn from their marketplace
and include best-sellers in their own assortment.
Disadvantages for retailers when expanding marketplaces:
- No control over prices
- No control over fulfillment
o May lead to inconsistent delivery times, fees & return policies
- No control over product presentation
o May lead to inconsistent & misleading information about product
characteristics & availability
- Damaged retailer equity
Why direct? COGS (cost of goods sold) -> likely higher (gross) profit margin for
manufacturer.
Why indirect?
- Amount of sales might be higher (depends on value added by middlemen):
o Bulk breaking: allow buying in small lots
o Assortment convenience: offer a wide variety of goods
o Time convenience: reduce waiting time
- Distribution costs are lower for manufacturer:
o Less contact lines. Cheaper for manufacturer
o Cost of a contact line: non-routine transaction if directly with
manufacturer vs routine transaction with middlemen which is cheaper
You can do away with the middleman, but you can’t do away their functions.
Nowadays, a channel business model is a combination of all; direct, indirect, B&M
and online.
Multichannel:
- Avoid under-distribution:
