Summary Juf
1, Most producers do not soil their goods dirccdy to final users. Between producers and final users, stands one or mure marketing channels, a host of mtirtctdng intermedin fliics perform ing A variety of functions.
2. Marketing-channel decisions are onto rig the most critical decisions facing management. The company's chosen channel(s) profoundly affect all other marketing decisions,
3, Companies use intermediaries when they tack the financial resources to carry out direct marketing, when direct marketing is not feasible, and when ihey can earn more by doing so. The must important functions performed by intermediaries are information, promotion, ncgotiatiori-tiKkring. financing, risk taking, physical possession, payment, and title.
4. Manufacturers have many alternatives for reaching a market. They can sell direct or use one-, mo-, or three-level than nets. Deciding which typc(s) of channel to use calls for analysing customer needs, establishing channel ohjcC-livcs, and identifying and evaluating the major alterna tives, including the types and numbers of intermediaries involved in the channel.
Effective channel Management calls lor selecting intermediaries and training and motivating them, The goal is to build a long-term partnership that will be profitable for all chauucl members,
(>, Marketing channels are characterized by continuous and sometimes dramatic change. Three of the most important trends are the growth of vertical marketing Systems, horizontal marketing systems, and multichannel marketing systems.
7. All marketing channels have the potential for conflict and competition resulting from such sources as goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent relationships. Companies can manage conflict by striving for supcrordinatc goals, exchanging people among two or in ore channel levels, coop t ing th e suppo r t of leade rs i 11 d ifferent pa r ts of t h e cl la n -uel. and encouraging joint membership in and between trade associations.
í96 PART i delivering value
!¡. Channel arrari gernerus are up to (be company, huí there aré certa i ti legal a tul ethical issues to he en n si ti ereil with regard to practices such as exclusive dealing or terri Kiries, lying agreements, arid dealers" rights.
9, )>cnmme?ca ho;. grown in Importance a* companies have adopted "brick-anil-click" channel systems. Channel integra titm inusi recognize ihc distinctive strengths o F online a tul offline selling and maximize their Joint contributions.
applications ::
Marketing Debate Does it Matter Where You Are Sold?
Some marketers feel that the image of the particular channel in which they sell Jheir products does no I matter all that matters is that the ri^ht customers shop there and the product is displayed in I he right Way. Others maintain that channel images—such as a retail store—can he critical and must be consistent with the image of the product.
Take a position: Channel images do not really Effect the brand images of the products they sell that much versus Channel images must be consistent with the brand image.
Marketing Discussion
Til int of ynur favor il e re t ail ers. I low bave they integrated their Channel syslem? Hcrwwöuld you like their c han neis to be i ¡negral ed? Do you tise multiple Channels front thcmtfwhy?
A^&on started as ir-e "world's largesl bookstore' in July 1995. it was a virtual bnoKslo'e that physical^ owned no liooks. Many detractors wondered il me online channel was right for hooks. Wi]houl browsing, as in a relail slwc |MHV ccuW boost buyers dearie whei'ief they might i Ke a book? Without a fr errfly, knowledgeable slalf haw could Imoit buyeti find the rit;h[ books? Tne oniy posii ,e side of Ifte newcftanfiei seemed to beiiwiAniaiDfi wouW he able to offer a easily broader sefection of titles than ootid be lound In most local bookstores.
Amazwi look steps lo repl'cate (he features nf a physical bookslore in iis online channel. fin si it TiplitalMl (he 'iricntily. knowledgeable stall" ad-jice llimugli reader book reviews, Anyone can write a review o< a took on Amazon, ana [hise reviews help custodiers pick boons. A btiilfin ranking system tets browsers rank wtifc^i revie.vs are heipiui and wtilch are not. Some tevfiwets even e^joy s kind of fame, writing hundreds of revicv/s over ihe yeajs and garnering loyal iolloivers who gradly boy books based on llieir comments
Second, Amazon tetficated the serendipity of oroivsmg by oilering a per-sona'iietr recommendation service. Amazon realized that if one person is buying the seme book as another person taighi, the two pwpli probably share gimi.!rsr invests and outlooks. Tlws, ths first person (night also be interested in sifter books thai the second poison iMirghl Amazon's personal recommendation service aggregates data on buying patterns In inler iccQmmendatians ol who mighl like which book. The result is a list rienl to every booh saying 'peo-pie who bought this Dor* also bough! the following books..." This irwrtes people to browse Amazon's virtual shelves.
Amazon is also tackling (he last downside ol the virtual diannel.The company has started to offer peete into books' eonlems, index. and beginning pages. In 2UU3., Arnizon pushed ihc virtual channel even lunhei. rtltoflucing a 'search inside 1he booh" feature that tEts customers searcn Ltie enure leit oi 1 ?0.tXKI books—atoul as many lilies as are n a Barnes & Nobis bookstore. The service is Iree.allhtwgh customers must regislei ard have a credit card an lite wilh Amazon. Customers type in a word, name, or phrase, and they get a list ol the book pages in which Ihose '.vords appear. Cusiomers can tfiew an image ol the page and twtt pages on sillier side of r. hut they cannot print She iesulls.
The Inlernel channel tets Amazon do promotions mat a physical boofcstore could not (to. For example, during the ift>3 holiday season. Amazon heltt a star-studded promotion: each day, a celebrated actor, author, director, musician. or media personality ottered a piece ol exclusive online content to Aii:aion.oom shoppers tree nl charge. For example, Michael J. Fox aad Jaift Eliac't enbibited original artwork, Musicians like Bruce Springsteen gave a sneak peak ol an upcoming conceit video and special "behind ihe scenes^ contenl.
Amazon's goal watli the pi emotion v;as lo ceiight customers and to dr.vc irtflrt and increase safes. So, the celebrities also recommended one to three ol their lavnrrle oroducls that were available 0ft Amajon.com They could recommend ineir onvn CDs or meviES, or Iheiy could choose somalli.ntf lliat lliei enjoyed awning inemseives.Havirtg the paiflclpants recommend praducb was a greal way lo introduce shoppers to items Ihey could b^ for the holidays—
Out ¡1 also slowed them to ge; SOCK ■nsight into !he celebriiies. H was a very impactful promotoV said Amazon spokesperson Emily Classman.
By Seeing the Schedule of "appearances" secret, Amazon gave customers an incentive to conic lo Ihe she daily to sec wtio would be makng Ihe nod appearance. The promotion, afong with the extended producl offering and free Shipping lor orders over S25. gave Amazon lis busiesl holiday season evet. More Ihan 2.1 m i:son units were ordered in a single day 24 ilems per second.
Amazon doesn't tiavc a retail presence, and there Tore doesn't need lo worry about pricing differences between online and reiail stores. Retailers who try to operate both channels ion the risk of channel wllict—lutl wars between the online and physical reiail channels over sharing costs ie tj.. marketing}, pr;ce compel ¡¡ion (if Hie online channe undercuts Ihe physical channel), and sharing profils (e.g., when a consumer near a physical stnre buys online).
Go to many Amazon pages and you will find used copies of the book for sale alongside riew copies. These used books are actually sold by independent used booksellers, not by Amazon. Why does Amazon cannibalize its own new-book sales with sales of used boolis that it does not even own? The key rs mat the Iransacl ion fees and pfOiits for a usert book are not si.n-ilar to the proiits from new-boon sales. Amazon's own new-book sales give il higher revenues Ulan helping someone else sell a trsed copy bul the new-book sales also haire much li'gher costs. In 1lie i;nd, helping others lo sell used books brings in bom more profit? and more customers to Amazon's site.
Amazon doesn't fear the reiail tfiannel. In tact, it gets revenue by helping traditional brick-and-mortar retailers like Target .cow and h'orrisinom and Toys "R" Us enier the online world. Not only does Amazon gel a seivice lee for opening the twl ne site, bul it also gets a cut ol the sales sold through the on me enamel, vifiich helped increase Amaroa's overall sales revenues by percenl in 2003. For Amazon, the channel is not about buying wholesale end selling reiail—it is about creating a retail service channel inat connects sellers to consumer.
Discussion Questions
1. wtipt have been ihe Key success (actors for Amazcm?
2. Wrerfi is Amazon vulnerable? What should it watch out (or?
3. What recofliniendaikjiis would you mane to senior marketing executes go>ng forv/aid? What should the company be sure to do with its marketing?
Snores, Eiizabeih West, TMios text?' Potentials. FetsiHry 200i. up 7-a. NHS Swam. "ViniSJQn.cQmi Ttai S&irch fiwc siiion' tofotuattifl Msraguuiwnt journal iJanuiiy-Febo^ 2(XM) 1&-1S: Chris fflytof. "Snan Library," Twttf. Nmcmber 17, 2003. p. GB; Cynttw LWtfjQ, "Amanxi's Lump of Ooul?" ■iVashagtonpffil com, Octotic 22, 20Q3.
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