Marketing Channels 8e
15-1
Chapter 15
ELECTRONIC MARKETING CHANNELS
Teaching Notes
This chapter discusses the advantages and disadvantages of electronic marketing
channels, namely the Internet. If possible, the instructor may want to ensure that his/her
Chapter Objectives
This chapter examines the emerging topic of electronic marketing channels, their
structure, development, and trends, as well as the advantages and disadvantages of these
channels. This chapter closes with the consideration of and the implications of electronic
marketing channels for channel strategy and management.
Learning Objectives
1) Recognize that electronic marketing channels have become an everyday reality.
2) Understand and be able to define what is meant by electronic marketing channels.
Chapter Topics
1) Electronic Marketing Channels Defined
2) Structure of Electronic Marketing Channels
Electronic Marketing Channels
15-2
Chapter Outline
Electronic Marketing Channels Defined
Key Term and Definition
▪ Electronic marketing channels: Defined as “the use of the Internet to make products
Several points of clarification are needed before proceeding.
▪ First, the term available does not imply the physical availability of the product
over the Internet.
Structure of Electronic Marketing Channels
We need to take a more in-depth look at channel structure in terms of three key
phenomena:
• Disintermediation versus reintermediation
A) Disintermediation versus Reintermediation
Recall from Chapter 1 that channel structure was defined as “the group of channel
members to which a set of distribution tasks has been allocated”.
A term has emerged to describe this concept called disintermediation.
Key Term and Definition
▪ Disintermediation: This concept is defined as when intermediaries become
Marketing Channels 8e
15-3
Key Term and Definition
▪ Reintermediation: The process of shifting, changing, or adding middlemen to the
channel.
For example, Amazon.com® is very much a middleman.
B) Information Flow versus the Product Flow
In the very first chapter, we discussed a series of five flows that occur in the marketing
channel: (1) product flow, (2) negotiation flow, (3) ownership flow, (4) information flow,
and (5) promotion flow.
Electronic Marketing Channels
15-4
C) Virtual Channel Structure versus Conventional Channel Structure
Customer demands for real rather than virtual stores, malls, and service facilities will
Developments and Trends in Electronic Marketing Channels
Online shopping grew to almost $175 billion by the end of 2010.
Table 15.1 shows anticipated online retail sales (2009-2015).
Table 15.2 shows projected online sales as a percentage of total sales (2009-2012).
A) Mobile Electronic Channels
Mobile commerce or m-commerce refers to electronic marketing channels that enable
consumers to conveniently shop online from a variety of electronic devices but became
more common with the introduction of smartphones. Smartphones provided an easy
means for consumers on the move to make purchases regardless of the time or of their
location.
Marketing Channels 8e
15-5
Table 15.8 shows the reasons consumers give for not purchasing using smartphones.
B) Electronic Channels on Social Network Sites
Table 15.9 the demographics of social network users..
Social networking sites such as Facebook, MySpace, and Twitter, are becoming
Table 15.10 lists categories of applications used by 18-24 year olds on social networks.
Advantages and Disadvantages of Electronic Marketing Channels
A) Advantages of Electronic Marketing Channels
Five advantages of electronic marketing channels are frequently mentioned for Internet-
based online shopping. These are:
A) Global scope and reach
1) Global Scope and Reach
This high-tech channel structure offers consumers around the world the capability to visit
2) Convenience/Rapid Transaction Processing
Shopping via electronic marketing channels offers greater convenience. Whether or not
3) Information-Processing Efficiency and Flexibility
From both the customers’ and sellers’ perspectives, electronic marketing channels
Electronic Marketing Channels
4) Data-Based Management and Relationship Enhancement
The technology underlying electronic marketing channels enables firms to target
5) Lower Sales and Distribution Costs
In theory, the use of electronic marketing channels can reduce sales and distribution costs
by making it possible to perform distribution tasks more efficiently than through
conventional channels.
B) Disadvantages of Electronic Marketing Channels
Four disadvantages of electronic marketing channels are:
1) Lack of contract with actual products and delayed possession
2) Fulfillment logistics not at Internet speed or efficiency
Marketing Channels 8e
15-7
1) No Contact with Product and Delayed Possession
Products available for sale over the Internet do not allow the customer direct contact with
their products. Moreover, products cannot be demonstrated or tried out and the ambience
2) Fulfillment and Logistics Lag
The Internet does not process and transport physical products. So with the exception of
3) Web Clutter
Literally hundreds of thousands of sellers have established Web sites, making clutter a
4) Ignores Personal and Social Shopping Motives
Edward Tauber in an article published over three decades ago entitled “Why Do People
Shop?” found that people do not shop simply to make purchases. Rather the desire to
Implications for Marketing Channel Strategy and Management
Electronic Marketing Channels
15-8
In Chapter 5, we discussed the six basic distribution decisions that many firms and
A) Objectives and Strategies of the Firm and Electronic Marketing Channels
Probably the most basic issue the channel manager will need to consider is whether
B) Role of Electronic Marketing Channels in the Marketing Mix
Electronic marketing channels made possible by the Internet may change the blend of the
marketing mix. Specifically, the fourth P, place (distribution) may assume a larger role
relative to the other three variables.
C) Channel Design and Electronic Marketing Channels
The seven-phase channel design paradigm, as a framework for setting up new channels of
distribution or modifying existing channels does not change in any fundamental sense
with the emergence of electronic marketing channels. This relatively new technology
Marketing Channels 8e
15-9
D) Channel Member Selection and Electronic Marketing Channels
It is key to recognize that, despite the Internet, channel member selection will remain an
important decision for most producers and manufacturers. Why?
E) Channel Management and Electronic Marketing Channels
What is important to keep in mind about the implications of electronic marketing
channels for channel management decisions is that channel management is likely to be
more challenging and complex because of this technology.
F) Evaluation and Electronic Marketing Channels
Nothing much of the substance of channel member performance evaluation is likely to
change as a result of electronic marketing channels. Performance expectations, criteria,
Answers to Review Questions
1. The Internet has augmented traditional retailing and wholesaling structure, shopping
2. Electronic marketing channels are defined in the text as the use of the Internet to
make products and services available so that target markets with access to computers
Electronic Marketing Channels
15–10
3. Not necessarily. Often and perhaps in the majority of cases, customers use the
Internet for information gathering purposes. Then they either go to a store to buy the
product or order via mail order using the telephone.
4. Disintermediation refers to the elimination of intermediaries from the channel
5. Not necessarily. It is commonly believed that the use of the Internet as an electronic
channel will reduce the role of middlemen because producers and final customers all
6. As discussed in question 5 above, basic economic principles still hold over new
technologies no matter how powerful these technologies may be. Thus, in the end,
7. The five flows in channels are: 1) product flow, 2) negotiation flow, 3) ownership
flow, 4) information flow, and 5) promotion flow.
Marketing Channels 8e
15–11
8. That depends. Virtual channel structure may be appealing to significant segments of
consumers who love to shop online. But the inherent limitations of the virtual channel
9. Some of the developments and trends are:
▪ Consumers of all ages shop online, but the highest percentages are the age range
of 25-54. The oldest age group (over 65) accounts for the smallest percentage.
▪ For incomes under $25,000 up to $75,000, there appears to be a positive
relationship between higher income and inclination to shop online. After
10. Key advantages of electronic marketing channels:
1) global scope and reach
11. Key disadvantages of electronic marketing channels:
1) lack of contact with actual products and delayed possession
12. The key implications of electronic marketing channels for the major areas of channel
decision making are as follows:
1) Electronic marketing channels have broadened the range of channel options
available to the firm.
Electronic Marketing Channels
15–12
13. The answer to this question hinges on the word fundamentally. If it means the
underlying concepts based on economic and organizational theory, the answer is no.
Commentaries on Issues for Discussion
1. While students may debate both sides of this question, and although there is no
definitive answer to it, reasonably strong arguments can be made for disagreeing with
the question. First, is the problem of order fulfillment of physical products that cannot
literally be transported over the Internet. Consequently, various kinds of
2. Answers in the affirmative will suggest that Maytag® has identified that their
decision not to allow consumers to purchase products online meets the synergy and
congruency of the channel decision with the company’s corporate objectives. In
Marketing Channels 8e
15–13
3. Considering the target market for Office Depot® is small to mid-size firms or
independent business owners, the speed and convenience of ordering online is a
competitive advantage to Office Depot because it saves their customers time and
trouble.
4. Flash sales are members only luxury online shopping sites that offer deep discounts
for a limited time. While Gilt.com is one of the best known sites, others like
Amazon.com which launched MyHabit.com, and Nordstrom Inc which bought
HauteLook, are also well known for their flash sites. Such sites offer up to 70 percent
5. Without a doubt m-commerce is already well established as an important marketing
channel. What is exciting about proximity marketing is that it continues to adapt by
Electronic Marketing Channels
incorporating applications that respond to changing needs and technology. With the
6. Taube argued that people do not shop simply to make purchases, rather shopping is a
social experience related to a range of personal and social motives. Perhaps it is the
social motives for shopping (e.g., gaining social experience outside the home,
communication with others having similar interests, peer group attraction, status and