Studied by 0 people
The key objective of this chapter is to develop an understanding of the Internet as a distribution channel, identify online channel members, and analyze the functions they perform in the channel. You will learn how the Internet presents opportunities to alter channel length, restructure channel intermediaries, improve the performance of channel functions, streamline channel management, and measure channel performance.
Distribution Channel
A distribution channel is a group of interdependent firms that transfer product/service and information from the supplier to the consumer.
Participants in distribution channel
03 participants:
Producers: Manufacturers, or originators of the product or service
Intermediaries: Firms that match buyers and sellers and mediate the transactions among them (e.g., retailers)
Buyers: Consumers or users of the product or service
Elements in forming a company’s channel structure
1. Types of channel intermediaries
2. Length of the channel
3. Functions performed by members of the channel
4. Physical and informational systems that link the channel members and provide for coordination and management of their collective effort to deliver the product or service.
Disintermediation
the process of eliminating traditional intermediaries
Functions of a distribution channels
Channel functions can be characterized as follows:
Transactional (making contact with buyers, marketing communications, matching products to buyer’s needs, etc);
Logistical (physical distribution activities such as transportation and inventory storage, often outsourced to third-party specialists like UPS, and FedEx);
Facilitating (performed by channel members including market research and financing).
Which of the following statements about Supply Chain Management is true?
A) SCM only focuses on material flow.
B) SCM integrates all three flows to optimize operations.
C) Information flow is less important than material flow.
D) Financial flow does not impact supply chain efficiency.
Correct Answer: B) SCM integrates all three flows to optimize operations.
Supply Chain Management (SCM) refers to the coordination of flows in 03 categories:
Material (eg: physical product)
Information (eg: demand)
Financial (eg: credit terms)
The most important flow in SCM is___________
A, Information
B, Material
C, Financial
A, Information.
Because the creation of the physical product and the financing depend on the information
Electronic Data Interchange (EDI) variables
Definition: the computerized exchange of information between organizations, typically used to eliminate paperwork.
EDI is based on three key variables: the openness of the system, the transport method (Internet or non-Internet), and the type of technology used for implementation. Combining these variables in different ways shows the five flavors of EDI most commonly used today
How does the Internet improve the efficiency of distributing tangible goods and services?
A) By eliminating the need for any distribution channels
B) By establishing effective coordination mechanisms between parties in the distribution system
C) By reducing the number of geographical areas served
D) By increasing reliance on traditional showroomsCorrect
B) By establishing effective coordination mechanisms between parties in the distribution system
E-Business Models
Which of the following best describes the content sponsorship model in e-commerce?
A) Selling physical products directly to consumers
B) Creating websites that attract traffic and selling advertising space
C) Offering subscription-based services for premium content
D) Providing customer support for online transactions
B) Creating websites that attract traffic and selling advertising space
Explanation: The content sponsorship model involves
Firms create Web sites, attract traffic, and sell advertising.
All the major portals utilize this model (Google, Yahoo!)
Content sponsorship is often used in combination with other models to generate multiple revenue streams.
How do firms using the content sponsorship model often enhance their revenue streams?
A) By increasing product prices on their e-commerce platforms
B) By combining content sponsorship with other business models, such as retail sales
C) By reducing the quality of their content to attract more visitors
D) By limiting access to their websites to paid subscribers only
B) By combining content sponsorship with other business models, such as retail sales
Explanation: Firms utilizing the content sponsorship model frequently employ a combination of strategies to diversify their revenue streams.
Eg: an online retailer like Buy.com may sell advertising space on its site while also selling products, allowing them to generate additional income and potentially lower prices for consumers. (E-marketing, 4th edition)
—> This approach maximizes revenue opportunities beyond just ad sales.
Which of the following products is most likely to benefit from a direct selling model due to its nature?
A) Heavy machinery
B) Large appliances
C) Bulk raw materials
D) Digital products like software
B) Digital products like software
Explanation: Digital products, such as software, require no physical inventory and can be delivered instantly online, making them well-suited for direct selling.
This model allows producers to bypass intermediaries entirely, reducing costs and increasing efficiency in distribution.
How has the Internet influenced direct selling and disintermediation?
A) It has made it harder for producers to reach consumers directly.
B) It has eliminated the need for all intermediaries.
C) It has facilitated easier connections between producers and consumers.
D) It has increased the costs associated with direct selling.
C) It has facilitated easier connections between producers and consumers.
Explanation: The Internet has significantly enhanced the ability of producers to sell directly to consumers or business customers by providing platforms that eliminate traditional intermediaries —> This has led to a rise in disintermediation, allowing manufacturers to reach their target markets more efficiently.
Informediary
An infomediary is an online organization that aggregates and distributes information.
The form infomediary is a market research firm and a variation on the content sponsorship model (permission marketing).
Usually, the infomediary compensates the consumer for sharing information.
What is one of the primary benefits of the infomediary model for consumers?
A) Receiving ads that are irrelevant to their interests
B) Increased control over how they receive marketing messages
C) Higher prices on products due to intermediary fees
D) Limited access to product information
B) Increased control over how they receive marketing messages
Explanation: The infomediary model was designed to give consumers more control over their marketing experiences by allowing them to receive advertisements that are specifically targeted to their interests. This personalization enhances consumer satisfaction and engagement with marketing messages.
How does the infomediary model benefit advertisers?
A) By allowing them to market without consumer consent
B) By providing access to a broad audience without targeting
C) By enabling them to reach a highly targeted audience that has opted in
D) By increasing the costs associated with advertising
C) By enabling them to reach a highly targeted audience that has opted in
Explanation: Advertisers benefit from the infomediary model because it allows them to market directly to a specific audience that has expressed interest in their products or services. This targeted approach increases the effectiveness of advertising campaigns and improves return on investment (ROI).
03 main intermediary models are: __________, ________, ________
Brokerage models, Agent models, and Online retailing
What is a primary function of brokers in the brokerage model?A) To create a market for buyers and sellers to negotiate and complete transactions
B) To represent either the buyer or seller in transactions
C) To manufacture products for direct sale to consumers
D) To provide financing options for buyers
A) To create a market for buyers and sellers to negotiate and complete transactions
Explanation: Brokers serve as intermediaries who facilitate transactions between buyers and sellers by creating a market where they can negotiate and complete deals. They typically charge transaction fees but do not represent either party in the negotiation process.
Which of the following is a benefit of using an online brokerage model for buyers?
A) Higher transaction fees compared to traditional brokers
B) Increased search time to find suitable sellers
C) Convenience and speed of order execution
D) Mandatory listing fees for all transactions
C) Convenience and speed of order execution
Explanation: One of the key benefits of online brokerage models for buyers is the convenience and speed with which they can execute orders. Online platforms allow buyers to quickly find products, compare prices, and complete transactions without the delays often associated with traditional brokerage methods.
What is the key difference between Broker and Agent Model?
Unlike brokers, agents do represent either the buyer or the seller depending on who pays their fee.
How do brick-and-mortar retailers benefit from establishing an online presence, and what challenges do they face compared to pure online retailers?
Answer: Brick-and-mortar retailers can benefit
from an online presence by reaching a larger audience
enhancing brand visibility beyond their physical locations.
attract customers who prefer shopping online while leveraging their established brand equity.
However, they face challenges:
adapting to the fast-paced online market,
managing inventory across multiple channels,
competing with pure online retailers (that may be more agile and innovative in meeting customer needs without the constraints of physical stores).
