Summary Digital Marketing Strategy
Part 3 The digital marketing mix
Chapter 10 – Place and the digital environment; convenience to the consumer
In the digital channel why is the P of place still relevant?
Organizations that offer products or services through the digital channel are, of
course, located somewhere. If those products or services have a physical
component, the organizations must also consider ‘classic’ distribution issues. It is well
known that the P of location relates to the distribution range, with the aim of
maximizing consumer convenience and minimizing inventory management, storage
and transportation costs. In other words; organizations want people to easily receive
their products or services without incurring high costs.
10.1 Distribution and the digital channel
All parties that manage the flow of goods can be referred to as distribution channels.
The question of which distribution channel to choose is one of the major dilemmas
that modern marketing professionals need to find a solution for. Such decisions are
closely linked to the organization’s strategy and are therefore less straightforward
than might initially be reckoned. This is not only because digitization has shaken up
the distribution channel structure, but also because some channels have been
reshaped or even sealed shut. Distribution channels can be opened as quickly as
they can be closed again.
10.1.1 Distribution and channel management
The purpose of a distribution channel is to make the right quantity of the right product
or service available at the right place at the right time.
A distribution channel is a set of independent organizations involved in making a
product of service available for consumption.
Traditionally, three channel structures could be identified. In the direct channel
structure, the producer supplies directly to the consumer. In the case of an indirect
channel structure, there is an intermediary and in a hybrid channel structure, there is
a combination of the first two variants. In the digital setting, direct and hybrid
channels are on the march.
Intermediaries usually create ‘economies of distribution’ by promoting the efficiency
of the distribution process. Intermediaries perform three basic functions that
correspond to the essential goals of distribution channels, regardless of whether it is
the digital or physical environment:
Sorting function reducing the discrepancy between assortments. For
example, a supermarket like Whole Foods Market, recently bought by
Amazon, puts many different products from many different manufacturers on
their shelves. These are available in small quantities for consumers.
Transaction function intermediaries create routine for transactions and
minimize distribution costs. Standardization of deliveries, payments and
, communications provides a boost to effectiveness and efficiency. PayPal is an
example.
Search function intermediaries facilitate the search process for both
producers and consumers by structuring information that is essential for both
parties.
As indicated earlier, such distribution functions are not exclusive to the digital
channel. One reason for this is that all sellers also have to work with intermediaries to
find target audiences. The influence of digitization on the distribution channel is thus
extremely high, meaning that understanding this influence is essential for all
marketers. The following digital effects are most relevant to distribution:
The death of distance distance does not affect the cost of digital
communication. Many products – music, software, videos – can be shipped
almost without cost to any place.
The homogenization of time web shops do not need to be closed, call
centres are more often available in the evening and a bank payment can be
executed while people are dreaming. Time is thus homogenized and uniformly
consistent for all buyers, suppliers and sellers.
The irrelevance of location if the internet connection works, people can
order digitally. Comparing traditional record and CD stores with a digital
provider like iTunes will make clear that the only real similarity between the
two is the industry.
If the three basic functions of distribution channels are offset against the effects of
digitization, this creates the Digital Distribution Mix. This tool can be used to identify
possibilities for improving or changing the digital distribution strategy of an
organization. Like most complex organizational phenomena, the different forces
interact and often affect each other. This matrix will help organizations to understand
the impact of digitization on the most important distribution functions.
10.1.2 Digital channel conflicts
The internet has not only redefined the channel functions. It is also a potential source
of conflicts and tensions between producers, retailers and intermediaries. In principle,
any producer can of course choose to sell directly to end users at any time. A direct
digital channel strategy can put pressure on relationships between supplier, producer
or service provider and its intermediaries. This is usually called a digital channel
conflict.
A digital channel conflict is a conflict that occurs in a digital environment when
producers, suppliers or service providers compete destructively with each other or
with intermediaries targeting the same markets, or when the digital channel is
implemented by a producer or supplier and thereby destructively competes with the
traditional bricks and mortar channel.
To determine an appropriate digital conflict management strategy, organizations
must first identify the internal digital channel conflict environment. The ICCM (Internet
Channel Conflict Measurement) model can prove quite useful for this. After
answering several questions, the style of the organization can be determined. The
following types are possible:
Part 3 The digital marketing mix
Chapter 10 – Place and the digital environment; convenience to the consumer
In the digital channel why is the P of place still relevant?
Organizations that offer products or services through the digital channel are, of
course, located somewhere. If those products or services have a physical
component, the organizations must also consider ‘classic’ distribution issues. It is well
known that the P of location relates to the distribution range, with the aim of
maximizing consumer convenience and minimizing inventory management, storage
and transportation costs. In other words; organizations want people to easily receive
their products or services without incurring high costs.
10.1 Distribution and the digital channel
All parties that manage the flow of goods can be referred to as distribution channels.
The question of which distribution channel to choose is one of the major dilemmas
that modern marketing professionals need to find a solution for. Such decisions are
closely linked to the organization’s strategy and are therefore less straightforward
than might initially be reckoned. This is not only because digitization has shaken up
the distribution channel structure, but also because some channels have been
reshaped or even sealed shut. Distribution channels can be opened as quickly as
they can be closed again.
10.1.1 Distribution and channel management
The purpose of a distribution channel is to make the right quantity of the right product
or service available at the right place at the right time.
A distribution channel is a set of independent organizations involved in making a
product of service available for consumption.
Traditionally, three channel structures could be identified. In the direct channel
structure, the producer supplies directly to the consumer. In the case of an indirect
channel structure, there is an intermediary and in a hybrid channel structure, there is
a combination of the first two variants. In the digital setting, direct and hybrid
channels are on the march.
Intermediaries usually create ‘economies of distribution’ by promoting the efficiency
of the distribution process. Intermediaries perform three basic functions that
correspond to the essential goals of distribution channels, regardless of whether it is
the digital or physical environment:
Sorting function reducing the discrepancy between assortments. For
example, a supermarket like Whole Foods Market, recently bought by
Amazon, puts many different products from many different manufacturers on
their shelves. These are available in small quantities for consumers.
Transaction function intermediaries create routine for transactions and
minimize distribution costs. Standardization of deliveries, payments and
, communications provides a boost to effectiveness and efficiency. PayPal is an
example.
Search function intermediaries facilitate the search process for both
producers and consumers by structuring information that is essential for both
parties.
As indicated earlier, such distribution functions are not exclusive to the digital
channel. One reason for this is that all sellers also have to work with intermediaries to
find target audiences. The influence of digitization on the distribution channel is thus
extremely high, meaning that understanding this influence is essential for all
marketers. The following digital effects are most relevant to distribution:
The death of distance distance does not affect the cost of digital
communication. Many products – music, software, videos – can be shipped
almost without cost to any place.
The homogenization of time web shops do not need to be closed, call
centres are more often available in the evening and a bank payment can be
executed while people are dreaming. Time is thus homogenized and uniformly
consistent for all buyers, suppliers and sellers.
The irrelevance of location if the internet connection works, people can
order digitally. Comparing traditional record and CD stores with a digital
provider like iTunes will make clear that the only real similarity between the
two is the industry.
If the three basic functions of distribution channels are offset against the effects of
digitization, this creates the Digital Distribution Mix. This tool can be used to identify
possibilities for improving or changing the digital distribution strategy of an
organization. Like most complex organizational phenomena, the different forces
interact and often affect each other. This matrix will help organizations to understand
the impact of digitization on the most important distribution functions.
10.1.2 Digital channel conflicts
The internet has not only redefined the channel functions. It is also a potential source
of conflicts and tensions between producers, retailers and intermediaries. In principle,
any producer can of course choose to sell directly to end users at any time. A direct
digital channel strategy can put pressure on relationships between supplier, producer
or service provider and its intermediaries. This is usually called a digital channel
conflict.
A digital channel conflict is a conflict that occurs in a digital environment when
producers, suppliers or service providers compete destructively with each other or
with intermediaries targeting the same markets, or when the digital channel is
implemented by a producer or supplier and thereby destructively competes with the
traditional bricks and mortar channel.
To determine an appropriate digital conflict management strategy, organizations
must first identify the internal digital channel conflict environment. The ICCM (Internet
Channel Conflict Measurement) model can prove quite useful for this. After
answering several questions, the style of the organization can be determined. The
following types are possible:
