E Commerce & changing market dynamics

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E COMMERCE

Managers of today are living in challenging times. Business targets had never been more, work pressure and managing the complexities of competition is keeping them on their toes all the time are the rule of todays time

 All those who are able to adapt to the change in the market and able to assimilate along with learn from tomorrow’s technology are able to run the race. Digital technology has changed the business game.

 In the case of courier industry,One can book a consignment from any location to any location in the world and you can use the track and trace feature to track the status of your parcel at any time. This feature has  a huge impact on a business which is sending some important and time bound cargo or document to another location.

it is very clear that the businesses that have adapted to and embraced E Business and E Commerce have managed to be successful  in the industry. Migrating to an E Business environment is not  at all easy and simple. Embracing e business needs Organisations to change their business models, business strategies as well as integrate the business processes with technology.

With times and changing environment they grew to understood and appreciated the need to be Customer oriented and Customer relationship management became a key focus area. Customer centric meant orienting the entire organisation and all its functions and divisions to be responsive to the internal and external customers.

 Being customer centric means re-inventing the business model where technology becomes the driver and the key differentiator. The entire Organisation needs to uplift  itself and graduate to new web enabling platforms where speed, information, visibility and co-ordination of various transactions, working of applications connecting different business processes form the components of the entire business chain.

Speed is the essence of E Commerce.

Why E commerce?

Organisations have begun adapt themselves to the markets and customers so as to improve its product delivery along with Customer relationship and loyalty. However, in a digital economy, they have tostay updated according to the Customer behaviour. The challenge today is not only to tune into the markets but also to anticipate and estimate the behaviour of the customers  in the digital market place and serve the customers accordingly.

For any business, migrating to the new Net Economy has become a  necessity. The Companies which  have successfully managed to change accoeding to Customers on the internet are successful today.

 The key differentiator can be said to be a combination of technology as well as Customer Centric business focus.

In the digital market where the competition, products and services are many, the speed information has become the key differentiator.

E Marketing is different from the traditional marketing. It with the help of technology and data warehousing has enabled  to get to know and address the Customer on an individual basis . The companies are able to reach, recognize and customize the products according to the specific needs of an  individual customer.

Customers buying behaviour and expectations are different, His demands have now changed due speed and information. Social media networks are emerging as the major influencers which  aids  the buyers decision making  and online financial services mechanism also has changed the buyer’s preferences and methods of buying.

Changing dynamics

                                                                                                                           source:Emblix Solutions

With the advent of the internet and big data analysis, organizations are able to use relationship marketing and database mining as a powerful marketing tool to gain success of the organisation This combination of the internet, technology and relationship marketing is also known as customer relationship management.

Customer relationship marketing uses different marketing tools like  direct marketing, relationship marketing and database mining to create useful customer relationship marketing strategy along with looking for the changing market and customers needs.

 Direct marketing serves at delivering product communication and also product themselves to individual customers. It gives the foundation to customer relationship management. The database mining serves as the technology platform needed to store and use consumer related information whenever needed.

The advantage of the internet from relationship marketing is the level of  interactivity. Organizations through email and online chat can establish customer relationships and data collected from this interaction will serve as a base for future product development ,offering and other personalized services.

How to design a Marketing Channel System

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To Design a marketing channel system we have to look into factors like analysing  the needs of the customers,established channel objectives, identification of major channel alternatives, and evaluating these channel alternatives for further amendments.

Analysing the needs of the Customers
 The marketer must estimate the service output levels which the target customers wants. Channels produce five service outputs which are mentioned below,

Lot size: It calculates the number of units which a channel allows a particular customer can buy at one time.
Waiting and delivery time: It allows to know the average time which consumers of that channel has to wait for receipt of the goods. The Customers prefer faster and timely delivery channel.
Spatial convenience: It reveals the extent to which the marketing channels facilitates the customers to obtain the needed products.
Product variety: It is the variety which is provided by the channels. Usually, the consumers prefer  greater collections, which will enhance the chance of finding what are the needs of the customers.

Service backup: The add-on services like credit, delivery, installation, repairs etc which are provided by the channel.
Greater service outputs denotes increased channel costs and consequently higher prices for customers. The triumph of discount resellers(online or offline) designate that many consumers does not accept lower outputs if they want to  save money.

Establishing Objectives and Constraints
Another factor in designing a marketing channel system is that marketers must declare their channel objectives in terms of targeted service output levels. In competitive conditions, channel institutions should coordinate their functional tasks to reduce total channel costs and still offer desired levels of service outputs. Generally, planners can recognize several market segments that want different service levels. Successful planning needs to determine which market segments to serve and the best channels for each. Channel objectives differ with product characteristics. Channel design is also affected by numerous environmental factors as competitors’ channels, monetary conditions, and legal regulations and limitations.

Identify Major Channel Alternatives

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Other factors which affects decisions in developing market channel is to recognize alternatives available. Companies may select various number of channels to approach customers, and each of which will have distinctive strengths as well as limitations.
 Channel alternatives are explained by
(i) the type of available intermediaries
(ii) the number of intermediaries needed  for business; and
 (iii) the terms and responsibilities of each member of the channel.

 Type of Intermediaries allows a firm needs to discover the types of intermediaries available to exploit to run its channel works. Some intermediary merchants like wholesalers and retailers buy, take title,and resell the products in the market.
Middle Agents such as brokers, manufacturers’ representatives,and sales agents who chase customers and may bargain on the producer’s behalf, do not take title to the merchandise. Available Facilitators, including transportation companies, independent warehouses, banks, advertising agencies etc helps in the distribution process but doesnt take any title to goods nor negotiate the purchases or sales.

Companies should recognize  which are the pioneering marketing channels.

The Number of Intermediaries indicates how to choose intermediaries,

 Companies can adopt one of three strategies:

1.  exclusive,
2.  selective, 
3. intensive distribution. 

Exclusive distribution means limiting the number of intermediaries available.
Selective distribution depends on more than a few but less than all of the intermediaries who are willing to carry a particular product in the markets.
In intensive distribution, the producer will place the goods or services in as many outlets as can be possible. This strategy is useful for items such as snacks, newspapers etc.

Terms and Responsibilities of Channel Members signifies that each channel member of the channel must be treated courteously and given opportunities to be lucrative as per their needs.
The main constituent in the “trade-relations mix” are pricing policy, conditions for sale, territorial rights of each member, and specific services to be performed by each member. Price policy assists the producer to decide upon a price list and schedule of discounts and allowances which the intermediaries see as sufficient and equivalent.

Evaluating the various Major Alternatives

The Company must be able to assess each alternative against all economic, control, and adaptive criterias. The firm should verify ,whether its own sales force or a sales agency will create more returns and it estimate the cost of selling different quantities of goods through each channel.

Managing of Marketing Channel

So as to maximize profit, companies must manage their marketing channels in an effective manner. Management of marketing channel refers to the whole process of analysing, planning, organizing and controlling its marketing channels.
 In marketing channel two different activities occurs.
 One is the establishment of a sustainable physical distribution system and
other is management of it as per the marketing objectives.
 Management of marketing channels involves functions of marketing mix which include product, price, distribution, program and people.Physical distribution system and channel structure is established along which products flow in the marketing channel.

Business Managers of today are living in challenging times. Business targets had never been stiffer, work pressure and managing the complexities of competition is keeping them on their toes all the time. 

Managing Retailing,Whole selling and Logistics

As we understood that channel management is an important part of success of organisation as a whole it is necessary to make members of the channels as partners and share the objectives and needs across these different channel partners.
Companies are trying to move from conventional chains to value chains networks which can further pass on to the customers Companies are looking forward to moving away from the conventional supply chain and moving towards value network.The entire marketing channel is designed such that each partners role,responsibilities,need and importance is given due consideration.

So we can understand these as follows

Retailing

Retailing involves activities which involves selling of goods to the customer who does not buy it for selling further but for ultimate consumption.
The persons who makes the products available are known as retailers.They are of various types like  Specialty store,Department store,Supermarket,Convenience store,Discount store,Off-price retailer,Superstore,Catalog showroom etc.
They includes the small stores which comes into direct contact with the customer.

 Retail organizations are divided into three categories store retailers, non-store retailers and retail organization. 

Store retailing involves Departmental stores. Store retailers are further divided on the service level with self service, self selection, limited service and full service stores. 90% of products reach the customers is trough stores.

Nowadays we have seen that the non retail stores like the online sites are gaining momentum and captured a significant market share.Non-store retailing includes direct selling, direct marketing, automatic vending and buying service. Internet retail giant Amazon.com is an example of direct marketing. Soft drink vending machines are a form of automatic vending.

Retail organizations are retailing stores under direct ownership of corporate. Customer satisfaction and brand management becomes easier through retail organizations. Corporate chain store like Old Navy and Franchises like McDonald’s are good examples of retail organizations.

For a successful marketing strategy analyzing the target market is necessary and look for what are the customers opting for -direct selling or in store selling as take decisions accordingly.
 Services form a big part of retailing business, so retailers have to finalize level of service. Services include pre-purchase, post purchase and supporting services.

With the advent of technology and unprecedented economic growth, retailing has changed in many ways.

Wholesaling

The act of purchasing goods for consumer and industry for further resale is referred to as wholesaling. Here, manufactures and farmers are not considered as wholesalers and the channel members are known as customers. It includes B2B marketing dealings.

Wholesaler is an important part of the marketing channel. Wholesaler increase reach of the company products and the risk of selling to the customers. Wholesaler can store inventory of various locations of product thus increasing cost for company and time for customers. Wholesaler can serve as ears and eyes for the company in understanding competition and customer.

Marketing Logistics

The supply chain management is essential for companies to improve the productivity and reduce costs of the company. The purpose of marketing logistics is to design and implement optimum infrastructure which can deliver goods from the point of origin to point of sell in an effective and least cost manner.
This objective mix of high customer satisfaction and lowest cost possible does not go hand in hand. The major decision involved with logistics relates to order processing, warehousing, inventory,transportation etc.

Companies looks for shortening order to payment cycle. A long cycle will lead to decrease in customer satisfaction and company’s profit. Companies have to set benchmarks at each level from sales people receiving orders to receiving payment from creditors.

Warehousing for finished goods is another important hub for companies. There has to be a right balance between sales order and quantity of finished goods. Warehousing at strategic locations increases timely delivery of goods and reducing in inventory. Technology has helped in improving warehousing standards.

Piled up inventory is not a good sign for the company. Inventory management involves making decision with time and quantity of raw materials for matching customer requirements. Management principle like Just In Time (JIT) are used for better inventory management. In JIT focus is to develop well time flow of raw materials and finished goods.

Transportation and freight cost plays an important role in final pricing, delivery and condition of raw materials as well as finished products. Here companies need to make the decision, whether to use a private carrier (company ownership), contractual (Outside agency) or common carrier (service shared at standard rates).

Retailing, wholesaling and logistic decision are very important to deliver value to end customers.

Designing and managing Integrated Marketing Channels

The main aim of Channel Management

Channel Management is a communication process between all the people involved from the sellers side i.e. all members who helps to get the product into existence and ready for selling purpose till the last customer which helps the consumer  to get value from the product.

So, the main aim of Channel Management is to maximize the value gained by the consumer be in terms of quality,quantity,timeliness,packaging,services,after sale services and also now a days services like sending messages via SMS,mails about recent developments.

All these comprises of Channel Management.

As it is a very complex and looped process it needs to managed very delicately across various point of contact or across various functions and channel partners.

There are two parts of Channel Management-

1. Marketing channels 
2. Value Chains

Marketing channels comprises of different organisation which helps in making the product available to the customer whereas value chain comprises of the relations like partnership,alliances etc which helps in sourcing,processing and delivering of the product.

There are two types of strategies

1)Pull Strategy

2)Push Strategy

Push Strategies are when the producers induces the intermediaries to promote and sell the product by using its sales force and trade promotions etc. It is beneficial if the brand loyalty of the product is high,it is a product which is required frequently and benefits of it is well understood.

Pull Strategies are the strategies in which involves use of advertising and other promotional techniques so that it creates demand from the customers side which will induce the intermediaries to demand product from time to time.It happens in case where the brands are kept at priority and brand differentiation is present.

Channel Design Decision

It  depends upon:

• Customer Service Expectation

Lot size.waiting period.spatial convenience,product variety, service back up etc.

• Objectives and Constraints of the Organisation-targeted output level,product characteristics,environmental factors like-competitors channel,economic conditions and legal regulations and restrictions
• Channel Alternatives

                      Types of intermediaries
                                   Merchants
                                   Facilitators
                     Number of intermediaries
                                   Exclusive
                                   Selective
                                   Intensive

                   Terms and responsibilities of channel members

                                 Price policy

                                Conditions of sale

                                Distributors’ territorial rights

                               Mutual services and responsibilities

• Major Alternatives

Check out various alternatives like weather we can sell at a lower cost or sales agency

or estimating the cost of selling products through various channels.

Consumer and industrial marketing channels

CHANNEL MANAGEMENT DECISION

Channel Management involves taking on various decisions like,

deciding the channel members

Having conversation with them so that there is an exchange of priorities between the channel and the producer

Training and motivating them

Evaluating them

Making changes if any is required in the channel arrangements.

CHANNEL INTEGRATION SYSTEM

This comprises of three methods:

1. Vertical Marketing System
2. Horizontal Marketing System
3. Multi Channel Marketing Systems

Vertical Marketing System

It comprises of three systems-

    a) corporate VMS- whole sellers-sponsored voluntary chain,retailers cooperatives and franchises organisation

    b)Administered VMS 

    c)Contractual VMS 

Horizontal Marketing Systems

When Two or more unrelated companies put together their resources or programs to exploit an emerging marketing opportunity.

Multi Channel Marketing Systems

Multi channel marketing Occurs when a single firm uses two or more marketing channels to reach one or more customer segments.

Multi Channel Marketing Systems

Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

CONFLICTS IN AN ORGANISATION

As it involves so many organisation or individuals conflicts are sure to arise.
There are two types of conflicts-

1. vertical conflict 
2. Multi channel Conflict

The various causes for Channel Conflicts are-

• Goal Incompatibility-when any one or more members have a different goal which does not match with the goal of the channel it leads to conflicts between them.
• Unclear goals and rights-When one channel partner is not clear of the overall goals of the channel then it leads to wrong decisions and the compatibility between various channel partners gets diluted.
• Differences and Preferences-Differences arising between partners and change in preference will lead to conflict.
• Dependence-The channel is a complete process which moves from one person to another and so when one person is not able to provide the material demanded by the ultimate customer because of negligence upper channel partners it leads to conflict between persons.

Strategies for Managing Channel Conflict

• Adoption of superordinate goals
• Exchange of employees
• Joint membership in trade associations
• Co-optation
• Diplomacy, mediation, or arbitration
• Legal recourse

Channel Management

Channel management is a term which has been revolutionized in the last decade. It has become the the nerves of the business through which the blood i.e. proper functioning flows. no business can now be imagined without managing the channels through which your product goes through and reach the ultimate consumer.
The last partner of your channel is the face of your product and thus satisfying your channel partners is very important for success of your product in the market.The ultimate goal of any organisation is to develop long term relations with the customers which will ultimately lead to success.
Channel Management forms an important part of sales as well as marketing.It is a process which forms a base to develop different marketing strategies to meets its target.It comprises of different individuals or companies which helps you in making you reach your product to the customers.

When a specific channel is formed with formatted path it makes selling and servicing customers easy.If any default arises it is easy to streamline communication between customers and the business managers.This can be done by segmenting your customers based on their needs,preferences,buying patterns etc.When all this is compiled together it leads to formation of process which can be customized according to the goals,policies,sales target,costs,marketing program etc.

There are two goals of channel management
1) to make the channel an open channel so that the customers can have a direct communication in each channel.
this goal is very important as it leads to better understanding of the market and can in real terms decide upon the various channels through which it can reach the customers.
2)   It gives a framework of the channel which can be used efficiently for desired results.When the channel and the segment gets matched it leads to determination of the products which can be best put through these channels.


Components of Channel..

It can include many of the following channel partners: ODMs (original design manufacturers), contract manufacturers, distributors, wholesalers, manufacturer's reps, re sellers, VARs and traditional retailers.

 Manufacturers are adopting specific software and solutions to help gain control over complex channel relationships,marketing programs and sales activities, and also to optimize inventory levels.

It helps to maximize revenues and reduce costs and cycle times.
Optimizing distribution channels helps you build stronger and more profitable relationships while ensuring that revenue leaks are plugged.

Price Adjustment

What is Price adjustments?
 Price Adjustments are often referred to as price protection as it allows customers to obtain refund of the price charge to them if they can show that the price of the product has fallen within a time period. It is practiced in USA.
 The retailers will then do “price adjustment,” by refunding the extra amount that has been charged to the customer because of the fall in price.

Many credit card companies also offer price protection as a standard benefit.
 there is no restrictions on retailers to make this an attractive option.
But remember,Price adjustments are not equivalent to return policies.There is a difference between the two. In price adjustments, retailers' refund the gap in cost even if the item has been used.
While on the other hand,Returns needs to be in an unused condition.
 There are different policies adopted by retailers for in-store purchase and online purchases. Several items are excluded from such adjustments and policies like for items which are on sale.

Price adjustments is different from price matching policies because in Price matching retailer gives you  refund  if thee is a difference between his price and a competing retailers price i.e.If a retailer charges higher price he will pay the gap in amount of his price and competitors lower price whereas in Price Adjustments the price difference occurs with the same retailer.

There are various companies which provide Price adjustment facility.
Some of these are-
Walmart

In case a purchase is made online , Walmart and the price of the product decreases a notice of such decrease will be shown in the website within 7 days of the order date.Walmart will refund the difference amount if there is a request for refund put up from the customers side.

 If the purchase is made in-store and there is a price reduction then it cannot be claimed online and vice versa.
 Some items like sale item,clearance item,Special Buy etc are excluded from such adjustments.


Amazon

Amazon provides price adjustment facility only on TVs .A customer can within 14 days find any other lowest price either on site or from different retailers to claim the price adjustment refund.For other products it says that its price fluctuated a lot and any price which was charged was the lowest of all which could be provided at that time.

Best Buy

Best Buy's price adjustment policy states that if any of the purchases is made and the customer finds lower price of the same product at any local Best Buy store then it will refund the amount provided it occurs within the return and exchange period.

However  items not eligible for refund are; Mail-in offers,limited quantity offer,free items, out of stock items, open box, clearance,Midnight sales,special hours sales,or any special day offer etc. items which are purchased online are adjusted over phones only and not in any of its stores.

Kohl's

Kohl's refunds the difference if any item's price drops within 14 days of the purchase date, but clearance goods and BOGO (buy one, get one) items are not eligible for price adjustments.Items in store as well as online purchases are eligible for such price adjustments.






Other tips:
 You can ask for the adjustment as no store will automatically issue refunds for goods whose price decreases post purchases. When you request an adjustment, you'll need your original receipt, the credit card or debit card you paid with and possibly a photo ID and also a  proof of the new, lower price.

Some stores do not advertise whether they have a price adjustment policy, so in these cases talk to a store manager. If a store does not have a price adjustment policy, in some cases you can give yourself the price adjustment by doing a little extra work. Buy the identical item at the new, lower price and then return it with the old receipt that shows the higher price. This process takes extra work, but may be worth your trouble for higher priced items and at stores you frequent. But you cannot employ this strategy with purchases that fall outside the store's return time frame or with items that can't be returned.

Finally, stores that marks some special days deals on such date shall not be considered for price adjustments.

Conclusion
It is not possible to keep an eye for lower prices for every purchase;but check out for expensive items as it can really pay off.

how to fight a low cost rival..

How to fight a low cost rival??

If a competitor enters your market with a similar product priced at a fraction of what you currently charge it is equivalent to a nightmare. You need a strategy to beat these low cost rivals.

On one hand you can lower your prices below the competitors, and buyers will be at your door. On the other hand, this will land you in a price war, and there are no winners in a price war — only survivors;chances are you may not have much of a business left when the battle is over.

 it is possible to beat a lower-priced competitor without foregoing your profits. The bad news is that you'll need to make major operational changes, and rethink how you communicate with customers. The changes are better than the alternatives. So it embarks on one of the biggest strategy challenges.

Select a Value Strategy.
Goal: Lay the framework to reposition the product.

When customers prefer the lower priced of two items, it's usually because they believe the cheaper item is a better value. To compete, you need to get the customer to value your product more than the competition's,regardless of the price.
According to Michael Treacy,  there are four market strategies that accomplish this:

Lower your prices. Yes, this is an option but the challenge is to do it without destroying your profits.margins. The danger here is it ends up with a price war.

Build a uniquely superior product. 
Customers are willing to pay more if they're convinced your product is better than the competitors. It can be "rational", "emotional", or a combination of both.
Create a hassle-free experience.
 if your product is easier to buy and use then the customers will automatically pay more. happy customers pay more for the convenience even though the price is higher than competitors product..
Take ownership of the customer's results. 
If you take responsibility for ensuring that the product generates the results the customer seeks the customers will pay more.
Big Idea
Where Do You Fit In..

Think of product value as a grid. The left axis defines what you sell: Does your firm offer stand-alone products, or do you specialize in offering an ongoing set of services? The top axis is about your core value proposition: Does your offering compete largely on the basis of how much it costs, or does it offer features that make it unique? The more sophisticated your product gets, the more you can charge for it relative to the competition. Similarly, the more value your services provide, the more you can charge for them.

Costs                                                        
Benefits
Products: "What we sell"
Price
Uniquely better product
Service:"How we do business"
Hassle-free purchase experience
Owning customer results
Source: GEN3 Partners, 2007

Reposition, Readjust, and Reallocate
Goal: Make the internal changes necessary to support your strategy.
Lower prices by making changes in manufacturing and distribution.
To beat low-price competitors along with remaining profitable,needs you to squeeze every last drop of inefficiency and cost from your manufacturing and distribution system.
Building a uniquely better product 
 Determining what features or design will prompt customers to see your product as being uniquely superior to the competition will help in better designing and engeneering of products.
Creating a hassle-free experience
Changing sales and marketing. Check out why it's difficult to buy and use your competitor's product, and then make it easy to buy and use yours.

Checklist
Self-Assessment: Your Firm's Core Competence
 rate the following aspects of your company's operations:

5=Best in the industry

4=Better than average

3=We're OK

2=We stink at this

1=Say what?

Controlling our supply chain.

• Setting up channel partnerships.
• Designing great products.
• Basic research and development.
• Creating marketing materials.
• Building customer relationships.
• Keeping existing customers happy.
• Getting customers to refer prospects.

Total each pair. The highest numbered pair indicates your core competency.
Match that with the strategy you should embrace, below.

First pair is highest:  lower your price strategy.
Second pair is highest: uniquely better product strategy.
Third pair is highest:  hassle-free experience strategy.
Fourth pair is highest: ownership of results strategy.
Warning: if no pair adds up to more than 6, your company may not be a viable competitor.



Promote the New You

Goal: Communicate new value strategy to potential customers.
Once you've implemented all the operational changes required to reposition your product in the marketplace,  tell the world why your firm offers superior value. That means adopting a communications strategy that matches your market strategy, as follows:

If you offer lower prices, mimic the competition's go-to-market strategy. Ensure that whenever a customer sees a competitor's product, your product is right next to it — at a lower price.

If you build a uniquely better product, target your advertising. Reach customer groups that are most likely to believe your product is superior by selecting venues that the competition neglects.

If you create a hassle-free experience, generate positive word of mouth. Make it easy for your customers to sell for you. Consider "tell a friend" coupons or offer referral fees.

Prepare a Plan B
Goal: Secure long-term competitive advantage with a secondary market strategy.
 a new pricing strategy and a new way to market it to customers.  Just as you are responding to your competitor's pricing moves, they will do the same in response to you. If you make things easy for customers, your rival could make things even easier. To prevent this, it's important to simultaneously execute a secondary market strategy that supports the first. Here's how it's done:

The challenge in executing a secondary strategy is that the four basic market strategies are, to a  extent are mutually exclusive. Better products typically cost more to make.

Nevertheless, having a secondary strategy in place — even if you can't make it fully effective — is a great way to keep competitors at bay because it makes it far more difficult for your rivals to beat you in your areas.