Channel Strategies and Marketing Mix in a Connected World PDF by Saibal Ray and Shuya Yin

Contents

Preface
In the process of selling a product or service, firms usually consider various components of the marketing mix and value proposition to influence consumers’ purchase behaviors, such as product design, advertising, delivery and convenience, pricing, and promotions. This mix varies depending on consumer characteristics in the market that the firm is targeting, the specific distribution channel(s) and related strategy, the level of product information disclosure, or firms’ environmental concerns. Keeping in mind the growing digitalization of business processes in the retail world and the move towards omni-channel retailing, this book aims to revisit the “traditional” interactions between channel strategies and the marketing mix in a connected world. By collecting state-of-the-art academic studies along these dimensions, this book would enhance our understanding of the potential impact that the new technologies and strategies can have on practice in the near future. In particular, we divide the chapters in the books along how digitilization of the retail channel affects the following three aspects: consumers, products, and sustainability.

1. Consumers represent the demand side of the value chain. Consumer characteristics and especially their behaviors in the Internet era shape how products or services should be distributed, how prices should be set, and how market uncertainty is formed, etc. Therefore, when firms consider different channel strategies, it is important to have a proper understanding of a “modern” consumer’s decision-making process and his/her utility function. This might involve their impulsiveness or patience when making purchase decisions, their pricesensitivity, how willing they are to collaborate for consumption purposes, how they react to environmental cues, how sensitive they are to health or environmental concerns, etc. Subsequently, firms should take this understanding into account

Chapter 1 demonstrates that demand of a particular product may be uncertain and hard to predict, especially when there are competing brands in the market. Failure to correct the errors in demand estimation may create biases which could further lead to miscalculation of operational decisions such as stocking levels. The uncertain demand could be caused by a new innovative product for which consumers are unsure about the utility to be gained from consuming the product. Given such a product, Chapter 2 analyzes firms’ optimal promotion and pricing strategies when consumers’ anxiety can be mitigated by learning from experiences of early adopters of this product. Chapter 3 also discusses a number of instruments that firms may adopt to disclose product information to consumers so as to reduce uncertainty in consumers’ valuation of a certain product and hence to increase the benefit they can obtain from it. These discussions indicate that understanding consumers’ psychological dimension when they are considering purchasing a product can help firms improve their operational decisions and distribution channel strategies.

2. Products are the core to success for any business and represent the supply side of the value chain. Given a product type, its value proposition is affected by various pricing, promotion, and advertising strategies that firms in a channel might use to influence consumers’ purchasing decisions. Building on some of the strategies examined in Chapters 2 and 3, the book presents five chapters (Chapters 4–

8) that address how these strategies need to be modified when consumers are “connected” via various media. Chapter 4 studies promotion planning for supermarket retailers that sell a large number of different items whose sales are interrelated cross-sectionally due to their complementarity or substitutability and also longitudinally across time periods due to consumers’ stockpiling behavior caused by promotions. Chapter 5 provides a different perspective on the topic of advertising. It specifically reviews the academic work on how the promotion or advertising strategies can be implemented online, given the rapid explosion of the digital advertising industry.

The Internet era also leads to the prevalence of e-commerce, which provides retailers an additional vehicle to reach out to their consumers. Chapter 6 focuses on the omni-channel retailing strategy that retailers adopt to sell their goods to consumers through both online and offline channels, taking into consideration consumer behavior in the digital era. This chapter shows that the omni-channel strategy can help mitigate two key problems in retailing: stockouts and product misfit. Subsequently, Chapter 7 explores the adoption of on-demand customization technology (such as additive manufacturing or 3D printing) in retailing and studies its impact on the online and offline distribution channels in terms of the product variety offered and the pricing strategies. In addition to the impact of new technologies on retail channels, Chapter 8 focuses on price matching strategies offered by competing retailers to price-sensitive consumers, where the online information search has made it much easier for consumers to compare prices charged by competing sellers. This chapter examines how consumer behavior and channel structure influence the effectiveness of such strategies.

3. Sustainability In addition to pricing, promotion, advertising, and distribution convenience, there are other factors (mostly non-pricing) that also affects consumer purchase behavior. Collaborative strategies among micro-retailers in developing countries and the consideration of retail sustainability are among them. The book uses the last two chapters (Chapters 9 and 10) to cover these topics. Chapter 9 explores the collaborative strategies that entities in public or private sectors can take in order to help micro-retailers in developing countries coordinate their inventory replenishment strategies and serve their communities better. The study unveils several key trade-offs associated with these collaborative strategies. Finally, starting with an overview of the most common and significant environmental impacts of retail, Chapter 10 examines the origin of sustainable planning and operations in retail, the business case for sustainability programs, and the maturation of retail sustainability programs. This chapter includes business-actionable steps for retail sustainability practitioners and describes the critical programmatic components for a strong retail sustainability program.

Chain Management. We also thank the following reviewers for their helpful and constructive comments in the review process: George Cai, Rachel Chen, Nagesh Gavirneni, Luyi Gui, Ho-Yin Mak, Arcan Nalca, Karthik Ramachandran, Nathan Yang, John Turner, and Wei Qi.