Multichannel Hybrid System - Case Study Example

Multi-channel Hybrid System Introduction The globalization concept in the market has demanded a more creative and a more innovative marketing strategy. At the same time, globalization requires businesses and companies to achieve competitive advantage in order to attain sustainability in the industry. One of the emergent strategies in the market at present is the multi-channel or hybrid system in product distribution. Simply defined as "a case where a marketer utilizes more than one distribution design system," multi-channel marketing and distribution has become the newest trend in the market nowadays. "The multi-channel approach expands distribution and allows the marketer to reach a wider market." ("Principles") In addition, a wider market provides more room for the company to explore the consumer needs and cater to a wide variety of customers, hence a wider distribution of products. Thus, the possibility having a sustainable market is higher. Both the local and the global markets are segmented. The needs of each segment in the market are differentiated; therefore an equal need in addressing these needs require different strategies as well as individual channels of product distribution. Concentrating with only one channel limits the market range that the company or the business may be able to cater. Customer needs and wants continue to change over time. In the most recent years, market trends has put more emphasis on delivering to the customers the products with superior quality as well as the superior services that the suppliers could offer. Moreover, a consistent delivery of high-quality products and services must be tracked down all the time, as well as analyzed, in order to become responsive to the constantly changing needs in the market. Suppliers are required to be market-oriented to become familiar with the newest marketing trends in order to remain competitive. However, market orientation does not stop in the company's awareness of the trends in the market. They need to acquire the organization-wide generation of market intelligence, its appropriate dissemination strategies across various departments, and the proper response to these new trends in the market. (cited in Jaworski & Kohli, 1993) Multi-channel/Hybrid System as a Distribution Strategy The needs of the consumers constantly changes through time. As a result, the question of whether a company should use a single-channel strategy or a multiple-channel strategy is no longer a question that needs to be answered. The markets in the future are expected to have a mix of different channels that would need to be explored by the companies in order to attain global competitiveness. The customers' increasing preferences of different channels when searching and buying products or services that depend on their characteristics, the nature of the product they buy and the transaction process are just two of the reasons of the consumers' preferences of having a multiple channel of marketing and distribution. (cited in Schijns & Groenewoud, 2002) The increasing technological developments at the same time are deemed as the reasons for this growing multi-channel distribution strategy in the market. These technological advancements offer the suppliers the opportunity to meet the preferred channel of the customers wherein it would be comfortable with him. (cited in Schijns & Groenewoud, 2002)There are, however, other distribution channels that need to be further explored by the suppliers in order to meet the demands of the customers. These consumer trends, along with the technological innovations, contribute to the decision-making of the companies with regards to the use of multi-channel or hybrid distribution that would increase production and distribution, that will eventually lead them to global competitiveness. Businesses and companies' need to add more channels are brought about by competitive pressures in the market. In the event that they refuse to accept this new trend in the market - attempting not to utilize new channels - the risk of becoming obsolete is high by chance. Their competitors might take this opportunity of making use of the newest channel therefore other companies might be left behind. "However, companies that employ multiple channels to respond to competitors, to respond to customer expectations, or because they have the technology and know-how available, will insufficiently utilize the benefits hybrid channel management has to offer them". (cited in Schijns & Groenewoud, 2002) The four major elements in the marketing mix are consist of the product, price, place, and promotion. Each of these four elements is comprised of several marketing instruments. Moreover, the distribution channels are identified to be one of the instruments that belong to the element of place in the marketing mix. (cited in Mller-Lankenau, n.d.) Just as each of the different elements is important in marketing competition, channel strategies concerning the 'place' element are as well important. These elements are treated independently in the market; therefore limiting this marketing aspect would further limit the competitive advantage of the products involved. On the other hand, in a conventional marketing channel, this may seem appropriate, but the risk of failing in meeting the needs and the demands of the customers is higher. In this case, limiting the place element however, may pose a negative connotation, yet the use of technologies virtually expands this element. Through the use of the different technologies as channels for the marketing and distribution of the products, even the geographically distinct markets or separate target groups of consumers are reached and marketed. The use of virtual channels is appropriately identified in this situation. On the other hand, for customers who choose to have physical interaction with the company may use the traditional method of distribution making use of the traditional channel. (Mller-Lankenau, n.d.) The physical distribution of goods and the accessibility of the products are essential aspects in the marketing strategy. For goods that are far too accessible, the tendency of the consumers is not to avail anymore of the products. On the other hand, a product that is very accessible to them, wherein they have found it convenient from the ease of use choosing, to purchasing, most importantly the delivery pr distribution of the goods, has greater chances of being availed by the consumers. The need to bridge the differences in time, place, amount and quality of the products are essential considerations in utilizing a multi-channel distribution strategy in marketing. This gap may include the geographical aspect of product availability that may be addressed by a hybrid distribution strategy. (cited in De Vries, 2004) Advantages in Using Multi-channel/Hybrid Distribution Strategy Marketing channels are considered an essential element of business strategy because it provides a variety of access to reach the markets and its consumers. It also ensures the physical and expansive presence of the company's proposition of values on the market. On the other hand, managing various marketing channels is complicated although a very challenging task. Due to its wide range of functions, roles and players involved, marketing channels consequently provides a wide range of advantages over any other marketing strategies. (cited in Mller-Lankenau, n.d.) Various studies have already identified several benefits in using a multi-channel or hybrid distribution strategy in meeting the needs of the consumers. Some of these benefits were identified in reference to the company are the following: (1) Cutting costs; (2) Developing deeper relationships with customers; (3) Increasing sales; (4) Spreading (or reducing) risks. (cited in Schijns & Groenewoud, 2002) The use of multi-channel marketing reduces costs through the use the Internet as a marketing medium. Customers can at the same time purchase their needs with the help of the Internet without the hassle of going to the store to make a purchase. In the businesses' perspective, self-service through the Internet reduces their costs as well, especially in human resource and administration who should be dealing with the customers physically in stores. (cited in Schijns & Groenewoud, 2002) There would in turn be lesser need for the company personnel and the customers to interact more often. However, the situation above - lesser physical interaction - is not deemed to create a negative effect on the company's customer relations aspect. The mere fact that the company has served the customers through their preferred channels, it will result further to the improvement of customer satisfaction and loyalty. Given this situation, it entails a harmonious relationship between the supplier and the consumer that creates a lifelong relationship. Both the 'high touch' means and the 'high tech' channels are consequently used for this situation. 'High touch' would refer to the emotional attachment developed in satisfying the consumer needs, and 'high tech' is using the suitable technology in meeting the needs of the consumers. These two are interrelated in such a way that 'high tech' enables 'high touch' - satisfying customers and keeping them away from competitors. (cited in Schijns & Groenewoud, 2002) One of the most significant aspects that multi-channel distribution strategy could offer the companies would be increasing its revenues. "Choosing the right channels, whose selling features fit customer requirements better, puts the company on the path of delivering increasingly personal and rewarding experiences and products." (cited in Schijns & Groenewoud, 2002) Once customers are satisfied with the services (i.e. convenient product purchase and distribution), loyalty is developed among the customers. In return this will reflect repeated purchases, cross-sales, and referrals that would create a wider network of consumers that are not limited geographically. (Schijns & Groenewoud, 2002) "In addition, new channels provide access to new (e.g. international) markets, and reach un(der)served customer segments that could not be 'touched' (effectively) through current channels, resulting in increased market coverage and sales volume" (cited in Schijns & Groenewoud, 2002) Market risks are one of the most challenging factors that need to be handled accordingly by the suppliers. In the event that they were not able to manage risks properly, the possibility of failing in the market demands is higher. That's why the more dispersed the risks are, the more favorable it is for the suppliers. Their need for risk management is reduced, therefore the risk of failure is also reduced. Risk dispersion is related to the three other advantages of utilizing multi-channel or hybrid distribution strategy. As an example, if the company enters into new markets, it will be able to reach new and additional customers under a different customer segment with the use of multiple channels. As a result, it increases sales and revenues at the same time it reduces the company's dependency on a limited number of markets and particular customer segments that they cater at present. This way, purchasing and distribution are directly handled by the company reducing the risks of depending on the 'middlemen' in the distribution system. This will reduce their costs in this additional medium for purchasing and delivery, thus reducing the risk of non-profitability, an in contrast, an improved customer relationship because it reduces a deficiency in handling customers' needs by the 'middlemen.' (Schijns & Groenewoud, 2002) In general, Gunther et al. (2003) proposed that channels are matched with the three phases of customer interaction - reach, transaction and service. Reach factor is characterized by the ability of promoting the products or services to the consumers. (Gunther et al, 2003) This involves promoting the products and services into a wide variety of consumers overcoming the geographical and time barriers. Transaction however refers to the ability to perform orders on a specific medium. (Gunther et al, 2003) This may include online transactions that provide convenience for the consumers. And finally, service includes the ability of the producer to communicate and serve the needs of the customers. (Gunther et al, 2003) Conclusion The above-mentioned situations proved to have multi-channel/hybrid system as a distribution strategy. Most of the times, this strategy is proved to have delivered favorable outcomes in the production industry. Goods and services are delivered to the customers at a preferred channel or medium of distribution. The ever-changing course of the marketing aspect, coupled with a number of technological advancements, consumers' needs and demands also changes. Their preferences change as time passes by. Multi-channel marketing or distribution strategy favors these changing preferences of the consumers, thus making the companies become more competitive in the market. On the other hand, there are certain considerations that the company should look into regarding the use of multi-channel or hybrid distribution strategy. Handling a multi-channel distribution may seem easier yet it has to consider human, organizational, operational, and technological adjustments along with this shift in distribution strategy. (Schijns & Groenewoud, 2002) The marketer must be careful with this approach due to the potential for channel conflict. ("Principles") However, this should not alarm the producers such that in a general perspective, multi-channel or hybrid distribution strategy favors mostly the change in the consumer demands - which is a permanent phenomenon in the marketing industry. Works Cited: de Vries, E. 2004. Multi-channeling and Front, Mid and Back Office Architectures in the financial service industry. http://primavera.fee.uva.nl/PDFdocs/2004-17.pdf. December 3, 2006. Gunther, et al. 2003. Analyzing Consumer Behavior at Retailers with Hybrid Distribution Channels - A Trust Perspective. http://delivery.acm.org/10.1145/950000/948060/p422- teltzrow.pdfkey1=948060&key2=3327794611&coll=&dl=ACM&CFID=15151515&CF TOKEN=6184618. December 3, 2006. Jaworski, B. & Kohli, A. 1993. Market Orientation: Antecedents and Consequences. Journal of Marketing, Vol. 57: 3. American Marketing Association. http://links.jstor.org/sici=0022- 2429%28199307%2957%3A3%3C53%3AMOAAC%3E2.0CO%3B2-I . December 3, 2006. Mller-Lankenau, C. n. d. Multi Channel Strategies: Strategy Formation and Web Channel Implementation. http://wifo1.bwl.uni-mannheim.de/dc2005/Beitraege_PDF/Mueller_Lankenau.pdf. December 3, 2006. Principles of Marketing - Part 8: Distribution Decisions http://www.knowthis.com/tutorials/principles-of-marketing/distribution-decisions/13.htm. December 3, 2006. Schijns, J. & Groenewoud, K. 2002. Multi-channel Management: Getting it Right! http://www.ou.nl/Docs/Faculteiten/MW/MW%20Working%20Papers/GR%2006- 02%20Schijns%20maart%202006.pdf. December 3, 2006. Read More