Introduction Gwe
The combination of rational and emotional factors of using a company's online services that influences customers' perceptions of a brand online. Developing the capability to create and maintain an effective online presence through a web site is a key part of Internet marketing. 'Effective' means that the web site and related communications must deliver relevance to its audience, whether this be through news content for a portal, product and service information for a business-to-business site or...
Questions for marketers
gt People, process and physical evidence 245 The re-launched Napster changes the music marketing mix 248 Key questions for marketing managers related to this chapter are How are the elements of the marketing mix varied online What are the implications of the Internet for brand development Can the product component of the mix be varied online How are companies developing online pricing strategies Does 'place' have relevance online
The relaunched Napster changes the music marketing mix
The element of the marketing mix that involves the methods and procedures companies use to achieve all marketing functions. The element of the marketing mix that involves the tangible expression of a product and how it is purchased and used. This case about online music subscription service Napster illustrates how different elements of the mix can be varied online. It also highlights success factors for developing an online marketing strategy since Napster's proposition, objectives, competitors...
Latency
Latency is related to Frequency - it is the average time between customer events in the customer lifecycle. Examples include the average time between web site visits, second and third purchase and e-mail clickthroughs. Online applications of latency include putting in place triggers that alert companies to customer behaviour outside the norm, for example increased interest or disinterest, and then to manage this behaviour using e-communications or traditional communications. For example, if a...
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Figure 2.23 A summary of how the Internet can impact on the buying process for a new purchaser It is worthwhile reviewing each of the stages in the buying process referred to in Figure 2.23 in order to highlight how effective the Internet can be when used at different stages to support the marketing communications objectives. Of course, the exact stage of the buying decision varies for different products and different types of customers, so an alternative approach is to develop channel chains...
internet strategy is a channel marketing strategy
We need to remember that an Internet marketing strategy is a channel marketing strategy which defines how a company should set channel-specific objectives and develop a differential channel-proposition and channel-specific communications consistent with the characteristics of the channel and consumer usage of it. The Internet marketing strategy determines the strategic significance of the Internet relative to other communications channels which are used to communicate directly with customers at...
Activity
Visit a price comparison site such as Kelkoo www.kelkoo.com or Pricerunner www.pricerunner.com . Choose one of the products below and write down the range of prices from lowest to highest. What is the percentage premium charged for a product by the most expensive company Low-involvement purchase - CD or book. Higher-involvement purchase - household appliance. Figure 5.9 Pricerunner www.pricerunner.coml Figure 5.9 Pricerunner www.pricerunner.coml
Key concepts of electronic customer relationship management eCRM
E-CRM or electronic customer relationship management involves creating strategies and plans for how digital technology and digital data can support CRM. Some specialists in e-commerce teams have this as their job title or in their job description. But what is e-CRM This is what Smith and Chaffey 2005 say What is e-CRM Customer Relations Management with an 'e' Ultimately, E-CRM cannot be separated from CRM, it needs to be integrated and seamlessly. However, many organisations do have specific...
Tescocom uses the Internet to support its diversification strategy
Tesco, well known as Britain's leading food retail group with a presence also in Europe and Asia has also been a pioneer online. By September 2005 online sales in the first half of the year were 401 million, a 31 year-on-year increase, and profit increased by 37 to 21 million. Tesco.com now receives 170,000 orders each week. Soon it should reach an annual turnover of 1 billion online and is generally recognised as the world's largest online grocer. The Tesco.com site acts as a portal to most of...
Globalisation
The increase of international trading and shared social and cultural values. Globalisation refers to the move towards international trading in a single global marketplace and the blurring of social and cultural differences between countries. Some perceive it as 'Westernisation' or even 'Americanisation'. Quelch and Klein 1996 point out some of the consequences for organisations that wish to compete in the global marketplace. They say a company must have a 24-hour order-taking and customer...
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and Associated Companies throughout the world Visit us on the World Wide Web at www.pearsoned.co.uk First published 2000 Second edition published 2003 Third edition published 2006 Pearson Education Limited 2000, 2003, 2006 The right of Fiona Ellis-Chadwick to be identified as author of this work has been asserted by her in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted...
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To conclude this chapter, read Case Study 1 for the background on the success factors which have helped build one of the biggest online brands. eBay thrives in the global marketplace It's hard to believe that one of the most celebrated dotcoms has now celebrated its tenth birthday. Pierre Omidyar, a 28 year old French-born software engineer living in California coded the site while working for another company, eventually launching the site for business on Monday, 4 September, 1995 with the more...
Examination questions
1 Contrast electronic commerce to electronic business. 2 Internet technology is used by companies in three main contexts. Distinguish between the following types and explain their significance to marketers. 3 An Internet marketing manager must seek to control and accommodate all the main methods by which consumers may visit a company web site. Describe these methods. 4 Imagine you are explaining the difference between the World Wide Web and the Internet to a marketing manager. How would you...
Internet Marketing Fundamentals
1 An introduction to Internet marketing 3 Learning objectives I Questions for marketers I Links to other chapters S Introduction - how significant is the Internet for Marketing applications of Internet marketing B Our changing media consumption 6 E-commerce and e-business defined 11 What benefits does the Internet provide for the A strategic approach to Internet marketing 1B How do Internet marketing communications differ from traditional marketing communications 2O A short introduction to...
The IDIC approach to relationship building
Collecting information about customer needs through their lifetime, An alternative process for building customer relationships online has been suggested by Peppers and Rogers 1998 and Peppers et al. 1999 . They suggest the IDIC approach as a framework for customer relationship management and using the web effectively to form and build relationships Figure 6.8 . Examples of the application of IDIC include 1 Customer identification. This stresses the need to identify each customer on their first...
Strategic goal setting
Any marketing strategy should be based on clearly defined corporate objectives, but there has been a tendency for Internet marketing to be conducted separately from other business and marketing objectives. Porter 2001 has criticised the lack of goal setting when many organisations have developed Internet strategies. He notes that many companies, responding to distorted market signals, have used 'rampant experimentation' that is not economically sustainable. This has resulted in the failure of...
1 Introduction To Internet Marketing 2 The Internet Micro-environment 4
Note A large tick indicates fairly detailed coverage a smaller tick indicates a brief direct reference or indirect coverage. Chapter 1 An introduction to Internet marketing introduces using the Internet as part of customer-centric, multi-channel marketing it also reviews the relationship between Internet marketing, e-marketing, e-commerce and e-business, and the benefits the Internet can bring to adopters, outlines differences from other media and briefly introduces the technology. Chapter 2...
Promotion
The promotion element of the marketing mix refers to how marketing communications are used to inform customers and other stakeholders about an organisation and its products. This topic is discussed in more detail in Chapter 8 - it is only introduced here. Promotion is the element of the marketing mix that is concerned with communicating the existence of products or services to a target market. Burnett 1993 defines it as the marketing function concerned with persuasively communicating to target...
Examples of changes to the five forces
In this section further examples are given of changes to the five competitive forces. Bargaining power of buyers The increase in customer power and knowledge is perhaps the single biggest threat posed by electronic trading. The bargaining power of customers is greatly increased when they are using the Internet to evaluate products and compare prices. This is particularly true for standardised products for which offers from different suppliers can be readily compared through online...
Location of trading in marketplace
A virtual marketplace such as the Internet in which no direct contact occurs between buyers and sellers. The locations on the Internet where an organisation is located for promoting or selling its services. While traditional marketplaces have a physical location, Internet-based markets have no physical presence - it is a virtual marketplace. Rayport and Sviokla 1996 used this distinction to coin the new term electronic marketspace. This has implications for the way in which the relationships...
Which is the best organisation structure for ecommerce
To review alternative organisational structures for e-commerce. Activity 1 Match the four types of companies and situations to the structures a to d in Figure 4.23. A separate operating company. Example Prudential and Egg www.eaa.com . A separate business unit with independent budgets. Example RS Components Internet Trading Channel www.rswww.com . A separate committee or department manages and coordinates e-commerce. Example Derbyshire Building Society www.derbyshire.co.uk . No formal structure...
Decision 1 Market and product development strategies
In Chapter 1, we introduced the Ansoff matrix as a useful analytic tool for assessing online strategies for manufacturers and retailers. This tool is also fundamental to marketing planning and it should be the first decision point since it can help companies think about how online channels can support their marketing objectives, but also suggest innovative use of these channels to deliver new products and more markets the boxes help stimulate 'out-of-box' thinking which is often missing with...
Different environment components
The Internet introduces new facets to the environment that must be considered by marketers since strategy development is strongly influenced by considering the environment the business operates in. Figure 2.3 illustrates the key elements of a business's environment that will influence the organisation. Many authors such as Porter 1980 on corporate strategy or Kotler et al. 2001 on marketing strategy make the distinction between Specific forces on an organisation generated by its stakeholders....
Commercial arrangement for transactions
Markets can also be considered from another perspective - that of the type of commercial arrangement that is used to agree a sale and price between the buyer and supplier. The main alternative commercial arrangements are shown in Table 2.3. It can be seen from Table 2.3 that each of these commercial arrangements is similar to a traditional arrangement. Although the mechanism cannot be considered to have changed, the relative importance of these different options has changed with the Internet....
Stage models of the Internet marketing capability
A further perspective on assessing current usage of the Internet channel is to assess the current level of Internet services and integration of Internet marketing with other marketing activities. Stage models of capability delivered through the online presence assist in this evaluation. Companies that operate in a particular market tend to follow a natural progression in developing their web site to support their marketing activities. The following levels of Internet marketing can be identified...
External value chains and value networks
Reduced time to market and increased customer responsiveness can be achieved through reviewing the efficiency of internal processes and how information systems are deployed. However, these goals are also achieved through consideration of how partners can be involved to outsource some processes that have traditionally been considered to be part of the internal value chain of a company. Porter's original work considered both the internal value chain and the external value chain or network. Since...
Decision 5 Multichannel distribution strategy
Assesses the strategic significance of the Internet relative to other communications channels and then deploys resources to integrate with marketing channels. The range of media used to communicate directly with a customer. The mechanism by which products are directed to customers either through intermediaries or directly. A traditional organisation with limited online presence. A business combining an online and offline presence. An organisation with principally an online presence. It does not...
Resource analysis
The internal audit will also include a resource analysis. This involves assessing the capabilities of the organisation to deliver its online services. Aspects that can be reviewed include Financial resources - the cost components of running an online presence, including site development, promotion and maintenance. Mismatch between current spend and required spend to achieve visibility within the online marketplace should be reviewed using tools such as Hitwise and Netratings which can be used...
Strategy formulation
Generation, review and selection of strategies to achieve strategic objectives. Strategy formulation involves the identification of alternative strategies, a review of their merits and then selection of the best candidate strategies. Since the Internet is a relatively new medium, and many companies are developing a strategy for the first time, a range of strategic factors must be considered in order to make the best use of it. In this section we shall cover the main strategic options by...
Political factors
The political and regulatory environment is shaped by the interplay of government agencies, public opinion and consumer pressure groups such as CAUCE the coalition against unsolicited e-mail which were active in the mid-1990s and helped in pressurising for laws, www.cauce.org, and industry-backed organisations such as TRUSTe www.truste.org that promote best practice amongst companies. The political environment is one of the drivers for establishing the laws to ensure privacy and to collect...
Customer service at the Nationwide
The Nationwide is a financial services organisation which has been active in using the Internet as a customer service tool. Bicknell 2002 reports that the volume of customer service is as follows 900,000 registrants on site with 2.4 million visits to the site in August 2001. Of the 1.2 million who entered the online bank, 900,000 made transactions resulting in 60,000 online contracts which require customer service. These figures highlight the number of transactions that will have reduced...
Introduction Tni
The series of seven key variables - Product, Price, Place, Promotion, People, Process and Physical evidence - that are varied by marketers as part of the customer offering. How online channels are used to support brands that, in essence, are the sum of the characteristics of a product or service as perceived by a user. This chapter shows how the well-established strategic framework of the marketing mix can be applied by marketers to inform their Internet marketing strategy. It explores this key...
Sloan Management Review For Internet Marketing
Aaker, D. and Joachimsthaler, E. 2GGG Brand Leadership. Free Press, New York. Allen, E. and Fjermestad, J. 2GG1 E-commerce marketing strategies a framework and case analysis, Logistics Information Management, 14 1 2 , 14-23. Anderson, C. 2GG4 The Long Tail. Wired. 12.1G. October. Baker, W., Marn, M. and Zawada, C. 2GGG Price smarter on the Net, Harvard Business Review, February, 2-7. BBC 2GGS Napster boss on life after piracy. BBC. By Derren Waters, 22 August. Benjamin, R. and Wigand, R. 199S...
Revenue models
Revenue models Revenue models specifically describe different techniques for generation of income. The Describe methods of main revenue models are shown in the second column of Figure 2.12. For existing com- an organisation panies, revenue models have been based upon the income from sales of products or services. This may be either for selling direct from the manufacturer or supplier of the service or through an intermediary that will take a cut of the selling price. Both of these revenue...
Downward pressure on price
An efficient market where there are an infinite number of suppliers and buyers and complete price transparency. Price transparency is one reason for downward pressure on price. The Internet also tends to drive down prices since Internet-only retailers which do not have a physical presence do not have the overhead of operating stores and a retailer distribution network. This means that online companies can offer lower prices than offline rivals. This phenomenon is marked in the banking sector...
Tax jurisdiction
Tax jurisdiction determines which country gets tax income from a transaction. Under the current system of international tax treaties, the right to tax is divided between the country where the enterprise that receives the income is resident 'residence' country and that from which the enterprise derives that income 'source' country . Laws on taxation are rapidly evolving and vary dramatically between countries. A proposed EU directive intends to deal with these issues by defining the place of...
The balanced scorecard
Some larger companies will identify objectives for Internet marketing which are consistent with existing business measurement frameworks. Since the balanced business scorecard is a well-known and widely used framework it can be helpful to define objectives for Internet marketing in these categories. The balanced scorecard, popularised in a Harvard Business Review article by Kaplan and Norton 1993 can be used to translate vision and strategy into objectives and, then, through measurement...
Velocity of new product diffusion
Quelch and Klein 1996 also noted that the implication of the Internet and concomitant globalisation is that to remain competitive, organisations will have to roll out new products more rapidly to international markets. More recently, Malcolm Gladwell in his book The Tipping Point 2000 has shown how word-of-mouth communication has a tremendous impact on the rate of adoption of new products and we can suggest this effect is often enhanced or facilitated through the Internet. In Chapter 8, we will...
Velocity of new product development
Quelch and Klein 1996 note that the Internet can also be used to accelerate new product development since different product options can be tested online more rapidly as part of market research. Companies can use their own panels of consumers to test opinion more rapidly and often at lower costs than for traditional market research. In Chapter 1, Figure 1.7, we saw how the Dubit Informer is used by brands to research the opinions of the youth market. Another aspect of the velocity of new product...
Options for varying the core product
For some companies, there may be options for new digital products which will typically be information products that can be delivered over the web. Ghosh 1998 talks about developing new products or adding 'digital value' to customers. The questions he posed still prove useful today 1 Can I offer additional information or transaction services to my existing customer base For example, for a bookseller, providing reviews of customer books, previews of books or selling books online. For a travel...
Decision 7 Online communications mix and budget
The decision on the amount of spending on online communications and the mix between the different communications techniques such as search engine marketing, email marketing and online advertising is closely related to the previous one. Varianini and Vaturi 2000 suggest that many e-commerce failures have resulted from poor control of media spending. They suggest that many companies spend too much on poorly targeted communications. They suggest the communications mix should be optimised to...
Intermediaries
Marketing intermediaries are firms that can help a company to promote, sell and distribute its products or services. In the Internet context, online intermediaries can be contrasted with destination sites which are typically merchant sites owned by manufacturers or retailers which offer information and products in reality any type of site can be a destination site, but the term is generally used to refer to merchant and brand sites . Online intermediary sites provide information about...
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Figure 2.7 Disintermediation of a consumer distribution channel showing a the original situation, b disintermediation omitting the wholesaler, and c disintermediation omitting both wholesaler and retailer The creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation. At the start of business hype about the Internet in the mid-1990s there was much speculation that widespread disintermediation would see the failure of many...
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Figure 1.13 The role of mixed-mode buying in Internet marketing Integrating online and offline communications To highlight differences in marketing communications introduced through the use of the Internet as a channel and the need to integrate these communications with existing channels. List communications between a PC vendor and a home customer over the lifetime of a product such as a PC. Include communications using both the Internet and traditional media. Refer to channel-swapping...
Decision 8 Organisational capabilities 7S
A useful framework for reviewing an organisation's capabilities to implement Internet marketing strategy is shown in Table 4.5 applied to Internet marketing. This 7S framework was developed by McKinsey consultants in the 1980s and summarised by Waterman et al. 1980 . Which are the main challenges in implementing strategy E-consultancy 2005 surveyed UK e-commerce managers to assess their views on the main challenges of managing e-commerce within an organisation. Their responses are summarised in...
Global variation in Internet provision
Visit the web site of the International Telecommunications Union ITU Choose Internet indicators. This presents data on Internet and PC penetration in over 200 countries. A summary of the indicators for different continents is presented in Figure 2.15. 1 Find your country and compare the number of PCs per hundred population and percentage Internet access compared with other countries in your region and on a global basis. 2 Now attempt to explain reasons for the disparity between your country and...
Technological factors
New technologies that prompt businesses to reappraise their strategic approaches. Electronic communications are disruptive technologies that have, as we saw in Chapter 2, already caused major changes in industry structure, marketplace structure and business models. Consider a B2B organisation. Traditionally it has sold its products through a network of distributors. With the advent of e-commerce it now has the opportunity to bypass distributors and trade directly with customers via a web site...
The online value proposition
The aim of positioning is to develop a differential advantage over rivals' products as perceived by the customer. Many examples of differentiated online offerings are based on the lower costs in acquiring and retaining online customers which are then passed on to customers - to do this requires creation of a different profit centre for e-commerce operations. Examples include Retailers offering lower prices online. Examples Tesco.com price promotions on selected products , Comet discounts...
Decision 3 Target marketing strategy
Evaluation and selection of appropriate segments and the development of appropriate offers. Identification of different groups within a target market in order to develop different offerings for each group. Deciding on which markets to target is a key strategic consideration for Internet marketing strategy in the same way it is key to marketing strategy. Target marketing strategy involves the four stages shown in Figure 4.12, but the most important decisions are Segmentation targeting strategy -...
Options for changing the extended product
When a customer buys a new computer, it consists not only of the tangible computer, monitor and cables, but also the information provided by the computer salesperson, the instruction manual, the packaging, the warranty and the follow-up technical service. These are elements of the extended product. Smith and Chaffey 2005 suggest these examples of how the Internet can be used to vary the extended product customer service see people, process and physical evidence incorporating tools to help users...