internet and digital marketing mix - ut · pdf fileinternet and digital marketing mix session...

Internet and Digital Marketing Mix

Session 4

Georg Singer

georg.singer ät ut . ee

Agenda

• Introduction to marketing mix

• Product

• Internet and branding

• Price

• Place

• Promotion

• People, process and physical evidence

3/7/2011Internet Marketing - UT Spring Semester

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Questions for marketers

• 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?

© Pearson Education Limited 2009

3/44Internet Marketing - UT Spring Semester

2011

Questions for marketers

• 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?



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The marketing mix

• In 1963 Bartels said:‘a marketer is like a chef in a kitchen … a mixer of ingredients’

• Variables used to define key elements of marketing strategy

• From the 4Ps of Jerome McCarthy to the 7Ps of Booms and Bitner sometimes referred to as the services mix– 4Ps – Product, Price, Place (Distribution), Promotion– 7Ps – add People, Processes and Physical Evidence– 8th P online = PARTNERSHIPS



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Mixing the mix online

• Which variables are important for the ideal customer?

– Price and quality?

– Where they buy?

• So need to decide on target markets first and do the research on the mix variables

• Remember the mix is not generic for all customers, but for segments



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The elements of the marketing mix



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Activity – Groups 15 mins

• Review slide 10 “Elements of the marketing mix” and explain the two most important ways in which the Internet gives new potential for varying the marketing mix for each of product, price, promotion, place, people and processes. State– New opportunities for varying the mix

– Examples of companies that have achieved this

– Possible negative implications (threats) for each opportunity


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Product


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The product element of the marketing mix refers to characteristics of a product, service or brand.

Product introduced

• ‘The element of the marketing mix that involves researching customers’ needs and developing appropriate products’

• Core product– The fundamental features of the product that meet the

user’s needs.• Notebook

• Extended product– Additional features and benefits beyond the core product.

• Cloud storage• Additional software• Backup • Security• 2 your pick warranty



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Extend core product - Pearson Custom Publishing (www.pearsoncustom.com)



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•Custom publishing•Create your own books

•Mass customization (Levi’s tailored jeans)•Prosumer= Producer+Consumer

Extended product options

• Examples:– Add-on services – gift wrapping @ Amazon– Endorsements– Awards– Testimonies– Customer lists– Customer comments– Warranties– Guarantees– Money back offers– Customer service (see people, process and physical evidence)– Incorporating tools to help users during their use of the product –

Citroën exCeed– Information – extranets



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Changing the Extended Product -Source: First Direct (www.firstdirect.com)



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•Interactive sales dialogue•Replicates sales dialogue with staff

Conducting marketing research online

• Online focus group

• Online survey

• Customer feedback or forums, possibly on independent sites

• Web logs



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The long tail concept (Anderson 2004) - Zipf’s law, showing decrease in popularity of items within an

ordered sequence



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The kth item is 1/k the popularity of the first

Pre Internet

With internet

Long tail facts

• Number of books on Amazon.com is 23 larger than the number of books shelved at a Barnes & Noble superstore and 57 times larger than in a typical large independent book store

• 40% of sales are from relatively obscure books ranking more than 100.000 (on Amazon), books that cannot be stocked in a conventional bookstore-> Long tail very important for online retailers

• Long tail products have higher margins, Brynjolfsson et al. (2003) estimated that average Amazon prices for an item in the top 100,000 is $29.26 and in less popular titles $41.60


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The Internet and branding


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What is a brand?

The process of creating and evolving successful brands; especially online very important as visitors have limited physical cues.

Brands• A brand is described by Leslie de Chernatony

and Malcolm McDonald in their classic book 1992 book Creating Powerful Brands as

‘an identifiable product or service augmented in such a way that the buyer or user perceivesrelevant unique added values which match their needs most closely. Furthermore, its success results from being able to sustainthese added values in the face of competition’.



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Brands online

• the promise of convenience – making a purchase experience more convenient than the real-world, or for rivals;

• the promise of achievement – to assist consumers in achieving their goals, for example supporting online investors in their decision or supporting business people in their day-to-day work;

• the promise of fun and adventure – this is clearly more relevant for B2C services;

• the promise of self-expression and recognition – provided by personalization services such as Yahoo! Geocities where consumers can build their own web site;

• the promise of belonging – provided by online communities.• Dayal et al. (2000) say, ‘on the world wide web, the brand is the experience

and the experience is the brand’. They suggest that to build successful online brands, organizations should consider how their proposition can build on these possible brand promises:

Plus trust and reassurance.



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Dorset Cereals website (www.dorsetcereals.co.uk)



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•Our recipes•Where to buy •Win stuff - trials•Today’s simplePleasure - engagement•Get in touch-feedback•Our shop•Our friends-related brands•Sell our cereals•Tell a friend•International

Brand names for online brands

1. Law of the common name: The kiss of death for an Internet brand is a common name like Art.com, Advertising.com

2. Law of the Proper Name: short, simple, suggestive of the category, unique, alliterative, speakable, shocking and personalized (Ries and Ries 2000, author of “22 immutable laws of marketing”)

3. Search engines tend to favour sites in their listings which include the name of the service like MyVoucherCodes.com


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The influence of brand knowledge on purchase. Matrix for question ‘I will buy a product if …’

Source: Brand New World (2004)



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->Place counts – Retailer recognitionBrand counts – Brand recognition

Price


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Refers to the organization's pricing policies which are used to define pricing models and to set prices for products and services.

Price implications – 2 views

• View 1 – decreased prices inevitable– Price transparency – price comparison engines, product

search engines

– Customer knowledge increases

– Price reduction and standardization

• View 2 – decreased prices unnecessary– 89% purchase books from first site

– Only 10% are aggressive bargain hunters

– For corporate buyers internal changes are main benefit

– Amazon, RS prove this?

See Baker et al. (2001)



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Increased Price Transparency Pricerunner (www.pricerunner.com)



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Downward pressure on price - mySupermarketaggregator (www.mysupermarket.co.uk)



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Comparing pricesFrom 4 supermarkets

Pricing options

• Cost-plus– Add profit margin to operational costs

• Target profit pricing– Based on breakeven– Different prices for different customers/segments (based on e.g.

volume)

• Competition-based pricing– Common online facilitated by price comparison sites

• Market-oriented (look at demand curve)– Premium-pricing, higher price than competition for high quality

item– Penetration pricing, below competitors prices to penetrate

market



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Differential pricing

• Precision– Setting prices more accurately through testing (price

indifference band)

• Adaptability– Rapid changes (dynamic pricing).– e.g. Concert tickets

• Segmentation– Different charges according to profiling– e.g. Ford and core vs fill-in customers

See Baker et al. (2001)



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Questions to consider

• How many competitors are there at a point in time?

• What is the position of the product in the lifecycle?

• What is the price sensitivity or elasticity of a product?

• What level of pricing is set?

• Are rivals monitoring my price?

• Are we stuck in the middle?


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B2B reverse auctions

• Will these become popular?

• Yes

– 10-20% reductions achievable

• No

– Only 2% prefer for B2B

– 50% do not choose lowest bidder

– 87% stay with current supplier

– Many have stopped experimentingSee Baker et al. (2001)



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Price elasticity of demand for a relatively elastic product, e.g. Going out to the cinema and

dinner



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Price elasticity of demand for a relatively inelastic product, e.g. Gas, health care services



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Action – Groups – 15 mins

• 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 and

– higher involvement purchase – household appliance.


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Place


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The element of the marketing mix that refers to how the product is distributed to customers – in online context: what other websites can be used to promote services.

Place 1 – place of purchase

• A. Seller-controlled sites are those that are the main site of the supplier company which are e-commerce enabled. , e.g. Dell.com

• B. Seller-oriented sites are controlled by third parties, but are representing the seller rather than providing a full range of options., Amazon marketplace, where sellers can offer stuff

• C. Neutral sites are independent evaluator intermediaries that enable price and product comparison and will result in the purchase being fulfilled on the target site., www.ebay.com, uswitch.com, www.computer.com

• D. Buyer-oriented sites are controlled by third parties on behalf of the seller, mysupermarket.com, www.priceline.com

• E. Buyer-controlled sites usually involve either procurement posting on buyer-company sites or those of intermediaries that have been set up in such a way that it is the buyer who initiates the market making, e.g. bulk purchasing of commodities over company’s own website



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http://www.ebay.com/

Evans and Wurster view of place

• Reach. This is the potential audience of the e-commerce site. Reach can be increased by moving from a single site to representation with a large number of different intermediaries. Allen and Fjermestad suggest that niche suppliers can readily reach a much wider market due to search engine marketing (chapter 8).

• Richness. This is the depth or detail of information which is both collected about the customer and provided to the customer. This is related to the product element of the mix.

• Affiliation. This refers to whose interest the selling organization represents – consumers or suppliers. This particularly applies to retailers. It suggests that customers will favour retailers who provide them with the richest information on comparing competitive products.



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Place 2 – new channel structures

A Distintermediation

B Reintermediation

C Countermediation



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Promotion


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The element of the marketing mix that is concerned with communicating the existence of products or services to the target market.

Promotion• ‘Promotion unfortunately has a range of meanings. It

can be used to describe

– the marketing communications aspect of the marketing mix or, more narrowly, as in sales promotion.

– In its very broad sense it includes the personal methods of communications, such as face to face or telephone selling, as well as the impersonal ones such as advertising.

– When we use a range of different types of promotion –direct mail, exhibitions, publicity, etc we describe it as the promotional mix.’

Wilmshurst (1993)



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Promotion tools

1 Advertising – interactive display ads, PPC advertising

2 Sales promotion – coupons, rewards, online loyalty schemes

3 Personal selling – usually f2f (e.g. cosmetics), personal emails, small online seminars, forums, blog

4 Public relations – Online editorial, blogs, feeds, e-newsletters, social networks, links, viral campaigns

5 Direct marketing - mainly e-mail campaigns but overlap with 1-5!



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People, process and physical evidence


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The element of the marketing mix that relates to how an organisation’s staff interact with customers and other stakeholders duringSales and pre- and post-sales communication with them.

Key issues in improving the delivery of service online

• Substitution – Deploying technology instead of people

• Complementarity – deploying technology in combination with people

• Displacement – Outsourcing or ‘off-shoring’ technology or labor

– Eg. Fast-food chain centralizing drive-through order taking in remote call centre


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Options for replacing people

• Autoresponders. These automatically generate a response when a company e-mails an organisation, or submits an online form.

• E-mail notification. Automatically generated by a company’s systems to update customers on the status of their order, for example, order received, item now in stock, order dispatched.

• Call-back facility. Customers fill in their phone number on a form and specify a convenient time to be contacted. Dialling from a representative in the call centre occurs automatically at the appointed time and the company pays which is popular.

• Frequently Asked Questions (FAQ). For these, the art is in compiling and categorising the questions so customers can easily find (a) the question and (b) a helpful answer.

• On-site search engines. These help customers find what they’re looking for quickly and are popular when available. Site maps are a related feature.

• Virtual assistants come in varying degrees of sophistication and usually help to guide the customer through a maze of choices.



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Mini Case Study – Boo.comLearning from the largest European dot-com

failure

• In Groups

• Answer questions at the end of the text

• Prepare 3-5 slides for next session

• Each group presents 5 minutes

• Content and quality of presentation is evaluated

• ->Scan of case study is in OIS


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