Marketing on the InternetMarketing on the Internet

E-MarketingE-Marketing (2 (2ndnd Edition) Edition)Judy Strauss & Raymond FrostJudy Strauss & Raymond Frost

Chapter 1

© Prentice Hall 2001

Chapter 1: Introduction to E-Marketing

Learning Objectives

Marketing Review– Describe the marketing planning process– Define the marketing concept– Explain the value proposition

Describe the new rules for e-marketing. Discuss the components of e-business. Compare and contrast marketing and

e-marketing.

Learning Objectives

Define Internet, Web, intranet, extranet, and corporate portal, portal, and hub.

Identify several e-marketing challenges and opportunities.

Discuss the characteristics of the Net’s two generations.

Name and describe e-marketing models for each of the 4P strategies.

The Yahoo! Story

Marketing Concept: Meeting organizational goals while serving customers needs

Currently has 500,000 sites classified into 25,000 categories

Currently the most popular site on the Internet.

3,566 advertisers and merchants use Yahoo!

New Rules for E-Marketing

Click here Yahoo.com

Ten Rules of E-Marketing

1. Power Shift from sellers to buyers

2. Increasing Velocity

3. Death of Distance

4. Global reach

5. Time compression

6. Knowledge management is key

7. Market deconstruction

8. Interoperability

9. Interdisciplinary focus

10. Intellectual capital rules (Digital City)

Its’ Bigger Than the Internet

Electronic marketing reaches far beyond the web.

Examples:– Email and Newsgroups– Web TV, Cell Phones, and text-only browsers– Bar Code Scanners– Cable Modem and DSL connections

What is E-Business (EB)?

Defined as the continuous optimization of a firm’s business through digital technology

[EB = EC + BI + CRM + SCM + ERP]

Where, • EI = e-commerce

• BI = business intelligence

• CRM = customer relationship management

• SCM = supply chain management

• ERP = enterprise resource planning

E-Business continued EC - uses digital technologies to enable buying/selling

BI - collecting primary/secondary information

CRM - strategy to satisfy customers and build long-lasting relationships; high interaction with customers

SCM – delivery of products efficiently and effectively; high interaction with distributors

ERP – optimize business processes and lowering costs– Order entry and purchasing– Invoicing and inventory control

Activity

Business Process

Enterprise

PurePlayBusiness transformation

(competitive advantage,industry redefinition)

Effectiveness(Incremental sales,customer retention)

Efficiency(Cost

reduction)

Pure dot-com(E*Trade)

Click and Mortar(eSchwab)

Customerrelationshipmanagement

Brochureware,Order processing

Leve

l of

busi

ness

impa

ct

Exhibit 1 - 2 Level of commitment to e-businessSource: adapted from www.mohanbirsawhney.com

What is E-Marketing?

Marketing:– Use of 4 “P’s” to meet customer’s needs

E-Marketing:– Use of technology to increase efficiency of

marketing– Increases company profitability and adds

customer value

The Big PictureToo much digital technology creates:

– Decreasing cultural/language differences– Workaholism; less family time– Social class divisions because of high literacy

requirements

Digital economies are interdisciplinary– Marketing, MIS/CIS, Finance, Strategists– Human Resources, Production/Operations

In order of its relative size:

– Intranet smallest– Corporate portal– Extranet– Hub– Portal

• Lycos• Excite

– Web– Internet largest

Networks

The Internet Statistics: Forrester.com; ACNielsen

Computer Industry Almanac estimates that worldwide users will reach 490 million by 2002; and the US is estimated to reach 165 million users

In 2001, consumer online advertising will grow only 25%, while email and promotions will grow 100% and 38%, respectively.

By 2002, E-Commerce may exceed $1.2 trillion

15 million virtual grocery shoppers predicted by 2007

End of the Beginning

High growth, but negative profits

Fewer E-Companies truly succeed– E.Schwab.com

Must rely on traditional marketing strategies

Dot-com drop-outs and mergers occurring

E-business drops the ‘e’ as electronic business is the way things will be done

Exhibit 1 - 4 Entering the Second Generation of E-BusinessSource: Adapted from the Gartner Group.

E-Marketing Challenges and Opportunities

Markets

Revenge of the Consumer

Businesses

Technology

Five Markets Business-to-Consumer (B2C)

– Example: www.iGo.com

Business-to-Business (B2B)– Example: www.amazon.com

Consumer-to-Consumer (C2C)– Example: www.eBay.com

Business-to-Government (B2G)

Government-to-Consumer (G2C)

Revenge of the Consumer 1930s:

– Caveat emptor (“let the buyer beware”)

2000s:– Consumers have control

What consumers want:– Privacy– To safeguard their children– Permission before being sent commercial email

Businesses

Challenges:– Quality customer service– Information overload

Opportunities:– Ways of generating revenue– Greater interdependence in their value chain

Exhibit 1 - 5 Amazon.com Uses Mass Customization to Personalize Web Pages

Source: www.amazon.com Amazon.com is a registered trademark or trademark of Amazon.com, Inc. in the United States and/or other countries. © 2000 by Amazon.com. All rights reserved.

Technology

Can lower costs on staff and paperwork

Can be a costly investment

Security issues

New payment instruments

Low bandwidth

E-Marketing DeliversValue = Benefits – Costs

Value - customer perceptions of the product’s benefits

Benefits - attributes, brand name, etc…– Add benefits through mass customization and

personalization

Costs - time, money, energy, and psychic– Lower costs through 24/7 convenience and one-stop

shopping

E-Business Model

A method of doing business that contributes to the firm’s profitability whether by increasing revenue or decreasing costs

Necessary for models to identify value for the customer

Marketing Mix Components

Product

Price

Distribution

Marketing Communication

Relationship Marketing

Marketing Mix Component Chapter Business Model

Product 4Digital value through new products

Price 4

Cost reduction using e-marketingNegotiationSegmented pricing

Distribution 5

Content sponsorshipDirect sellingInfomediaryIntermediaries Broker: Online exchangeOnline auction Agent: Manufacturer’s agentAffiliate programMetamediaryVirtual mallShopping agent Reverse auctionBuyer cooperative E-tailer Bit vendorTangible products

Marketing Communication 6

Online advertising Online sales promotionContent publishingE-mail

Relationship Marketing 7CRM Community building

Exhibit 1 - 6 Selected E-Business Models

Product

Through E-Marketing numerous new products emerged

Breakthrough software, hardware, and services that created digital value

Price

Efficiencies have been manifested through E-Marketing

No need for a sales force with all order processing, billing and payments are transacted between customer and Website– Cost savings return a larger profit margin and

lower prices

Distribution A primary E-Marketing application that creates

customer value

New ways for selling and distributing products

Affects all manufacturers, service providers and intermediaries

Models: – Content Sponsorship Model– Direct Selling Model– Infomediary Model– Intermediaries Model

Content Sponsorship Model

Companies create valuable content or services on their Websites

Self-advertising– Examples:

• Yahoo!

• gURL.com

Direct-Selling Model

Manufacturers eliminating channel intermediaries and sell directly to consumers

Known as “Disintermediation”

Dell Computers

Infomediary Model

An organization that collects and sells information about consumers or businesses

Similar to a Market Research firm

Hoover’s

Intermediary Model

Brokers and agents bring buyers and sellers together but neither purchase nor take possession of the actual products– Brokerage firms

• E-Trade, E-Bay, Metalsite– Agent firms

• Travelocity

E-tailers are firms that buy products and resell them online– “Click and mortar” stores– Example: E-Toys

E-Marketing Communication

Accomplished through promotion mix elements:– Advertising– Sales Promotion– Direct Marketing– Public Relations

Models:– Online Advertising Model– Online Sales Promotion Model– Content Publishing Model– Email Model

Online Advertising Model

Firms purchase advertising space on Websites owned by other firms

Does not include a firm’s own Website

Dogpile

Online Sales andPromotion Model

Sampling digital products

Allows consumer to view products before purchasing

E-Music

Content Publishing Model A company’s Website

The displaying of a firm’s information about their product offerings on the Website to Internet users

Brochureware

Does not involve transactions

Directed towards stakeholders

Pure Fishing

E-Mail Model Three types:

– Target Promotions• Companies target users through research and data mining to

send e-mail• Bulk Email Software Marketing

– Reverse Channel• User to firm• Customer service• Bass Pro Shops

– Consumer-to-Consumer• Word of mouth

Relationship Marketing Customer Relationship Marketing (CRM)

E-Marketing is able to build long-term relationships due to:– Online FAQs– Automatic e-mail responders– Customized Websites– Fax-on-demand– Supply chains integrated with the firm’s functions

Model:– Community Building Model

Community Building Model Website developed to create a special interest

community

Users may provide information for products or services

Bring consumer to concise location, making them more available for communication by a firm

Creates social bonds and enhances customer relationships

Ivillage

Marketing Plan Tasks

Situation Analysis– Environmental Factors – Marketers collect and

analyze external elements that include economic analysis, social and demographic trends, and more

– Market opportunity analysis – This entails a supply and demand analysis along with a SWOT analysis. The SWOT analysis determines the strengths, weaknesses, opportunities, and threats.

Selecting Target Market – marketers select the type of customer they are looking to attract.

Marketing Plan Tasks continued Setting objectives – marketers set the objectives according to

the firm’s mission and resources.

Designing marketing mix strategies – Develop product, pricing, distribution, and promotion strategies

Action Plan – Plan the actual marketing plan implementation

Budget – Set a budget for the marketing plan

Evaluation Plan – Continuously evaluate the plan to make sure objectives are met.

         

Environmental Scan

1.        Situation analysis—Environmental factors

—Market opportunity analysis (demand, supply, and SWOT: strengths, weaknesses opportunities, threats)

2.        Select target market(s)

3.        Set objectives

4.        Select marketing mix:Product, price, distribution promotion

5.        Action plan (tactics)

6.        Budget

7.        Evaluation plan

 

Exhibit 1 - 7 Marketing Plan Tasks

Review Questions

1.List the 10 new rules for e-marketing.

Which in your mind is the most important and why?

         Power shift from sellers to buyers.          Increasing velocity.          Death of distance.          Global reach.         Time compression.          Knowledge management is key.          Market deconstruction.          Interoperability.          Interdisciplinary focus.         Intellectual capital rules.

The most important is the first—Power shift from sellers to buyers. This is because it affects all marketing strategies. A good case probably can be made for each of the others, however.

Question 1:

2. Define e-business and e-marketing

E-business is the continuous optimization of a firm’s business activities through digital technology. It involves attracting and retaining the right customers and business partners. It includes digital communication, e-commerce, online research, and it is used by every business discipline. The following formula is simply a graphical representation of important e-business components.

EB = EC + BI + CRM + SCM + ERP E-marketing is the use of electronic data and applications for

planning and executing the conception, distribution, promotion, and pricing of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. It affects traditional marketing by increasing efficiency in traditional marketing functions, and the technology of e-marketing transforms many marketing strategies.

Question 2:

3. How many users are connected to the Internet

worldwide?

How many in the United States?

Question 3:

Approximately 266 million users are connected to the Internet worldwide and 122 million of those are in the United States.

Note: This number will have increased since publication.

4. Explain the difference between intranet, extranet,

and corporate portal.

Question 4:

Intranet—A network that runs internally in a corporation but that uses Internet standards such as HTML and browsers.

Extranet—An intranet to which value chain partners have admission for strategic reasons.

Corporate Portal—A second-generation intranet. The goal of a corporate portal is to merge all of the employees’ information and communication needs into a single interface. Thus, corporate portals access internal documents, data warehouses, groupware, e-mail, and calendars, in addition to the Web. From largest to smallest: Extranet, Corporate Portal, Intranet. The latter two are usually proprietary to the firm’s employees, while an Extranet is open to a firm’s partners, customers, and other selected stakeholders.

5. Explain the difference between a portal

and a vertical portal.

Give examples of each.

Question 5:

A portal is a point of entry to the Internet. Many portals such as Yahoo!, Lycos, and Excite were originally just search engines. What makes them portals is that they now provide many services in addition to searching.

A vertical portal is a portal that specializes in one topic, market, or product area. An example is www.homearts.com that specializes in women’s issues concerning the home.

Note: This review question requires outside research due to an omission in the text.

6. Explain how a higher-priced item can deliver more value.

Question 6:

Value includes customer perceptions of the product’s benefits: specifically its attributes, brand name, and support services. Subtracted from benefits is the cost in acquiring the product: monetary, time, energy, and psychic. Higher priced items can deliver more value by adding more benefits or by lowering time, energy and psychic costs.

7. What is a business model?

Question 7:

A business model is a method of doing business that contributes to the firm’s profitability either by increasing revenue or decreasing costs.

8. How are business models related to customer value?

Question 8:

When firms decrease costs through e-marketing, they can pass this along to customers via lower prices.

E-marketing can also lower costs by saving customers time and making it easier to purchase products. Many business models increase customer benefits, thus enhancing value.

9. What is the difference between

a broker and an agent?

Question 9:

Brokers and agents bring buyers and sellers together but neither purchase nor take possession of the products.

Brokers assist in the negotiation and don’t actually represent either side, whereas agents tend to represent either the buyer or seller, taking a commission for their work.

10. What are three ways in which e-mail can be used for marketing communication?

Question 10:

The first concerns e-mail to target promotions to specific users. The targeting can be very sophisticated—for example, targeting users when they are most receptive to a promotional offering based on data mining of past purchase patterns.

The second form of e-mail is the reverse channel: from the user to the firm.

The third form of e-mail is from consumer to consumer. This is the modern-day equivalent of word of mouth.

The End.The End.