3 Marketing on the Internet Chapter 1 4 Chapter 1: Introduction to E-Marketing.

3

Marketing on the Internet

Chapter 1

4

Chapter 1: Introduction to E-Marketing

5

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.

6

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.

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Ten Rules of E-Marketing1. 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)

8

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

9

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

10

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

11

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

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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

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The Big Picture

• Too 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

14

• In order of its relative size:

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

• Lycos• Excite

– Web– Internet largest

Networks

15

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

16

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

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E-Marketing Challenges and Opportunities

• Markets

• Revenge of the Consumer

• Businesses

• Technology

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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)

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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

20

Businesses

• Challenges:– Quality customer service– Information overload

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

21

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.

22

Technology• Can lower costs on staff and paperwork

• Can be a costly investment

• Security issues

• New payment instruments

• Low bandwidth

23

E-Marketing Delivers

Value = 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

24

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

25

Marketing Mix Components• Product

• Price

• Distribution

• Marketing Communication

• Relationship Marketing

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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

27

Product

• Through E-Marketing numerous new products emerged

• Breakthrough software, hardware, and services that created digital value

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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

29

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

30

Content Sponsorship Model

• Companies create valuable content or services on their Websites

• Self-advertising– Examples:

• Yahoo!• gURL.com

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Direct-Selling Model

• Manufacturers eliminating channel intermediaries and sell directly to consumers

• Known as “Disintermediation”

• Dell Computers

32

Infomediary Model

• An organization that collects and sells information about consumers or businesses

• Similar to a Market Research firm

• Hoover’s

33

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

34

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

35

Online Advertising Model

• Firms purchase advertising space on Websites owned by other firms

• Does not include a firm’s own Website

• Dogpile

36

Online Sales andPromotion Model

• Sampling digital products

• Allows consumer to view products before purchasing

• E-Music

37

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

38

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

39

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

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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

41

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.

42

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.

43

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

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Chapter Two

Internet User Characteristics and Behavior

45

Learning Objectives• Marketing review

– Describe the diffusion process and adopter categories

– Tell why the Product Life Cycle is important to marketers

– List several market segmentation bases and variables

• Describe what the customers want in the 21st century

• List five important customer markets• Identify a number of digital tools customers use

46

Learning Objectives

• Describe important geographic markets for e-business

• Discuss barriers to adoption in emerging countries

• Describe several important demographic segments

• Tell why attitude toward technology might be the most important e-commerce predictor

• Identify many important benefit and usage segments

• Explain three important consumer navigation behavior

47

Customers in the 21st Century

• One half of US population is online

• Marketers have turned to specific segment measurement: characteristics and behavior

• Marketers must design marketing mixes that add value to attract and retain csutomers

48

It’s About Customers• Value is king.

• Price is most important for most customers.

• Customization adds value.

• Speed is everything.

• Convenience is critical for busy people.

49

It’s About Customers

• Easy does it.

• Personalization makes users feel important.

• One stop shopping and integrated solutions make life easier.

• Self-service saves time.

• Email communication to firms deserves answers.

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5 Markets of E-Business• B2C – Business to Consumer

• B2B – Business to Business

• C2C – Consumer to Consumer

• B2G – Business to Government

• G2C – Government to Consumer

51

B2B Markets• Represents more than half of all e-commerce:

– Selling products– Customer Relationship Management (CRM)– Supply Chain Management (SCM)

• Online access to order status, products and price information, etc.

• The online business market is segmented by size, geography, product usage, and type.

• The firms are segmented by level of Internet usage.

52

It’s bigger than the Web• The Web is only one way to communicate with

customers using digital information

• The key: determine which devices customers own and prefer to use

Firms Customers

Scanners in grocery stores, e-mail fax machines, web TV, etc…

E-mail, electronic pagers, etc.

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It’s bigger than the Web

• Decreasing importance of web pages

• Increasing importance of smaller bits of information sent to user wireless devices

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People with Access Digital Tool

Everyone

TelephoneAutomated telephone routing system at firmVoice mail at firm1-800 telephone number at firmInteractive kiosk at storeProduct bar code scan at storeCoupons with bar code Smart card (e.g., long-distance card)

Fewer people

Personal computerNet accessE-mail: personal, lists, bulletin boards, chat roomsFAX machineCell phone PagerElectronic forms

Even fewer people

Palm Pilot or other PDAInteractive TV (e.g., Web TV)Virtual reality on PCVideo mailReal audioOther multimedia on PC

Exhibit 2 - 1 Digital ToolsSource: Adapted from Bishop (1998)

55Exhibit 2 - 2 Net User Definitions

  Effect on Population Estimate

Variable Big Bigger Biggest

Geography Country Region World

Age Adults 18+ Adults 16+ Adults and children

Recency of use(last connection)

Last 3 months Last 6 months Last year

Application Only Web E-mail plus Web Any application

Access America Online Any ISP account Any access

The Big picture: Defining Users

56

• Innovators – first 2.5% to purchase

• Early Adopters – next 13.5%

• Early Majority – next 34%

• Late Majority – next 34%

• Laggards – final 16%

The Big picture: Adopter Categories

57

Exhibit 2 - 3 Product Life Cycle and Diffusion of Innovation Curves

58

0

20

40

60

80

100

120

1990 1995 1996 1997 1998 1999

Mill

ion

s

Exhibit 2 - 4 Growth in United States Internet UsersSource: compiled from data at Cyberatlas.com

Slow growth: Text based users (e-mail and file transfers)

Expansion: Introduction of the World Wide Web

59

Exhibit 2 - 5 Internet Users by Region

Source: adapted from www.nua.ie

Millions of Users Millions of Users Percent growth

Mar-98 Mar-00 1998 to 2000

Africa 0.8 2.46 208

Asia/Pacific 19 54.9 184

Europe 24 72 200

Middle East 0.75 1.3 73

Canada and USA 70 136.1 94

South America 7.25 8.8 21

World Total 121.8 275.56 126

Region

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42% to 72% 22% to 65% 3% to 5%

2% to 5%

2% to 8% 1% to 2%

Exhibit 2 - 6 Proportions of Internet Users in the Population of Each Region from 2000 to 2005

Source: Compiled from data at Cyberatlas.com (9/99)

61

Market Segmentation Bases

• Demographics

• Geographic Location

• Psychographics

• Behavior with Regard to Product

62

Bases Geographics Demographics Psychographics Behavior

Identifying /ProfilingVariableExamples

CityCountyStateRegionCountry

AgeIncomeGenderEducationEthnicity

ActivitiesInterestsOpinionsPersonalityValues

Benefits soughtUsage levelBrand loyaltyUser status

Exhibit 2 - 7 Segmentation Bases and Exemplary Variables

63

Segmentation Coverage Strategies• Mass Marketing – one mix for entire market

• Multisegment Marketing – 2 or more mixes based on predefined segments

• Niche Marketing – mixes designed to target one particular segment

• Micromarketing – all or part of entire mix dedicated to very small group

64

Geographic Segments

• Most firms target specific cities, regions with product offerings

Multisegment strategies based on geographic

• Why? Product distribution strategy Wait to reach only customers in countries to which

its distributes products

65

Market Opportunities• 10 criteria global marketing index (Bishop 1999):

- economic growth- Power- Stability- Trading level (GDP +Balance of trade)- Political environment- Existence of freedom of expression- Bureaucratic efficiency- Telecommunications infrastructures- Digital capabilities (PC ownership per capita)- Online resources (host computer on the net)

66

Market Opportunities

• Bishop’s criteria to the penetration statistics In Europe, the Netherlands, the UK, Germany and

Sweden appear attractive 2003: Europe will become the largest Internet User

• Must consider other factors involving international marketing, firm’s goals, capabilities

67

Barriers to Internet Adoption

• Sociological Issues

• Cultural Issues

• Technological Issues

• Legal Issues

• Political Issues

68

Demographic Segments

• Women

• Seniors

• Teens & Children

• Ethnic Groups

• Gays & Lesbians

69

Psychographic Segments• Personality

• Values

• Lifestyle

• Activities

• Interests

• Opinion

70

Attitudes Toward Technology

• CAT – Consumer Acceptance of Technology– How will the technology benefit the individual?– How will the technology benefit the group?– How will society react to the new technology?

• Technographics– Attitude towards technology– Income level– Motivation for being online

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Technographic Segments

• Fast Forwards

• New Age Nurturers

• Mouse Potatoes

• Techno-Strivers

• Digital Hopefuls

• Gadget Grabbers

• Handshakers

• Traditionalists

• Media Junkies

• Sidelined Citizens

72

Exhibit 2 - 12 Consumer Technographic Segments and Proportion in the United StatesSource: Adapted from Modahl 2000

Career Family Entertainment

Technology High Income Fast Forwards New Age Nurturers Mouse Potatoes

Optimists (>$40,000) 12% 8% 9%

52% Low Income Techno-Strivers Digital Hopefuls Gadget Grabbers

(<$40,000) 7% 7% 9%

Technology Handshakers Traditionalists Media Junkies

Pessimists 7% 8% 5%

48%

Motivation for Using Internet

High Income

Low Income Sidelined Citizens

28%

73

Benefit Segmentation

• Community Members – join chat rooms, frequent “community” oriented sites like GeoCities

• Shoppers – Use the internet mainly to make purchases

• Streamies – Listen to online audio

74

User Segments

• Home & Work – how do users access the internet?

• ISP – Which service provider is used most?

• Wireless – How many users have wireless access?

• Time Online – How much time do users spend online?

75

Consumer Navigation Behavior

• Attention – Online attention span is longer than traditional media.

• Privacy – Users highly value personal privacy online.

• User Control of Message – User is able to control how message is delivered.

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Chapter Three

Marketing Knowledge

77

Learning Objectives• Marketing review

– Differentiate secondary and primary data– Define marketing information system (MIS)– Describe several types of information needed in an

environmental scan– Identify the steps in a primary marketing research

project• List several online sources of publicly and

privately generated secondary data important to marketing managers

• Explain several ways to check the quality of secondary data gathered online

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Learning Objectives

• Understand marketing knowledge and its applications

• Tell how the Internet is used as a contact method for several primary research approaches

• Identify the strengths and weaknesses of the Internet for primary data collection

• Describe the content of a marketing database• Outline several useful strategies for applying

database information

79

Marketing Information System

• MIS: Marketing Information System– Gather, analyze, & disseminate marketing data

• EKM: Enterprise Knowledge Management– Database and server technology– Makes important marketing data available to

others in the system

80

Marketing Information System

• In decision making process, marketers use:

– Internal records: insight about sales and inventory movements

– Secondary data (from Media Matrix): understand competitors, consumers, factors in the environment affecting an organization

– Primary data about consumers: The Net, the telephone, product bar code, scanners, etc.

– E-mail, web surveys, online experiments, focus groups (for current and prospective customers)

81

Marketing Information System

• It’s a system of:

– Assessing information needs– Gathering information– Analyzing it– Disseminating it to marketing decision makers

82

Product data Marketing intelligence data

Customer/prospect data Employee/partner network

Marketing analysis/reports

InternalSecondaryPrimary

Information Need

Information Distribution

Full access:Marketing decision makers

Marketing Databases

Limited access:CustomersPartnersChannel members

Data Sources

Exhibit 3 - 1 The Electronic Marketing Information System

83

Marketing Knowledge

• MIS: gathering, analyzing and disseminating info

• Marketing knowledge: “group mind” or “collective memory” of the marketing personnel

• Enterprise Knowledge Management: combination of the database contents and the technology used to create the MIS at a company wide level

84

Use in the Telecom Industry Representative Firm

Scanner Check-Out Data AnalysisCall Volume AnalysisEquipment Sales AnalysisCustomer Profitability AnalysisCost and Inventory AnalysisPurchasing Leverage with SuppliersFrequent-Buyer Program Management

AT&TAmeritechBelgacomBritish TelecomTelestra AustraliaTelecom IrelandTelecom Italia

Use in the Retail Industry Representative Firm

Scanner Check-Out Data AnalysisSales Promotion TrackingInventory Analysis and DeploymentPrice Reduction ModelingNegotiating Leverage with SuppliersFrequent-Buyer Program Management. Profitability AnalysisProduct Selection for Markets

Wal-MartKmartSearsOsco/Savon DrugsCasino SupermarketsW. H. Smith BooksOtto Versand Mail OrderAmazon.com

Exhibit 3 - 2 Uses of Knowledge Management in Two IndustriesSource: Adapted from Kalakota and Robinson (1999)

85

Sources of Marketing Knowledge

Source 1: Internal Records

Nonmarketing Data

Sales Force Data

Customer Characteristics and Behavior UPC Codes Web site log files

86

Sources of Marketing Knowledge

Source 2: Secondary DataMarketing Intelligence:

Publicly Generated Data Privately Generated Data

Infomediaries Online Databases

87

Sources of Marketing Knowledge

Source 3: Primary Data

1. Internet-Based Approaches: Online Experiments

2. Online Focus Groups

3. Online Observation

4. Online In-Depth Interviews (IDIs)

88

Research Problem

Research Plan

Data Collection

Data Analysis

DistributeResults

Exhibit 3 - 7 Primary Research Steps

89

E-Tailers Web Sites

Improve online merchandisingForecast product demandTest new productsTest various price pointsTest co-brand and partnership effectivenessMeasure affiliate program effectiveness

Pages viewed most oftenIncrease site “stickiness” (stay longer)T`test site icons and organizationPath users take through the site—is it efficient?Site visit overall satisfaction

Customers and Prospects Promotions

Identify new market segmentsTest shopping satisfactionProfile current customersTest site customization techniques

Test advertising copyTest new promotionsCheck coupon effectivenessMeasure banner ad click-through

Exhibit 3 - 8 Typical Research Problems for E-Marketers

90

Sources of Marketing KnowledgeSource 3: Primary Data

4. Online Surveys Research E-mail Surveys Web Surveys

5. Online Panels

6. Other Technology-enabled Approaches Client-Side Data Collection

Clickstream Data Server-Side Data Collection

Web Server Log Files

91

Radio buttons:Choose all that apply

Open ended

Radio buttons: Choose one

Exhibit 3 - 10 Mitchell and Strauss Web Survey

92

Advantages Disadvantages

Fast and inexpensive Sample selection / generalizability

Diverse, large group of Net users worldwide to small specialized niche

Self-selection bias

Computer entry reduces errors Respondent authenticity uncertain

Honest responses to sensitive questions

Frivolous تافهor dishonest responses

Anyone-can-answer, invitation-only, or password protected

Duplicate submissions

Electronic data are easy to tabulate Steep عال learning curve

Exhibit 3 - 11 Advantages and Disadvantages of Online Survey Research

93

Sources of Marketing Knowledge

Source 3: Primary Data

7. Real-Space Approaches: Marketing Databases Data Warehouses

Transaction Processing Databases Data Analysis / Distribution

Data Mining Customer Profiling RFM Analysis (recency, frequency, monetary)

94

Customer Database

Data Warehouse

Product Database

Transaction Database

UPC Scanner

Exhibit 3 - 12 Real-Space Data Collection and Storage Example

95

Future Trends

Marketing Research on the Rise

Data collection becoming more difficult Internet technology will improve

Virtual Reality product tests Video teleconferencing

Real-Space data collection UPC code scanners Universal Product Code

96

CHAPTER 4

E-Marketing Strategies:Product & Pricing

97

Learning Objectives• Marketing review

– Define product and price– Describe six new product strategies– Understand the importance of branding and

positioning on-line• Explain how the Internet can increase customer

value• Give examples of product attributes, branding,

labeling, and customer services online• Explain important criteria for Internet domain

naming• Understand many new trends affecting

development of behind-the-scenes products

98

Learning Objectives• Discuss the hottest areas for new products

behind the scenes in e-business• Discuss nine cells of a suggested Internet

product taxonomy• Tell how the power shift to buyers affects

product development• Discuss whether or not the Net is an efficient

market• Understand the factors putting downward

pressure on Internet pricing• Explain several pricing strategies appropriate for

products selling on the Net

99

INTRODUCTION• Defining a Product:

• A Product is a bundle of benefits that satisfies the needs of organizations or consumers and for which they are willing to exchange money or other items of value

• The term Product includes items such as tangible goods, services, ideas, people, and places

• How Marketers create products providing benefits using new technologies

• Customer Value = Benefits – Costs

• Market efficiencies brought about by Internet technologies

• E-Marketing pricing strategies appropriate for e-commerce

100

Marketing Mix Component

 Business Model

ProductDigital value through new products

Price

Cost reduction using e-marketingNegotiationSegmented pricing

Exhibit 4 - 1 E-Business Models Discussed in This Chapter

101

Creating Customer Value Online

• What Is Value?

• The entire product experience• Defined by the customer (Consumer Perception)• It must meet customer expectations• Value is applied at all price levels

102

Online Benefits

• Companies must fill Web user needs:• Effective Web navigation, attractive and useful site design,

quick download speed, user-friendly Web browsing etc..

• Marketers must make five general product decisions that comprise its bundle of benefits to meet customer needs:

• Attributes, branding, support services, labeling, and packaging.

103

ATTRIBUTES• Product attributes include overall:

• quality: “you get what you pay for”. Higher and consistent quality generally means higher prices

• specific features: It includes color, taste, style, size, and speed of service.

• Product Benefits: • The same features from a user perspective• They are key components in the value proposition

• Marketing Mix Customization: • Tangible and intangible products are sold online with

additional items or services in order to provide additional benefits at a higher price

• Customizing Products• User Personalization (another form of customization)

– BMG Direct

104

BRANDING• A Brand includes a name, a symbol, or other identifying

information

• When those information are registered with the U.S Patent Office, it becomes a trademark, and it is legally protected from imitation

• Trademark: It is a or a combination of word(s), phrase(s), symbol(s), or design(s), that identifies and distinguishes the source of the goods or services of one party from those of others

• A product’s brand name and its image are often part of the benefits a user desires

• Value proposition: Consumers can pay lower prices and use less well-known brands

• Wal-Mart (U.S), Aldi (Germany)

105

Using Existing Brand Names in Cyberspace

• Firms can use existing brand names or create new brands for their new products

• Amazon kept its well-established Web brand name for the new offerings (music CDs, video, software etc…)

• Sports Illustrated, entering the online publishing business, did not want to use its brand online and created an extension, Thrive (www.thriveonline.com). Since that time, the Thrive online name has been sold to Oxygen Media

• Using the Internet to reposition the offline brand. NBC serves an older market than does MSNBC online, but the network decided to use the same brand name in order to bring younger viewers from MSNBC on the Internet to its television network

• The firm might want to change the name slightly for the new market or channel to differentiate it from the offline brand. (e.g.: Wired magazine)

106

Creating New Brands for Internet Marketing

• Criteria for a new Internet brand name:• it must be good• it should suggest something about the product• it should differentiate the product from competitors• it should be capable of legal protection

107

Cobranding

• Cobranding occurs when two different companies put their brand name on the same product

• Advantages:• Good way for firms to build synergy through expertise and brand

recognition• Yahoo! and TV Guide initially combined to provide television

listings on the Yahoo! Site. Since that time, TV Guide separately branded its own site

108

Internet Domain Names• Organizations spend time and money to develop unique brand names

and, thus, developing strong brand equity

• Using the company trademark helps consumers quickly find the site

• Network Solutions Inc., provide domain registering services for a mere $70 for two years per name (www.networksolutions.com)

• If the firm name is taken, there is the possibility to buy the name from the currently registered holder, or to come up with a new or modified site name

• The right domain name can make a huge difference when trying to entice users to the site and to build consistency in the firm’s marketing communications.

• Time Warner’s Pathfinder Web site

109

Support Services• Customer support is a critical component to the value

proposition

• To develop customer relationships, customer service representatives should be knowledgeable and concerned about customer experiences

• Amazon.com’s founder and CEO, Jeff Bezos, even answered some of the e-mails messages himself

• CompUSA Inc., the largest U.S computer retailer. Successfully combined online and offline channels to increase support services.

• Customer service as a product benefit is an important part of customer relationship management

110

Labeling

• Product labels identify brand names, sponsoring firms, product ingredient, and often provide instructions for use and promotional materials

• Tangible products labels create product recognition and influence the purchase

• Labeling has a digital equivalent. For online services, terms of product usage, product features, and other information comprise online labeling at Web sites

• Online labeling can serve many of the same purposes on the Web as offline

111

Exhibit 4 - 3 Microsoft Terms of Use Label

Source: www.microsoft.com. Copyright © 2000 Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-

6399 U.S.A. All rights reserved.

112

Online Costs• Internet technologies often save customers money, time, energy, and

psychic costs (frustration when users spend more time and energy because of some difficulties encountered on the Net), thus increasing value

• Costs will decline thanks to the increasing bandwidth, evolving technology, and better online strategies developed by firms

• Nonmonetary costs reductions based on Net technology:• The net is convenient• The net is fast• Self-service saves time• One-stop shopping saves time• Integration saves time• Automation saves energy

113

Additional Nuances of Product Development• It is important to underscore several additional features affecting

product development due to new technologies• Market deconstruction resulted in the creation of unusual new

products and firms. E.g.: Lending Tree, which offers online searches for the best prices for mortgages and other types of loan.

• Increasing velocity results in fierce competition, lots of product imitation, and short product life cycles

• Proliferation of online auctions (eBay, Amazon.com, and many others)

• The power shift to buyers, when combined with the Net’s reach global reach and death of distance, allows for many unusual business partnerships and for both business and consumer collaboration

• Design customer products that deliver value (Dell Computer)

• Knowledge management allows firms to monitor customer behavior online and create new-product offerings overnight (Book publishers)

• Combination of digital text, graphics, video and audio, and use new Internet delivery systems

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New-Product Strategies for E-Marketing

• Product Mix Strategies (How can marketers integrate hot product ideas into current product mixes?)

• Six categories of new-product strategies:• Discontinuous innovations• New product lines• Additions to existing product lines• Improvements or revisions of existing products• Repositioned products• Me-too lower-cost products

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A Taxonomy for Internet Products

• There are thousands of products based on Internet technologies, which can be classified according to the customers to whom they appeal

• The taxonomy reveals a great number of product opportunities in the B2B market. The B2B products are those sold to content providers or to Internet infrastructure companies. While B2C market gets most of the attention, marketers must know about cutting edge products and trends in both markets.

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   Content Provider

Internet Infrastructure

 End User

Hardware Server farm, high- speed switch

Router, satellite, fiber-optic backbone

Modem, PC, Web TV, PDA, assistive technologies, convergence products

Software Web authoring, encryption, audio/video digitizingenabling software

Protocols, TCP/IP, DNS

Web browser, e-mail client, decryption, audio/video player software

Services E-commerce consulting, Web development, Web design, application service providers

ISP, backbone service provider, Web hosting

Web-based virus scan, auto updates, calendaring, e-mail

Exhibit 4 - 4 Product Taxonomy

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7 new product trends• Create digital value (www.cisco.com)

• Represent either: • A new brand• A new product line• A discontinuous innovation• A technology improvement

• Key to success: customer value by offering:• Desired benefits• Lowering costs

• Largely unseen by the final customer

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Market

B2B• 4 trends: value chain

automation, outsourcing, information sharing & centralizing information access

• Potential to increase both efficiency and effectiveness in performing important marketing functions: sales, distribution…

B2C• 3 trends: multimedia,

assistive technologies & convergence of media

• Power to open up new markets

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Value chain automation

• The value chain includes all businesses involved in moving product from supplier to consumer

• 6 benefits: • Rapid deployment • Relatively bug-free rollout of systems• Integrated solutions• Large number of features • Compatibility with business trading partners• Cost savings

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 Company

1999 ValuationIncrease

 Core Business

Commerce One 1,798% Value chain management B2B portals

Redback Networks 1,239% Broadband access solutions

Vignette 1,223% E-relationship management through customized content

F5 Networks 1,210% Internet traffic and content management—load balancing traffic across servers

Vitria Technology 1,104% Value chain management

Digital Island 1,049% Scalable Web hosting services

E.piphany 1,049% Customer profiling

Exhibit 4 - 5 Valuation Increase for Selected Enabling Companies

Source: Adapted from Pegasus Research

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Enabling technology• Affiliate programs

(www.amazon.com)(www.befree.com)

• Targeted advertising(www.doubleclick.com)

• Personalized promotions

• Sales

• Product configuration(www.calico.com)

• Brokerages

• Payment/financing

• Customer service(www.egain.com)

• Distribution (JIT)(www.i2.com)

• Relationship marketing(www.verbind.com)

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Outsourcing: ASPs• ASPs: application service providers

(www.webharbor.com)

• Advantages: • Perform value chain functions off-site• Different location of the software and support• Lower startup costs• No internet service staff costs• Lower switching costs

• Disadvantages:• Lack of control over key customer data and business processes• Risk by putting the business’ reputation in the ASP’s hands

• VSPs: vertical service providers

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Information sharing

• EDI: Electronic data interchange is a generic term that refers to the exchange of data between businesses in digital form

• Benefit: consistent standards mean the data do not need to be rekeyed by the receiving business

• Two solutions:• OBI: Open Buying on the Internet• XML: Extensible Markup Language

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Centralizing information access• Corporate portals reduce search times by using Web-based

technology to create sites designed for a company’s employees

• Extension an earlier concept Intranet

• Linked to a wide variety of corporate information stores: sales data, groupware documents…

• Extranets are corporate portals whose access has been opened up to value chain partners

• Groupware products are used to coordinate and share information among work teams.

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Multimedia• Gains in Network performance

• Limiting factor: lack of sufficient bandwidth

• High-speed access via cable modems, DSL modems &wireless technologies

• Multimedia technologies available today:• Conferencing software• Webcams• Streaming audio and streaming video• CD-quality audio• Internet telephony VoIP (Voice over Internet Protocol)

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Assistive technologies

• Clever developments allow for computer access by persons with a wide range of disabilities:

• Voice-activated computers• Large-type screen displays• Type-to-speech or braille• Speech-to-text telephony• Eye gaze-to-type

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Exhibit 4 - 7 Home Page Reader Source: www-3.ibm.com/able/hpr.htm

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Convergence of media

• Three types of convergence:

• Voice, video, and data on corporate networks

• Wireless devices and the web: include PDAs (Personal Digital Assistants) and cell phones

» WAP ( wireless access protocol)

• Broadcast media and the Internet with cable modems, DSL modems…

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Pricing: efficient market

• Efficient market means perfect price competition

• Conditions: customers have equal access to information about products, prices and distribution

• Expectations: lower prices, high price elasticity, frequent price changes, smaller price changes and narrow price dispersion

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Lower prices• Mainly true thanks to:

• Shopping agents • Reverse auctions• Tax-free zones• Venture capital• Competition• Lower costs: Order processing –self service, JIT,

Overhead, Customer service, Printing and mailing, Digital product distribution costs

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Exhibit 4 - 8 MySimon Shopping Agent Search ResultsSource: www.mysimon.com

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Price changes

• Frequent price changes due to:

• Competition • Shopping agents• Easiness• Volume discount• experimentation

• Smaller price change increments:

• Price sensitive consumers

• Shopping agents

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Non efficient market• Priced dispersion is not narrow:

the observed spread between the highest and the lowest price for a given product

• Explanation for price dispersion:• How goods are priced online• Delivery options• Time-sensitive shoppers• Branding• Switching costs• Second-generation shopping agents• metamediaries

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Pressure on internet pricing

• Distribution

• Affiliate programs

• Site development and maintenance

• Marketing and advertising

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Exhibit 4 - 9 Frictionless Purchase Sourcetm Allows Product Feature Ratings

Source: retail.frictionless.com

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Pricing strategies

• Penetration pricing

• Market skimming pricing

• Price leadership

• Promotional pricing

Segmented pricing

Negotiation

Dynamic pricing

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Exhibit 4 - 10 Network Solutions Practices Segmented Pricing for ServicesSource: www.networksolutions.com Reprinted with express permission.

Copyright © 2000 Network Solutions, Inc. All rights reserved.

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Three major advantages

• Target through e-mail messages

• High customer satisfaction with Internet purchases

• Customers are more loyal online than offline