Lecture 3Lecture 3 The Internet and the markti iketing mix

Lecture 3Lecture 3The Internet and the

k ti imarketing mix

Learning objectivesg j

A l th l t f th k ti i iApply the elements of the marketing mix in an

online contextonline context.

Evaluate the opportunities that the InternetEvaluate the opportunities that the Internet

makes available for varying the marketing mixmakes available for varying the marketing mix.

Questions for marketers

How are the elements of the marketing mix varied online?Can the product component of the mix be varied online?How are companies developing online pricing strategies?Does ‘place’ have relevance online?What are the digital tools for communicating with customers?

The marketing mixg

In 1963 Bartels said:‘a marketer is like a chef in a kitchen a mixer ofa marketer is like a chef in a kitchen … a mixer of ingredients’Variables used to define key elements of marketing y gstrategyFrom the 4Ps of Jerome McCarthy to the 7Ps of Booms and Bitner sometimes referred to as the services mixand Bitner sometimes referred to as the services mix

4Ps – Product, Price, Place, Promotion7Ps – add People Processes and Physical Evidence7Ps add People, Processes and Physical Evidence8th P – online Partnerships

The 4Ps and the 4Cs

Price Cost

PromotionCommunications

withPromotion with company

Product Customer needs and wants

Place Customer conveniencePlace convenience

Mixing the mix onlineg

Which variables are important for the ideal customer?

Price and quality?

Where they buy?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 butRemember the mix is not generic for all customers, but

for segments.

The elements of the marketing mixg

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

th ’ dthe user’s needs.

• Extended productAdditi l f t d b fit b d th– Additional features and benefits beyond the core product.

Extended product optionsp p

• Examples:– Add on services – gift wrapping @ Amazon– Add‐on services – gift wrapping @ Amazon– Endorsements– Awards– TestimoniesTestimonies– 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

Brands

• A brand is described by Leslie de Chernatony and Malcolm M D ld i h i l i b k 1992 b k C iMcDonald 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 perceives relevant 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’these added values in the face of competition .

Brands online

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 buildexperience and the experience is the brand . They suggest that to build successful online brands, organisations should consider how their proposition can build on these possible brand promises:the promise of convenience – making a purchase experience more

i t th th l ld f i lconvenient 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;pp g p p y y ;the promise of fun and adventure – this is clearly more relevant for B2C services;the promise of self‐expression and recognition – provided by

li i i h Y h ! G i i hpersonalization services such as Yahoo! Geocities where consumers can build their own web site;the promise of belonging – provided by online communities.

Plus trust and reassurance.

Online brand optionsp

1 Mi t t diti l b d li1. Migrate traditional brand online.

2. Extend traditional brand: variant.

3. Partner with existing digital brand.

4. Create a new digital brand.

Napster.co.uk

Guinness brand site (www.guinness.com)

Price implicationsp

View 1 – decreased prices inevitableP i tPrice transparencyCustomer knowledge increasesPrice reduction and standardizationPrice reduction and standardization

View 2 – decreased prices unnecessary

89% purchase books from first site89% purchase books from first siteOnly 10% are aggressive bargain huntersFor corporate buyers internal changes are main benefitAmazon prove this?

See Baker et al. (2001)

Differential pricingp g

• Options – reduce or transfer. Other optionsP i i• Precision– Setting prices more accurately through testing

(price indifference band) (p )• Adaptability

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

• Segmentation– Different charges according to profilingDifferent charges according to profiling– Regular vs fill‐in customers

See Baker et al. (2001)See Baker et al. (2001)

New Pricing ApproachesNew Pricing Approaches

• Forward Auctions (B2C)Forward Auctions (B2C)

• Reverse Auctions (B2B)

d i ll i h b• Aggregated Buying‐ collective purchase by customer union e.g. LetsBuyit.com

• Dynamic Pricing‐ price updated in real time according to the type of customer or current market conditions e.g. Amazon in 2000 but received negative review

Traditional Pricing optionsg p

• Cost‐plus– Add profit margin to operational costs

• Target profit pricing– Based on breakeven

• Competition‐based pricing• Market‐oriented

– Premium‐pricing– Penetration pricing

Kotler (1997) on Pricing Options for eCommerce

• Maintain the priceMaintain the price

• Reduce the price to avoid losing market share• Reduce the price to avoid losing market share

R i i d lit diff ti t• Raise perceived quality or differentiate product further by adding value services

• Introduce new lower‐priced product lines

PLACE‐ LocaliztionPLACE Localiztion

• Providing a local site with or without aProviding a local site with or without a language specific version

• A site may need to support customer from a• A site may need to support customer from a range of countries with:

Diff t d t d– Different product needs

– Language differences

l l d ff– Cultural differences

Place – new channel structures• Distintermediation‐ is there an option for

selling direct?selling direct?

• Reintermediation‐ the new intermediaries created through partnering with affiliatecreated through partnering with affiliate arrangements. Intermediaries receive a commissioncommission

• Countermediation‐ should we partner with th t it i t di ? Eanother or set up its own intermediary? E.g.

European airlines www.opodo.com to counter l t i t d b kwww.lastminute.com and www.ebookers.com

Channel ConflictsChannel Conflicts

• Going online to sell direct may threatenGoing online to sell direct may threaten distribution arrangements with existing partners

• Different forms of channel the Internet can take– A communication channel only– A distribution channel to intermediaries– A direct sales channel to customers– Any combination of the above

– This is linked to “Getting the right mix of Brick and Click”

Promotion

• Promotion unfortunately has a range of meanings.

• It can be used to describe the marketing fcommunications aspect of the marketing mix

• Or, more narrowly, as in sales promotion

Promotion tools

1 Advertising

2 Sales promotion

3 Personal selling3 Personal selling

4 Public relations

i k i5 Direct marketing

Options for replacing peoplep p g p p

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

• 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.O i h i Th h l fi d h h ’ l ki• 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 usuallyVirtual assistants come in varying degrees of sophistication and usually help to guide the customer through a maze of choices.

Using promotion to vary the mixg p y

1. Reviewing new ways of applying each of the elements of the communications mix such as advertising, sales promotions, PR andcommunications mix such as advertising, sales promotions, PR and direct marketing.2. Assessing how the Internet can be used at different stages of the buying process.

l l ff f3. Using promotional tools to assist in different stages of customer relationship management from customer acquisition to retention. In a web context this includes gaining initial visitors to the site and gaining repeat visits through these types of communications techniques:p g yp q– reminders in traditional media campaigns why a site is worth visiting, such

as online offers and competitions;– direct e‐mail reminders of site proposition – new offers;

frequently updated content including promotional offers or information– frequently updated content including promotional offers or information that helps your customer do their job or reminds them to visit.

Impact of the Internet on Buyer Process

Online and offline communications htechniques

Search Engine MarketingSearch Engine Marketing

• Vital for generating quality visitors to yourVital for generating quality visitors to your website

• Naturally Search Engines such as Google• Naturally Search Engines such as Google, Yahoo and Bing will come to mind as the popular option consumers use to find productpopular option consumers use to find product etc

G l f 50% f id h• Google account for over 50% of paid search expenditure. Atlas (2007)

Two types of SEMTwo types of SEM

1. Search Engine Optimisation (SEO)‐ involves1. Search Engine Optimisation (SEO) involves achieving the highest position or ranking in the Natural Listings in the search resultsthe Natural Listings in the search results page.

2 Paid Search Marketing or PPC relevant ads2. Paid Search Marketing or PPC‐ relevant ads with link to a company website is displayed when the user of a search engine types in awhen the user of a search engine types in a specific phrase. Usually labelled Sponsored LinksLinks.

Paid Search Marketing ToolsGOOGLE

• Google Adword – https://adwords google com• Google Adword – https://adwords.google.com

• Double Click‐htt // l /d bl li k/http://www.google.com/doubleclick/

Yahoo!

• Yahoo! Search Marketing http://advertisingcentral.yahoo.com/searchmarketing/en_SG/index

• Yahoo! Small BusinessYahoo! Small Business

http://smallbusiness.yahoo.com/marketing/

Online PR

• What is it?‘th t f t ti th l d d– ‘the management of reputation ‐ the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics’publics

The UK Institute of PR (IPR)

– ‘the managed process of communication between one group and another … (it) is the method of defining messages and communicating them to targetmessages and communicating them to target audiences in order to influence a desired response’.

Public Relationships Consultants Association (PRCA)Public Relationships Consultants Association (PRCA)

Key E‐PR activitiesy

• Communicating with the media

• Link‐building

• Blogs RSS and PodcastingBlogs, RSS and Podcasting

• Managing how your brand is presented on third party sitesthird party sites

• Creating a buzz – online viral marketing

Social NetworkingFacebook

• Facebook Statistics• Facebook Statistics – http://www.facebook.com/press/info.php?statisti

cscs

• Facebook Advertisingh // f b k / d i i /– http://www.facebook.com/advertising/

• CheckFacebook (not affiliated with facebook)– http://www.checkfacebook.com/p

Affiliate MarketingAffiliate Marketing • Affiliation can generate more sales at a

ll dcontrolled cost

• The question is whether these sales would have occurred anyway if the brand is well known

• For example , Amazon has an Affiliate Programme for over 10 yearsg y

• It could be argued with such a recognized brand and large customer base it wouldbrand and large customer base it would receive most sales anyway

The Affiliate Marketing ModelThe Affiliate Marketing Model

• Affiliate Marketing is known as ‘pay‐per‐g p y pperformance’ marketing

• It is a commissioned based arrangement where the gmerchant only pays when they make the sale or get a lead

Options for Affiliate MarketingOptions for Affiliate Marketing

1 Aggregators‐ these are major comparison1. Aggregators these are major comparison sites, e.g. Kelkoo, Shopzilla, Uswitch, MoneysupermarketMoneysupermarket

2. Review Sites‐ e.g. CNET, reviewcentre.com, epinions comepinions.com

3. Reward Sites‐ e.g. GreasyPalm or QuidCo

4. Voucher Code Sites‐ e.g. MyVoucherCodes or Hot UK Deals

E Mail MarketingE Mail Marketing

• Outbound Email Marketing‐ where campaignsOutbound Email Marketing where campaigns are used to encourage trial and purchase

• Inbound Email Marketing where emails from• Inbound Email Marketing‐ where emails from customers, such as enquiries are managed

A li i f il k i i l d• Applications of email marketing include:– Customer acquisition and retention

– Sales promotion

– Gathering customer data

– Brand awareness

Opt‐In Email options for Customer Acquisition

1. Cold email campaign‐ rent an email list from a provider such as www.experian.com anda provider such as www.experian.com and send out opt‐in email

2 Co branded the recipient receives an email2. Co‐branded‐ the recipient receives an email with an offer from a company they have a strong affinity with E g credit card companystrong affinity with. E.g. credit card company could partner with a mobile provider to send out an offerout an offer

3. Third‐party e‐newsletter‐ a company bli i it lf i thi d t l ttpublicizes itself in a third‐party e‐newsletter,

in the form of ad or sponsorship

Promotion technique Main strengths Main weaknesses

Search engine registration Large online reach – used by high proportion of web users. Visitors are self-

Works best for specialist products rather than generic products e.g. insurance.

selecting. Relatively low cost, but increasing.

Cost – search engine optimisation is continuous as techniques change.

Link-building campaigns Relatively low cost and good targeting. Setting up a large number of links can be time-consuming.time consuming.

Affiliate campaigns Payment is by results (e.g. 10% of sale goes to referring site).

Further payment to affiliate manager required for large-scale campaigns.

Banner Main intention to achieve visit i.e. direct response model Useful role in branding

Response rates have declined historically to banner blindnessresponse model. Useful role in branding

also.to banner blindness.

Sponsorship Most effective if low-cost, long-term co-branding arrangement with synergistic site.

May increase mind-share, but does not directly lead to sales.

E-mail marketing Push medium – can’t be ignored in users’ in-box. Can be used for direct response link to web site.

Requires opt-in list for effectiveness. Better for customer retention than acquisition? Message diluted amongst other e-mails.

Viral marketing With effective creative possible to reach a large number at relatively low cost.

Risks damaging brand since unsolicited messages may be received.

PR Relatively low-cost vehicle for PR. Many alternatives for innovation.

Offline PR may give higher impact and reach.

Traditional offline advertising (TV, Print, etc)

Larger reach than most online techniques. Greater creativity possible leading to greater impact.

Targeting arguably less easy than online. Typically high cost of acquisition.