Lindell’s Notes
CHAPTER 7
MARKETING AND THE INTERNET
CHAPTER OBJECTIVES AND SUMMARY
1. To demonstrate why the Internet is a valuable marketing tool The Internet is a global electronic superhighway of computer networks that is accessible to people worldwide. The World Wide Web is a way to access the Internet, whereby users see words, colorful charts, pictures, and video, and hear audio. In this chapter (and book), the terms are used interchangeably. E-marketing involves any marketing activity through the Internet. E-commerce refers to sales-generating Internet transactions. E-marketing is the broader concept, and it does not necessarily have sales as the primary goal.
Hundreds of millions of people around the globe are surfing the Web, a number that will soon reach 1 billion individuals. People surf the Internet for a variety of reasons other than shopping. For instance, they seek out entertainment, financial, sports, and news sites. They do product research. They “talk” to one another. They communicate with companies to register complaints and make suggestions. They send E-mails and greetings cards. Companies also surf the Web for a variety of reasons other than shopping. They check what competitors are doing. They read about industry trends and events. They communicate with suppliers. They exchange data among offices anywhere in the world. They monitor inventory. They survey customers. They analyze customer data bases.
E-marketing is evolving in three phases: (1) traditional bricks-and-mortar firms, (2) clicks-only Internet firms, and (3) bricks-and-clicks firms that combine the other two formats. Today, the trend is more toward bricks-and-clicks firms because they can appeal to multiple market segments, maximize customer contact points, leverage the strengths of each form of business, and enter into new alliances.
Companies can achieve various benefits from using the Internet in marketing. These include communicability, a focus/tailored approach, information, timeliness, cost efficiencies, dynamism/ flexibility, global possibilities, multimedia capabilities, interactivity, and sales.
2. To explore the multifaceted potential marketing roles for the Internet The Web can serve multiple marketing roles. Each firm must determine which of these roles to pursue and how to prioritize their importance: projecting an image, customer service, channel relations, purchasing and inventory management, information gathering and sharing, data-base development, mass customization (a process by which mass-market goods and services are individualized to satisfy a specific customer need, at a reasonable price), advertising and sales promotion, selling, and multichannel marketing.
3. To show how to develop an Internet marketing strategy A firm should adhere to a systematic process in forming a proper strategy. The six steps in the process relate to the basic components of an Internet marketing strategy. There are also four outside influences in making strategic decisions.
(1) Goal categories are set. Both quantitative and qualitative objectives should then be enumerated. (2) The target audience is identified and selected, and its desires studied. (3) Web site attributes are determined. However, the company must first decide whether to undertake all Web-related activities itself (insourcing) or to have specialized firms perform some or all Web-related activities for it (outsourcing). Second, the company must choose the scale of its Web presence, especially the importance of the Web site in its overall marketing strategy, the percent of the marketing budget for the Web site, and how the Web site is to be implemented. Then, Web site attributes (address name, home page, etc.) are ascertained.
(4) Internet-based marketing-mix decisions are made while developing the Web site, consistent with offline marketing decisions. (5) The strategy is implemented. Again, two factors affect a firm’s ability to properly enact its strategy: security and channel relationships, and they must be dealt with well. Once the strategy is enacted, the firm must ensure that it runs smoothly. (6) The last step is to assess performance and make needed modifications.
4. To illustrate how the Internet is being utilized to enhance marketing strategies Many firms are actively using the Web in their consumer analysis, product planning, distribution planning, promotion planning, and price planning. Several examples are noted.
5. To consider the challenges of using the Internet in marketing and to forecast the future of E-marketing Some challenges are rather uncontrollable (such as slow-speed modems) and others are self-inflicted by companies. Attention must be paid to consumer shopping resistance, customer service, system breakdowns, site speed, connection costs, legal issues, privacy issues, spamless communications, clutter, a workable business model, expectations of free services, integrating bricks-and-clicks operations, and global issues.
In the future, Internet usage will continue growing, with E-marketing being even more essential. Bricks-and-clicks firm will succeed best. High-speed connections will lead to more multimedia-rich Web sites. Business-to-business E-commerce will greatly outstrip business-to-consumer E-commerce.
CHAPTER OUTLINE
OPENING VIGNETTE
John Graham, the president of a marketing consulting firm, says there are 16 principles that firms should review when considering use of the Internet. These are eleven of them:
E-Commerce Is Not for Everyone
The Web Does Not Stand Alone
Traditional Marketing Channels Are Still Valid
It’s a Matter of Planning or Perish
Look at the Web as Research
All That Counts Is the Customer
Let’s Get Outside Ourselves
If You See It, Don’t Believe It
Just Because It Works Doesn’t Mean It’s Right
It’s 24/7 for Everyone
The Customer Is in Charge
These principles show that companies need to do a lot of homework before, during, and after going live on the Web. There are many challenges involved in using it successfully.
7-1 OVERVIEW
The Internet, also known as “the Net,” is a global electronic superhighway of computer networks in which users at one computer can get information from another computer. It is a public, cooperative, self-sustaining system accessible to people worldwide.
The World Wide Web, also known as “the Web,” comprises all of the resources and users on the Internet using the Hypertext Transfer Protocol. It is a way of accessing the Internet.
The Internet and the Web have somewhat different meanings but both relate to online activities. Throughout the text, the terms have the same connotation: online actions.
E-marketing includes any marketing activity conducted through the Internet, from customer analysis to marketing-mix components.
E-commerce refers to revenue-generating Internet transactions.
The Internet, due to its low costs, wide geographic reach, and many marketing roles, should be a key part of any firm’s marketing strategy.
The true impact of the Internet relates to the multiple marketing tasks that can be undertaken, better and more efficiently—not to the level of sales revenues to be attained.
7-2 WHY THE INTERNET IS A VALUABLE TOOL IN MARKETING
Hundreds of millions of people around the globe are surfing the Web. See Table 7-1. By 2005, it is predicted that three-quarters of all U.S. households will be online.
7-2a BRICKS-AND-MORTAR, CLICKS-ONLY, AND BRICKS-AND-CLICKS
E-marketing is evolving through the phases shown in Figure 7-1.
Bricks-and-mortar firms are traditional companies not involved with the Internet. They are likely to be small in size and scope.
Clicks-only firms do business just online. They don’t have traditional facilities. Many entered the marketplace in the 1990s and often expanded too fast, resulting in going out of business. Still, there are thousands of these firms.
Bricks-and-clicks firms operate in both a traditional setting and on the Internet. Virtually all large retailers, as well as manufacturers, wholesalers, government organizations, nonprofit organizations, and others, have a Web presence.
7-2b THE BENEFITS OF A COMPANY’S USING THE INTERNET IN MARKETING
These are the benefits a firm may receive by going online (see Figure 7-4):
1. Communicability.
Focus/tailored approach.
Information.
Timeliness.
Cost efficiencies.
Dynamism/flexibility.
Global possibilities.
Multimedia capabilities.
Interactivity.
Sales.
7-3 THE MULTIFACETED POTENTIAL MARKETING ROLES FOR THE INTERNET
A. The Web has the potential to serve these multiple marketing roles (see Figure 7-5):
1. Projecting an image—This can be done through the site’s design and the content presented. The example of Accenture (formerly Andersen Consulting) is given.
2. Customer service—The online service may supplement traditional service.
3. Channel relations—The Internet can help channel members to better each other, coordinate distribution strategies, smooth over conflicts, etc.
4. Purchasing and inventory management—The Web can save a lot of time in this area. Sprint was able to whittle down a list of 120 suppliers to 10 or 20 in hours when a paper trail took as long as two months.
5. Information gathering and sharing—Procter & Gamble, in a joint venture with Worldwide Magnifi, will offer for sale its 160 years of marketing know-how. Coca-Cola is one of its earliest customers.
6. Data-base development—Extensive marketing data bases will result from the online interaction between a company and its suppliers and customers.
7. Mass customization—This is a process by which mass-market goods and services are individualized to satisfy a specific customer need at a reasonable price. It is characterized by small volumes, competitive cost, timely deliveries, and more distributed production.
8. Advertising and sales promotion—A firm can use banner ads at portal sites, be listed at search engines, and present multimedia messages and special sales promotions at its own Web site. Staples is very vigorous in its approach.
9. Selling—A site’s role isn’t to just create a shopping experience, but also to develop and share with the consumer tools (such as product information, help guides, etc.) to make shopping a great experience. See Figure 7-6.
10. Multichannel marketing—Bricks-and-clicks firms engage in this, whereby they sell their products through more than one distribution format.
7-4 DEVELOPING AN INTERNET MARKETING STRATEGY
A. To best utilize the Internet in marketing, a firm should follow a systematic process in preparing and enacting the proper strategy. See Figure 7-7.
7-5 HOW THE INTERNET IS BEING APPLIED IN MARKETING STRATEGIES
7-5a CONSUMER ANALYSIS
Table 7-2 highlights consumer analysis research findings.
75-b PRODUCT PLANNING
A. Companies are taking varied approaches to the Internet.
1. Atomic Dog (the textbook publisher) is involved with Internet-driven texts and print versions of them. Its online texts feature high-tech graphics, animations, interactivity, and other attributes not in paper-based books.
2. Pillsbury’s Web site allows people to download recipes that may require ingredients the firm markets. Many of the meal ideas don’t even mention Pillsbury, which gives the company credibility with consumers.
7-5c DISTRIBUTION PLANNING
Some firms, such as Terry Precision Cycling, do little E-commerce business at their Web site.
J.C. Penney’s Web site provides the company with its greatest sales growth. In 2000, online sales were $300 million. As of 2002, annual online sales are expected to reach
$1 billion.
A complex aspect of E-distribution involves business-to-business exchanges that connect sellers with potential buyers.
A number of online firms, having faced distribution problems, are more apt to outsource delivery to such industry powerhouses as UPS, which has a significant Internet logistical presence. See Figure 7-9.
7-5d PROMOTION PLANNING
A. Due to the demise of some E-commerce firms, Internet-driven firms have scaled back on advertising efforts, particularly TV ads.
1. Print and online ads remain popular.
In-store kiosks have a role. See Figure 7-10.
Opt-in E-mail is rising rapidly in popularity.
B. Companies new to Web-based promotion may turn to these two excellent resources from Wilson Internet Services:
1. “The Web Marketing Checklist: 27 Ways to Promote Your Site.”
2. “How to Attract Visitors to Your Web Site.”
7-5e PRICE PLANNING
Eighty percent of Internet shoppers comparison shop before buying and 46 percent visit 3 to 5 sites before making a purchase.
Some firms set online prices similar to their offline prices and count on customer loyalty to stimulate business.
Others, such as eBay and Priceline.com, appeal to people who like to price shop and get bargains.
A number of firms use the Internet to sell close-out merchandise at deep discounts.
7-6 CURRENT CHALLENGES AND FUTURE PROSPECTS FOR E-MARKETING
7-6a THE CHALLENGES OF USING THE INTERNET IN MARKETING
Some challenges that marketers face are beyond their control (such as slow-speed modem connections), while others are self-inflicted (such as poor customer service).
Following are general reasons why E-marketing can be difficult:
1. A company’s corporate culture may be resistant to change.
Internet marketing may not capitalize on a firm’s core competencies.
The proper roles for E-marketing may not be clear enough or realistic.
Web users may be demanding.
Some customers seek a personal touch.
Channel partners may be at odds.
Online and offline systems may be hard to navigate.
It may be hard to determine which Internet functions to insource and which to outsource.
Investment costs and ongoing expenses may be underestimated.
C. The following are specific challenges related to marketing and the Internet:
1. Consumer resistance to online shopping.
a. Final consumers want personal contact, the immediacy of a purchase, and the ability to touch products before buying.
b. The online purchase process can be too cumbersome.
c. From a business perspective, most companies’ existing suppliers are not yet on the Web. Moreover, purchasing managers are reluctant to learn how to use various Intranet and Internet sites.
2. Customer service.
a. Responses to customers’ E-mail often are too slow.
b. Deliveries can be delayed.
c. Customers may not be notified of target delivery dates on out-of-stock items.
d. Many companies require customers to fill out electronic forms to contact a representative, but rarely offer a phone number.
3. System breakdowns.
a. Most of these are due to the complexity of E-marketing with regard to the number of parties involved in a Web site, the amount of traffic on the Web, the number of links firms have at their sites, the use of multimedia, etc.
b. Hackers may corrupt files, steal customer data, and be destructive in other ways.
4. Speed of site performance.
a. Slow Internet connections bother both users and companies with Web sites.
b. Users with dial-up connections must wait to log on every time they dial-up, face busy signals, and must endure long delays when photos or other multimedia tools are featured at the site.
c. This challenge will be less daunting in the future with the advent of “always on” cable, DSL, and other high-speed connections. See Figure 7-11.
5. Internet connection costs.
a. Costs will have to come down for more users to sign up.
6. Legal issues.
a. Precedents often do not yet exist because of the newness of the use of the Internet in business.
b. Company versus company issues may relate to disputes over copyrights, patents, and business practices.
c. Government actions may relate to taxing items sold over the Internet, denying children access to undesirable sites, rules governing purchase terms and delivery dates, and protecting individuals’ privacy.
7. Privacy issues.
a. Internet users are concerned with both what information is being requested at company Web sites and how that information is to be used.
b. Most people desire that the information they provide not be shared with other firms.
Communicating without spam (unsolicited and unwanted E-mail).
Clutter
a. It is tougher for any one company to be noticed and stand out due to the huge number of companies online.
b. Companies will have to keep up their promotion efforts.
10. Finding a workable business model.
a. Only a few Internet-based firms have earned a profit because of investing too much, expanding too fast, system breakdowns, and overestimation of how quickly people would buy on the Web.
11. Expectations of free services.
a. Thousands of Web sites allow free access to valuable resources – including newspapers, magazines, encyclopedias, software, consulting advice, etc.
b. Users therefore expect that these services will be free and bypass sites that charge a fee.
12. Integrating bricks-and-clicks operations.
a. Integrating offline and online strategies is not simple.
13. Global issues.
a. Cultural, language, currency, legal, and other differences among countries can impact on a firm seeking a global Internet strategy.
b. Global distribution is complex, so firms often need to outsource tasks.
7-6b THE FUTURE OF E-MARKETING
The overall impact of the Internet will be enormous, although the emphasis will be more on E-marketing rather than E-commerce.
Bricks-and-clicks firms will outperform bricks-and-mortar firms and clicks-only firms.
The growth of new high-speed transmission modes will allow more multimedia capabilities to be incorporated into company Web sites.
Business-to-business E-commerce will far outstrip business-to-consumer E-commerce. See Figure 7-12.
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