E-BUSINESS ISSUES & INTERNET MARKETING
Introduction
At its core, the mission of marketing is to attract and retain customers. To accomplish this goal, a traditional bricks-and mortar marketer uses a variety of marketing variables-including pricing, advertising, and channel choice-to satisfy cur-rent and new customers. In this context, the standard marketing-mix toolkit includes such mass-marketing levers as television advertising, direct mail, and public relations, as well as customer-specific marketing techniques such as the use of sales reps.
With the emergence of the Internet and its associated technology-enabled, screen-ta-face interfaces (e.g., mobile phones, interactive television), a new era of marketing has emerged.
Well-respected academics and practitioners have called for new rules and urged debate about fundamental tenets of marketing, including segmentation, mass marketing, and regionalized programs.) At the ‘other extreme, pundits and academics alike have argued that both the basic building blocks of marketing strategy and the pathways to competitive advantage have remained the same
if you like my post then pls click on advertisment and add as you in my follower list.
Its beneficial for you and me both.
The approach taken in the current volume falls between these polar views. That is, new levers have been added to the marketing mix, segments have been narrowed to finer gradations, consumer expectations about convenience have forever been altered, and competitive responses happen in real time. In short, these are new, exciting changes that have a profound impact on the practice of marketing. At the same time, some of the fundamentals of business strategy-seeking competitive advantage based on superior value, building unique resources, and positioning in the minds of customers-have remained the same.
The intent of this text is to provide a clear indication of what has changed and what has not changed. At the same time, the text would not be complete (and indeed might be actionable from the standpoint of business practice!) if it did not propose
a broader framework to understanding the practice of Internet marketing. Frameworks such as the 4Ps of marketing or the five forces of competitive analysis are important because they provide easy-to-remember, simplifying structures for complex problems. They also serve as guides to managerial action. Thus, under-standing the five forces enables firms to comprehensively map their competitive environment while simultaneously identifying specific actions for their managers (e.g., reduce buyer power by increasing the number of buyers). This opening chapter provides a simple seven-stage framework for Internet marketing. But first it offers a brief review of the basics of marketing and the scope of Internet marketing.
Definition and Scope of Internet Marketing
It is perhaps best to begin with the basic American Marketing Association definition of marketing:
Marketing is the process of planning and executing the conception, pricing, pro-motion, and distribution of ideas, goods, and services to create exchanges that satisfy individual
and organizational goals
The Basics: What Is Marketing?
The definition summarized above has four critical features. These are:
Marketing is a Process
A process is a particular method of doing an activity, generally involving a series of steps or operations. The classical marketing approach involves four broad steps: market analysis, market planning, implementation, and control. 5 Market analysis involves searching for opportunities in the marketplace, upon which a particular firm-with unique skills-can capitalize. Market planning requires segmentation, target market choice, positioning, and the design of the marketing mix (also termed the 4Ps, or marketing program). Market implementation includes the systems and processes to go to market with the marketing pro-gram. Finally, marketing control refers to the informal and formal mechanisms that marketing mangers can use to keep the marketing program on course. Analysis, planning, implementation, and control collectively provide a process for marketing managers to follow in the design and execution of marketing programs.
It Involves a Mix of Product, Pricing, Promotion, and
Distribution
Strong marketing programs do not involve one action, such as the design of a great product. Rather, the most successful marketing programs involve mixing the ingredients of marketing to deliver value to customers. This mixing entails blending the right amounts of the 4P ingredients, at the right time, and in the right sequence. Too often, marketing programs fail because they allocate too many (or too few) resources in an uncoordinated way.
How often have you witnessed the hot Christmas toy advertised-but not found it on the shelf? In the Internet environ-ment, this translates into significant problems with order fulfillment at the most pressing times of the year.
It is about Exchange
Marketing is not successful unless two parties exchange something of value. The buyer may exchange time, money, or services, while the seller must exchange something of value to the buyer. The traditional retail context pro-vides the simplest illustration of this principle. A given consumer exchanges money for a particular good or service. However, exchange also occurs in a wide variety of contexts, many of which are non monetary. These include bartering, volunteering services, and political donations.
It is Intended to Satisfy Individual and Organizational Needs
The aim of marketing is to provide a satisfactory outcome for both the firm and the customer. Firms can have highly satisfied customers if they provide services for free. However, those organizations are not likely to have a long life. The key to modern marketing is simultaneously satisfying the customer, the firm, and its shareholders. In the long run, the firm must have a positive cash flow or show a clear path to profitability for investors to maintain confidence.
What is Internet Marketing?
If traditional marketing is about creating exchanges that simultaneously satisfy the firm and customers, what is Internet marketing?
Internet marketing is the process of building and maintaining customer relation-ships through online activities to facilitate the exchange of ideas, products, and serv-ices that satisfy the goals of both parties.
This definition can be divided into five components:
1. Process
Like a traditional-marketing program, an Internet-marketing program involves a process. The seven stages of the Internet-marketing program process are setting corporate and business-unit strategy, framing the market opportunity, formulating the marketing strategy, designing the customer experience, designing the marketing program, crafting the customer interface, and evaluating the results of the marketing program. These seven stages must be coordinated and internally consistent. While the process can be described in a simple linear fashion, the mar-keting strategist often has to loop back and forth during the seven stages.
2. Building and Maintaining Customer Relationship
The goal of marketing is to build and create lasting customer relationships. Hence, the focal point shifts from finding customers to nurturing a sufficient number of committed, loyal customers.?
Successful marketing programs move target customers through three stages of relationship building: awareness, exploration, and commitment. It is important to stress that the goal of Internet marketing is not simply building relationships with online customers. Rather, the goal is to build offline (as relevant) as well as online relationships.
The Internet marketing program may well be part of a broader campaign to satisfy customers who use both online and offline services.
3. Online
By definition, Internet marketing deals with levers that are available in the world of the Internet. However, as noted above, the success of an Internet market-ing program ‘may rest with traditional, offline marketing vehicles. Consider, for example, the recruiting and job-seeking service Monster.com. Monster’s success can be tied directly to the effectiveness of its television advertising and, in particu-lar, its widely successful of the past two years.
4. Exchange
At the core of both online and offline marketing programs is the concept of exchange. In both the online and offline worlds, exchange is still the heart of marketing. In the new economy, firms must be very sensitive to cross-channel exchanges. That is, an online marketing program must be evaluated according to its overall exchange impact-not just the online exchange impact.
Hence, online mar-keting may produce exchanges in retail stores. Firms must be increasingly sensitive to these cross-channel effects if they are to measure the independent effects of online and offline marketing programs.
5. Satisfaction of Goals of both Parties
One of the authors of this book is a loyal user of the website weather.com. Each day he arises and checks the weather in his city as well as the weather in cities he will be traveling to during the week. He is clearly sat-isfied with and loyal to the site. To the extent that weather.com can monetize this loyalty-most likely, in the form of advertising revenue-both parties will be satis-fied. However, if the firm is unable to meet its financial obligations to employees, suppliers, or shareholders, then the exchange is unbalanced. Customers are still happy, but the firm is unable to sustain its revenue model. Both parties must be sat-isfied for exchange to continue.
A Narrow View Vs a Broad View
The above discussion raises the question of how broadly one should define the scope and impact of Internet-marketing programs. Consider, for example, Figure1. Cell I represents a situation in which the marketing effort is online (e.g., viral marketing, banner ads) and the sales revenue is realized online. Online marketing clearly produces online-based revenue.
However, consider Cell 2. Here, the online marketing effort has led to revenue increases offline; visiting Gap’s online store results in more sales to the traditional Gap retail store. Cell 3 shows the reverse effect. That is, traditional offline marketing activities (e.g., Amazon billboard, Monster Super Bowl ad) drive traffic and purchases at the website. Cell 4 is a situ-ation in which traditional advertising (e.g., television ads for Gap retail stores) drives the traffic and purchases at the retail store.
So, should Internet marketing be broadly defined? A narrow view would be that Internet marketing focuses principally on
Cell I. Advocates of this view would argue that it is only in the quadrant in question that one can truly measure and attribute the effects of Internet marketing. Other cells (or the spillover effects) should not be counted. On the other hand, it could be argued that Cells 1,2, and 3 should be counted as part of the overall Internet marketing effort. After all, the firm would realize lower total revenue if the cross-channel marketing effects did
not occur.
Hence, these cross-channel impacts should be considered part of Internet marketing.
Internet Marketing Impact
This text strongly advocates the broad view of Internet marketing. Moreover, the overall efforts of marketing-all four quadrants-need to be coordinated and managed in an integrated way. Throughout this volume, the careful reader will notice that this text addresses the integration of all four quadrants.
The Seven Stages of Internet Marketing
Te given figure provides an overview of the seven stages of Internet marketing. The seven stages are these: setting corporate and business-unit strategy, framing the market opportunity, formulating the marketing strategy, designing the customer experience, designing the marketing program, crafting the customer interface, and evaluating the results of the marketing program.
The Seven Stage Cycle Of internet Marketing
Stage One: Setting Corporate and Business-Unit Strategy
Corporate strategy addresses the interrelationship between the various business units in a firm, including decisions about which units should be kept, sold, or aug-mented. Business-unit strategy focuses on how a particular unit in the company attacks a market to gain competitive advantage. Consider, for example, Amazon.com. Corporate-strategy issues relate to the choice, mix, and number of business units such as kitchen, music, electronics, books, and tools/hardware. Once these business units are established and incubated in Amazon’s corporate head~ quarters, the senior leadership team of each unit sets the strategic direction and steers the business unit toward its goals.
Stage Two: Framing the Market Opportunity
Stage two entails the analysis of market opportunities and an initial first pass of the business concept-that is, collecting sufficient online and offline data to establish the burden of proof of opportunity assessment. Let’s say, for example, that you are running a major dot-com business such as Amazon. The senior management team is continually confronted with go/no-go decisions about whether to add a new business unit or develop a new product line within an existing business unit.
What mechanism do they put in place to evaluate these opportunities?
In this second part of the Internet-marketing process, a simple six-step methodology helps evaluate the attractiveness of the opportunity
The six steps include:
• seeding the opportunity,
• specifying unmet or underserved customer needs,
• identifying the target segment,
• declaring the company’s resource-based opportunity for advantage,
• assessing opportunity attractiveness,
• and making the final go/no-go decision.
The final go/no-go choice is often a corporate or business-unit decision. However, it is very important to stress that marketing plays a critical role in this market-opportunity assessment phase.
In order for the firm to make an informed choice about the opportunity, the management team needs to obtain a sufficient picture of the marketplace and a clear articulation of the customer experience that is at the core of the opportunity.
Thus, during the market-opportunity assessment phase, the firm also needs to col-lect sufficient market research data.
Stage Three: Formulating the Marketing Strategy
Internet marketing strategy is based upon corporate, business-unit, and overall marketing strategies of the firm. This set of linkages is shown in figure . The marketing strategy goals, resources, and sequencing of actions must be tightly aligned with the business-unit strategy. Finally, the overall marketing strategy com-prises both offline and online marketing activities.
Corporate, Business-unit, and Marketing Strategy
for pure-play online businesses such as Amazon’s tools and hardware group,
Stage Four: Designing the Customer Experience
Firms must understand the type of customer experience that needs to be delivered to meet the market opportunity. The experience should correlate with the firm’s positioning and marketing strategy. Thus, the design of the customer experience constitutes a bridge between the high-level marketing strategy (step three) and the marketing program tactics (step five).
Stage Five: Designing the Marketing Program
The completion of stages one through four results in clear strategic direction for the firm. The firm has made a go/no-go decision on a particular option. Moreover, it has decided upon the target segment and the specific position that it wishes to own in the minds of the target customer. Stage five entails designing a particular combination of marketing actions (termed levers) to move target customers from awareness to commitment. The framework used to accomplish this task is the Market space Matrix. Simply put, the Internet marketer has six classes of levers (e.g., pricing, community) that can be used to create target customer awareness, exploration, and, it is hoped, commitment to the firm’s offering. However, prior to discussion of the Market space Matrix, the stages of the customer relationship and the associated classes of levers that can be employed must be defined.
1. Building and Nurturing Customer Relationships
A relationship can be defined as a bond or connection between the firm and its customers. This bond can originate from cognitive or emotional sources. The connection may manifest itself in a deep, intense commitment to the brand (e.g., the Harley-Davidson HOG club-member) or a simple, functional-based commitment (e.g., regular use of weather.com). Whether defined as a function or an organization-wide culture, marketing is responsible for acquiring and retaining target customers. In this process, success-ful marketers manage to move desirable customers from awareness through explo-ration and, finally, commitment. Once customers reach commitment, the firm is in a position to observe their behavior patterns and determine which customers to nurture and which customers to terminate (or serve at a lower level of cost). Managing this building and pruning process is one of marketing’s key tasks. The four stages of customer relationships are briefly outlined below
a. Awareness
When customers have some basic information, knowledge, or attitudes about a firm or its offerings but have not initiated any communications with the firm, they are in the awareness stage.
Consumers become aware of firms through a variety of sources, including word-of-mouth, traditional marketing such as television advertising, and online marketing programs such as banner ads. Awareness is the first step in a potentially deeper relationship with the firm. However, as one can imagine, awareness without action is not in the best interests of the firm.
b. Exploration
In the exploration stage, the customer (and firm) begin to initiate com-munications and actions that enable an evaluation of whether or not to pursue the four key stages of customer relationship.
deeper connection. This stage is also likely to include some trial on the part of the customer. Exploration is analogous to sampling songs, going on a first date, or test- driving a car. In the online world, exploration may take the form of frequent site vis-its, some e-commerce retail exchanges, and possibly even the return of merchandise. It may include phone call follow-ups on delivery times or e-mails about product inventory. The exploration stage may take only a few visits or perhaps years to unfold.
c. Commitment
In this context, commitment involves feeling a sense of obligation or responsibility for a product or firm. When customers commit to a website, their repeated, enduring attitudes and behaviors reflect loyalty. Commitment is a state of mind (e.g., I strongly prefer Amazon.com over Barnes & Noble.com) as well as a pattern of behavior (e.g., 9 out of 10 of my book purchases are made through Amazon). One direct measure of commitment to a particular site is the extent to which the individual has invested in customizing the site (e.g., creating a Myweather page on weather. com).
d. Dissolution
Not all customers are equally valuable to the firm. In an industrial- marketing context, managers often refer to the 80/20 rule of profitability. That is, 20 percent of customers provide 80 percent of the profit. By implication, therefore, a large number of customers are unprofitable or have high cost to serve. Firms should segment their most valuable and less valuable customers. The most valuable customers may be identified based on profit, revenue, and/or strategic significance (e.g., a large well-regarded customer may not be profitable but opens the door to new accounts). The firm does not want this set of customers to terminate the rela-tionship. Unprofitable, non strategic customers are a different matter. Often it is in the best interests of the firm to terminate the relationship or encourage this set of customers to disengage with the firm. Chapter 7 provides a much more thorough review of these four stages.
The four stages vary by the ‘intensity of the connection between the firm and the customer Intensity of connection may be defined as the degree or amount of connection that unfolds between the firm and its target customers. Three dimensions capture intensity:
1. The frequency of the connection. (How often does the customer visit the site?)
2. The scope of the connection. (How many different points of contact does the customer have with the firm?)
3. The depth of contact. (How thoroughly is the customer using the site?)
A customer might visit a website such as Amazon on a regular basis, but only to purchase books. This visitor would have a high level of frequent contact but a low level of scope. Another customer might visit Amazon frequently but not stay on the site for a long duration or engage in deeper connections such as writing reviews, commenting on products, or communicating with other Amazon users. This cus-tomer would have high frequency but low depth. In all cases, relationship intensity is correlated with the stage of the relationship .
2. The Internet Marketing Mix
The traditional 4Ps of marketing are product, price, promotion, and place/distribution. All four of these choices are part of the Internet marketing mix, plus two new elements: community and branding. Community is the level of interaction that unfolds between users. Certainly, the firm can encourage community formation and nurture community development.
However, community is about user-to-user connections.
Branding is a critical component of building long-term relationships on the Web. Thus, rather than view branding as a subcomponent of the product, it is developed here as a moderating variable upon the levers-product, pricing, communication, community, and distribution.
1. Product
The product is the service or physical good that a firm offers for ex-change. A wide range of product forms are being offered on the Internet, includ-ing physical goods (e.g., clothing), information-intensive products (e.g., The Wall Street Journal online), and services (e.g., online grocers). Frequently, the offerings are a combination of all three forms. In the course of building customer rela-tionships, the firm can use a variety of product levers to build enduring customer relationships.
Product packaging is often used to build customer awareness, , upgrades and complementary services enable customers to explore a deeper con-nection, and customized offerings strengthen commitment. The key point is that specific product levers can be used to encourage a stronger connection. Chapter 8 further develops the process by which product levers can move customers through the four stages.
2. Pricing
Price is the amount the firm charges customers for a particular market transaction. This would include the price of the product, shipping, handling, war-ranty, and other financial costs incurred by the customer. Price is critical because it influences the perceived customer value (the complete product offering minus cost is often termed customer value). While a .casual observer might view the pricing levers quite narrowly (there is only one choice: the price to charge lor the good), there is a wide variety of traditional and new-to-the-world levers that emerge on the Internet. Traditional levers include such potential choices as tiered loyalty pro-grams, volume discounts, subscription models, and targeted price promotions. The Internet has created an entirely new category of pricing tools for new-economy firms to use, including dynamic pricing strategies.
I. Communication
Marketing communication can be defined as activities that inform one or more groups of target customers about the firm and its products. This text takes a broad view of market communication to include all types of firm- level communications, including public relations, the use of sales representatives, and online advertising. Everyone knows how advertising and other forms of communication such as television and direct mail can make target customers aware of the offerings of the firm. However, marketing communication can also encourage exploration, commitment, and dissolution.
For example, viral marketing (where one user informs another user about a site through e-mails) often leads to exploration of a firm’s offerings by new customers. Also, permission marketing (where customers opt to receive communications from the firm) is intended to encourage commitment to the firm. Both offline and online communication levers can encourage customers to build a stronger bond with the firm and should be inte-grated in any marketing program.
II. Community
Community is defined as a set of interwoven relationships built upon shared interests, which satisfy members’ needs otherwise unattainable individually. One of the unique aspects of the Internet is the speed with which communities can be formed. Equally important is the impact that these communities can have on the firm. A critical question confronting Internet marketers is how communities should be leveraged to build deep customer relationships. Communities can be leveraged to build awareness (e.g., user-to-user communication to make others aware of a product promotion), encourage exploration (e.g., user groups discussing which automotive options to purchase-or not purchase), and commitment (e.g., bonds between users lead to deepening involvement with the site). Chapter 11 addresses the community levers that can be employed to nurture customer relationships.
3. Distribution
The Internet is simultaneously a completely new form of commerce- a revolution in how customers and firms interact-and a distribution channel for the firm’s products. With respect to the role as a distribution channel, the Internet has the power to shift customers to a new channel-or to use this channel in combination with other channels (e.g., search the Internet and then purchase at the retail store). Distribution levers include the number of intermediaries (both online and offline), the breadth of channel coverage, and the messaging from the channels. Broad levels of distribution impact both customer awareness and the potential for more customer exploration of the firm and its offerings.
4. Branding
Branding plays two roles in marketing strategy. First, branding is an out-come or result of the firm’s marketing activities.
Marketing programs affect how consumers perceive the brand, and hence its value. Second, branding is a part of every marketing strategy. That is, each marketing activity is enhanced if the brand is strong, or suppressed if the brand is weak. Thus, a strong advertising program for Travelocity.com is likely to produce better results than a strong advertising program for a site with a weaker brand, such as Travel.com. Branding levers work in concert with other marketing levers to produce positive financial and/or customer results for the firm.
In sum, the Internet marketing mix comprises six classes of levers.. The interactive, or multiplier, effect of the brand can be positive or negative. Importantly, this does not mean that the other mix elements do not interact, because they do. However, branding is unique insofar as it is both a lever and an outcome of marketing actions.
3. Individualization and Interactivity
The previous section provided an overview of the six variables in the Internet marketing mix. However, simply specifying that the firm is able to manage these six classes of variables in an online environment does not do full justice to the uniqueness of the Internet environment. Two very important concepts need to be introduced to fully understand the profound implications that the Internet brings to business. These two concepts are. individualization (or customization) and interactivity.
The first concept is individual-level marketing exchange. In addition to high lev-els of interactivity, customers expect to have a personal experience with the firm. Broadcast approaches send the same messages to all members of the target audience.
The Internet enables the firm to engage in customer-specific actions-a broadcast to an audience of one. Equally important, the customer can control the degree of customization by taking action to set the level of customization he or she desires. Hence, the amount of individualization can be controlled either by the firm or by the customer.
Interactivity is defined as the extent to which a two-way communication flow occurs between the firm and customers. The Internet enables a level of customer dialogue that has not previously been experienced in the history of business. Certainly customers could have conversations with retail-store clerks, sales reps, or managers; however, it was not possible at the scale that the Internet affords. Hence, the fundamental shift is one from broadcast media such as television, radio, and newspapers to one that encourages debate, exchange, and conversation.
Pricing can be both inter-active and individualized-indeed, that is the essence of dynamic pricing. And market communications can be both interactive and individualized-that is the purpose of real-time customer service on the Web. Further, more, products and services can be designed in real time by the customer, maximizing both interactivity and customization.
This level of custom dialogue has revolutionized the impact of the Internet on marketing.
Stage Six: Crafting the Customer Interface
The Internet has shifted the locus of the exchange from the marketplace (i.e., face--to-face interaction) to the market space (i.e., screen-tb-face interaction). The key difference is that the nature of the exchange relationship is now mediated by a technology interface. This interface can be a desktop PC, sub-notebook, personal digital assistant, mobile phone, wireless applications protocol (WAP) device, or other Internet-enabled appliance. As this shift from people-mediated to technology -mediated interfaces unfolds, it is important to consider the types of interface design considerations that confront the senior management team.
What is the look-and-feel, or context, of the site?
Should the site include commerce activities?
How important are communities in the business model?
Stage Seven: Evaluating the Marketing Program
This last stage involves the evaluation of the overall Internet marketing program. This includes a balanced focus on both customer and financial metrics
Introduction
At its core, the mission of marketing is to attract and retain customers. To accomplish this goal, a traditional bricks-and mortar marketer uses a variety of marketing variables-including pricing, advertising, and channel choice-to satisfy cur-rent and new customers. In this context, the standard marketing-mix toolkit includes such mass-marketing levers as television advertising, direct mail, and public relations, as well as customer-specific marketing techniques such as the use of sales reps.
With the emergence of the Internet and its associated technology-enabled, screen-ta-face interfaces (e.g., mobile phones, interactive television), a new era of marketing has emerged.
Well-respected academics and practitioners have called for new rules and urged debate about fundamental tenets of marketing, including segmentation, mass marketing, and regionalized programs.) At the ‘other extreme, pundits and academics alike have argued that both the basic building blocks of marketing strategy and the pathways to competitive advantage have remained the same
if you like my post then pls click on advertisment and add as you in my follower list.
Its beneficial for you and me both.
The approach taken in the current volume falls between these polar views. That is, new levers have been added to the marketing mix, segments have been narrowed to finer gradations, consumer expectations about convenience have forever been altered, and competitive responses happen in real time. In short, these are new, exciting changes that have a profound impact on the practice of marketing. At the same time, some of the fundamentals of business strategy-seeking competitive advantage based on superior value, building unique resources, and positioning in the minds of customers-have remained the same.
The intent of this text is to provide a clear indication of what has changed and what has not changed. At the same time, the text would not be complete (and indeed might be actionable from the standpoint of business practice!) if it did not propose
a broader framework to understanding the practice of Internet marketing. Frameworks such as the 4Ps of marketing or the five forces of competitive analysis are important because they provide easy-to-remember, simplifying structures for complex problems. They also serve as guides to managerial action. Thus, under-standing the five forces enables firms to comprehensively map their competitive environment while simultaneously identifying specific actions for their managers (e.g., reduce buyer power by increasing the number of buyers). This opening chapter provides a simple seven-stage framework for Internet marketing. But first it offers a brief review of the basics of marketing and the scope of Internet marketing.
Definition and Scope of Internet Marketing
It is perhaps best to begin with the basic American Marketing Association definition of marketing:
Marketing is the process of planning and executing the conception, pricing, pro-motion, and distribution of ideas, goods, and services to create exchanges that satisfy individual
and organizational goals
The Basics: What Is Marketing?
The definition summarized above has four critical features. These are:
Marketing is a Process
A process is a particular method of doing an activity, generally involving a series of steps or operations. The classical marketing approach involves four broad steps: market analysis, market planning, implementation, and control. 5 Market analysis involves searching for opportunities in the marketplace, upon which a particular firm-with unique skills-can capitalize. Market planning requires segmentation, target market choice, positioning, and the design of the marketing mix (also termed the 4Ps, or marketing program). Market implementation includes the systems and processes to go to market with the marketing pro-gram. Finally, marketing control refers to the informal and formal mechanisms that marketing mangers can use to keep the marketing program on course. Analysis, planning, implementation, and control collectively provide a process for marketing managers to follow in the design and execution of marketing programs.
It Involves a Mix of Product, Pricing, Promotion, and
Distribution
Strong marketing programs do not involve one action, such as the design of a great product. Rather, the most successful marketing programs involve mixing the ingredients of marketing to deliver value to customers. This mixing entails blending the right amounts of the 4P ingredients, at the right time, and in the right sequence. Too often, marketing programs fail because they allocate too many (or too few) resources in an uncoordinated way.
How often have you witnessed the hot Christmas toy advertised-but not found it on the shelf? In the Internet environ-ment, this translates into significant problems with order fulfillment at the most pressing times of the year.
It is about Exchange
Marketing is not successful unless two parties exchange something of value. The buyer may exchange time, money, or services, while the seller must exchange something of value to the buyer. The traditional retail context pro-vides the simplest illustration of this principle. A given consumer exchanges money for a particular good or service. However, exchange also occurs in a wide variety of contexts, many of which are non monetary. These include bartering, volunteering services, and political donations.
It is Intended to Satisfy Individual and Organizational Needs
The aim of marketing is to provide a satisfactory outcome for both the firm and the customer. Firms can have highly satisfied customers if they provide services for free. However, those organizations are not likely to have a long life. The key to modern marketing is simultaneously satisfying the customer, the firm, and its shareholders. In the long run, the firm must have a positive cash flow or show a clear path to profitability for investors to maintain confidence.
What is Internet Marketing?
If traditional marketing is about creating exchanges that simultaneously satisfy the firm and customers, what is Internet marketing?
Internet marketing is the process of building and maintaining customer relation-ships through online activities to facilitate the exchange of ideas, products, and serv-ices that satisfy the goals of both parties.
This definition can be divided into five components:
1. Process
Like a traditional-marketing program, an Internet-marketing program involves a process. The seven stages of the Internet-marketing program process are setting corporate and business-unit strategy, framing the market opportunity, formulating the marketing strategy, designing the customer experience, designing the marketing program, crafting the customer interface, and evaluating the results of the marketing program. These seven stages must be coordinated and internally consistent. While the process can be described in a simple linear fashion, the mar-keting strategist often has to loop back and forth during the seven stages.
2. Building and Maintaining Customer Relationship
The goal of marketing is to build and create lasting customer relationships. Hence, the focal point shifts from finding customers to nurturing a sufficient number of committed, loyal customers.?
Successful marketing programs move target customers through three stages of relationship building: awareness, exploration, and commitment. It is important to stress that the goal of Internet marketing is not simply building relationships with online customers. Rather, the goal is to build offline (as relevant) as well as online relationships.
The Internet marketing program may well be part of a broader campaign to satisfy customers who use both online and offline services.
3. Online
By definition, Internet marketing deals with levers that are available in the world of the Internet. However, as noted above, the success of an Internet market-ing program ‘may rest with traditional, offline marketing vehicles. Consider, for example, the recruiting and job-seeking service Monster.com. Monster’s success can be tied directly to the effectiveness of its television advertising and, in particu-lar, its widely successful of the past two years.
4. Exchange
At the core of both online and offline marketing programs is the concept of exchange. In both the online and offline worlds, exchange is still the heart of marketing. In the new economy, firms must be very sensitive to cross-channel exchanges. That is, an online marketing program must be evaluated according to its overall exchange impact-not just the online exchange impact.
Hence, online mar-keting may produce exchanges in retail stores. Firms must be increasingly sensitive to these cross-channel effects if they are to measure the independent effects of online and offline marketing programs.
5. Satisfaction of Goals of both Parties
One of the authors of this book is a loyal user of the website weather.com. Each day he arises and checks the weather in his city as well as the weather in cities he will be traveling to during the week. He is clearly sat-isfied with and loyal to the site. To the extent that weather.com can monetize this loyalty-most likely, in the form of advertising revenue-both parties will be satis-fied. However, if the firm is unable to meet its financial obligations to employees, suppliers, or shareholders, then the exchange is unbalanced. Customers are still happy, but the firm is unable to sustain its revenue model. Both parties must be sat-isfied for exchange to continue.
A Narrow View Vs a Broad View
The above discussion raises the question of how broadly one should define the scope and impact of Internet-marketing programs. Consider, for example, Figure1. Cell I represents a situation in which the marketing effort is online (e.g., viral marketing, banner ads) and the sales revenue is realized online. Online marketing clearly produces online-based revenue.
However, consider Cell 2. Here, the online marketing effort has led to revenue increases offline; visiting Gap’s online store results in more sales to the traditional Gap retail store. Cell 3 shows the reverse effect. That is, traditional offline marketing activities (e.g., Amazon billboard, Monster Super Bowl ad) drive traffic and purchases at the website. Cell 4 is a situ-ation in which traditional advertising (e.g., television ads for Gap retail stores) drives the traffic and purchases at the retail store.
So, should Internet marketing be broadly defined? A narrow view would be that Internet marketing focuses principally on
Cell I. Advocates of this view would argue that it is only in the quadrant in question that one can truly measure and attribute the effects of Internet marketing. Other cells (or the spillover effects) should not be counted. On the other hand, it could be argued that Cells 1,2, and 3 should be counted as part of the overall Internet marketing effort. After all, the firm would realize lower total revenue if the cross-channel marketing effects did
not occur.
Hence, these cross-channel impacts should be considered part of Internet marketing.
Internet Marketing Impact
This text strongly advocates the broad view of Internet marketing. Moreover, the overall efforts of marketing-all four quadrants-need to be coordinated and managed in an integrated way. Throughout this volume, the careful reader will notice that this text addresses the integration of all four quadrants.
The Seven Stages of Internet Marketing
Te given figure provides an overview of the seven stages of Internet marketing. The seven stages are these: setting corporate and business-unit strategy, framing the market opportunity, formulating the marketing strategy, designing the customer experience, designing the marketing program, crafting the customer interface, and evaluating the results of the marketing program.
The Seven Stage Cycle Of internet Marketing
Stage One: Setting Corporate and Business-Unit Strategy
Corporate strategy addresses the interrelationship between the various business units in a firm, including decisions about which units should be kept, sold, or aug-mented. Business-unit strategy focuses on how a particular unit in the company attacks a market to gain competitive advantage. Consider, for example, Amazon.com. Corporate-strategy issues relate to the choice, mix, and number of business units such as kitchen, music, electronics, books, and tools/hardware. Once these business units are established and incubated in Amazon’s corporate head~ quarters, the senior leadership team of each unit sets the strategic direction and steers the business unit toward its goals.
Stage Two: Framing the Market Opportunity
Stage two entails the analysis of market opportunities and an initial first pass of the business concept-that is, collecting sufficient online and offline data to establish the burden of proof of opportunity assessment. Let’s say, for example, that you are running a major dot-com business such as Amazon. The senior management team is continually confronted with go/no-go decisions about whether to add a new business unit or develop a new product line within an existing business unit.
What mechanism do they put in place to evaluate these opportunities?
In this second part of the Internet-marketing process, a simple six-step methodology helps evaluate the attractiveness of the opportunity
The six steps include:
• seeding the opportunity,
• specifying unmet or underserved customer needs,
• identifying the target segment,
• declaring the company’s resource-based opportunity for advantage,
• assessing opportunity attractiveness,
• and making the final go/no-go decision.
The final go/no-go choice is often a corporate or business-unit decision. However, it is very important to stress that marketing plays a critical role in this market-opportunity assessment phase.
In order for the firm to make an informed choice about the opportunity, the management team needs to obtain a sufficient picture of the marketplace and a clear articulation of the customer experience that is at the core of the opportunity.
Thus, during the market-opportunity assessment phase, the firm also needs to col-lect sufficient market research data.
Stage Three: Formulating the Marketing Strategy
Internet marketing strategy is based upon corporate, business-unit, and overall marketing strategies of the firm. This set of linkages is shown in figure . The marketing strategy goals, resources, and sequencing of actions must be tightly aligned with the business-unit strategy. Finally, the overall marketing strategy com-prises both offline and online marketing activities.
Corporate, Business-unit, and Marketing Strategy
for pure-play online businesses such as Amazon’s tools and hardware group,
Stage Four: Designing the Customer Experience
Firms must understand the type of customer experience that needs to be delivered to meet the market opportunity. The experience should correlate with the firm’s positioning and marketing strategy. Thus, the design of the customer experience constitutes a bridge between the high-level marketing strategy (step three) and the marketing program tactics (step five).
Stage Five: Designing the Marketing Program
The completion of stages one through four results in clear strategic direction for the firm. The firm has made a go/no-go decision on a particular option. Moreover, it has decided upon the target segment and the specific position that it wishes to own in the minds of the target customer. Stage five entails designing a particular combination of marketing actions (termed levers) to move target customers from awareness to commitment. The framework used to accomplish this task is the Market space Matrix. Simply put, the Internet marketer has six classes of levers (e.g., pricing, community) that can be used to create target customer awareness, exploration, and, it is hoped, commitment to the firm’s offering. However, prior to discussion of the Market space Matrix, the stages of the customer relationship and the associated classes of levers that can be employed must be defined.
1. Building and Nurturing Customer Relationships
A relationship can be defined as a bond or connection between the firm and its customers. This bond can originate from cognitive or emotional sources. The connection may manifest itself in a deep, intense commitment to the brand (e.g., the Harley-Davidson HOG club-member) or a simple, functional-based commitment (e.g., regular use of weather.com). Whether defined as a function or an organization-wide culture, marketing is responsible for acquiring and retaining target customers. In this process, success-ful marketers manage to move desirable customers from awareness through explo-ration and, finally, commitment. Once customers reach commitment, the firm is in a position to observe their behavior patterns and determine which customers to nurture and which customers to terminate (or serve at a lower level of cost). Managing this building and pruning process is one of marketing’s key tasks. The four stages of customer relationships are briefly outlined below
a. Awareness
When customers have some basic information, knowledge, or attitudes about a firm or its offerings but have not initiated any communications with the firm, they are in the awareness stage.
Consumers become aware of firms through a variety of sources, including word-of-mouth, traditional marketing such as television advertising, and online marketing programs such as banner ads. Awareness is the first step in a potentially deeper relationship with the firm. However, as one can imagine, awareness without action is not in the best interests of the firm.
b. Exploration
In the exploration stage, the customer (and firm) begin to initiate com-munications and actions that enable an evaluation of whether or not to pursue the four key stages of customer relationship.
deeper connection. This stage is also likely to include some trial on the part of the customer. Exploration is analogous to sampling songs, going on a first date, or test- driving a car. In the online world, exploration may take the form of frequent site vis-its, some e-commerce retail exchanges, and possibly even the return of merchandise. It may include phone call follow-ups on delivery times or e-mails about product inventory. The exploration stage may take only a few visits or perhaps years to unfold.
c. Commitment
In this context, commitment involves feeling a sense of obligation or responsibility for a product or firm. When customers commit to a website, their repeated, enduring attitudes and behaviors reflect loyalty. Commitment is a state of mind (e.g., I strongly prefer Amazon.com over Barnes & Noble.com) as well as a pattern of behavior (e.g., 9 out of 10 of my book purchases are made through Amazon). One direct measure of commitment to a particular site is the extent to which the individual has invested in customizing the site (e.g., creating a Myweather page on weather. com).
d. Dissolution
Not all customers are equally valuable to the firm. In an industrial- marketing context, managers often refer to the 80/20 rule of profitability. That is, 20 percent of customers provide 80 percent of the profit. By implication, therefore, a large number of customers are unprofitable or have high cost to serve. Firms should segment their most valuable and less valuable customers. The most valuable customers may be identified based on profit, revenue, and/or strategic significance (e.g., a large well-regarded customer may not be profitable but opens the door to new accounts). The firm does not want this set of customers to terminate the rela-tionship. Unprofitable, non strategic customers are a different matter. Often it is in the best interests of the firm to terminate the relationship or encourage this set of customers to disengage with the firm. Chapter 7 provides a much more thorough review of these four stages.
The four stages vary by the ‘intensity of the connection between the firm and the customer Intensity of connection may be defined as the degree or amount of connection that unfolds between the firm and its target customers. Three dimensions capture intensity:
1. The frequency of the connection. (How often does the customer visit the site?)
2. The scope of the connection. (How many different points of contact does the customer have with the firm?)
3. The depth of contact. (How thoroughly is the customer using the site?)
A customer might visit a website such as Amazon on a regular basis, but only to purchase books. This visitor would have a high level of frequent contact but a low level of scope. Another customer might visit Amazon frequently but not stay on the site for a long duration or engage in deeper connections such as writing reviews, commenting on products, or communicating with other Amazon users. This cus-tomer would have high frequency but low depth. In all cases, relationship intensity is correlated with the stage of the relationship .
2. The Internet Marketing Mix
The traditional 4Ps of marketing are product, price, promotion, and place/distribution. All four of these choices are part of the Internet marketing mix, plus two new elements: community and branding. Community is the level of interaction that unfolds between users. Certainly, the firm can encourage community formation and nurture community development.
However, community is about user-to-user connections.
Branding is a critical component of building long-term relationships on the Web. Thus, rather than view branding as a subcomponent of the product, it is developed here as a moderating variable upon the levers-product, pricing, communication, community, and distribution.
1. Product
The product is the service or physical good that a firm offers for ex-change. A wide range of product forms are being offered on the Internet, includ-ing physical goods (e.g., clothing), information-intensive products (e.g., The Wall Street Journal online), and services (e.g., online grocers). Frequently, the offerings are a combination of all three forms. In the course of building customer rela-tionships, the firm can use a variety of product levers to build enduring customer relationships.
Product packaging is often used to build customer awareness, , upgrades and complementary services enable customers to explore a deeper con-nection, and customized offerings strengthen commitment. The key point is that specific product levers can be used to encourage a stronger connection. Chapter 8 further develops the process by which product levers can move customers through the four stages.
2. Pricing
Price is the amount the firm charges customers for a particular market transaction. This would include the price of the product, shipping, handling, war-ranty, and other financial costs incurred by the customer. Price is critical because it influences the perceived customer value (the complete product offering minus cost is often termed customer value). While a .casual observer might view the pricing levers quite narrowly (there is only one choice: the price to charge lor the good), there is a wide variety of traditional and new-to-the-world levers that emerge on the Internet. Traditional levers include such potential choices as tiered loyalty pro-grams, volume discounts, subscription models, and targeted price promotions. The Internet has created an entirely new category of pricing tools for new-economy firms to use, including dynamic pricing strategies.
I. Communication
Marketing communication can be defined as activities that inform one or more groups of target customers about the firm and its products. This text takes a broad view of market communication to include all types of firm- level communications, including public relations, the use of sales representatives, and online advertising. Everyone knows how advertising and other forms of communication such as television and direct mail can make target customers aware of the offerings of the firm. However, marketing communication can also encourage exploration, commitment, and dissolution.
For example, viral marketing (where one user informs another user about a site through e-mails) often leads to exploration of a firm’s offerings by new customers. Also, permission marketing (where customers opt to receive communications from the firm) is intended to encourage commitment to the firm. Both offline and online communication levers can encourage customers to build a stronger bond with the firm and should be inte-grated in any marketing program.
II. Community
Community is defined as a set of interwoven relationships built upon shared interests, which satisfy members’ needs otherwise unattainable individually. One of the unique aspects of the Internet is the speed with which communities can be formed. Equally important is the impact that these communities can have on the firm. A critical question confronting Internet marketers is how communities should be leveraged to build deep customer relationships. Communities can be leveraged to build awareness (e.g., user-to-user communication to make others aware of a product promotion), encourage exploration (e.g., user groups discussing which automotive options to purchase-or not purchase), and commitment (e.g., bonds between users lead to deepening involvement with the site). Chapter 11 addresses the community levers that can be employed to nurture customer relationships.
3. Distribution
The Internet is simultaneously a completely new form of commerce- a revolution in how customers and firms interact-and a distribution channel for the firm’s products. With respect to the role as a distribution channel, the Internet has the power to shift customers to a new channel-or to use this channel in combination with other channels (e.g., search the Internet and then purchase at the retail store). Distribution levers include the number of intermediaries (both online and offline), the breadth of channel coverage, and the messaging from the channels. Broad levels of distribution impact both customer awareness and the potential for more customer exploration of the firm and its offerings.
4. Branding
Branding plays two roles in marketing strategy. First, branding is an out-come or result of the firm’s marketing activities.
Marketing programs affect how consumers perceive the brand, and hence its value. Second, branding is a part of every marketing strategy. That is, each marketing activity is enhanced if the brand is strong, or suppressed if the brand is weak. Thus, a strong advertising program for Travelocity.com is likely to produce better results than a strong advertising program for a site with a weaker brand, such as Travel.com. Branding levers work in concert with other marketing levers to produce positive financial and/or customer results for the firm.
In sum, the Internet marketing mix comprises six classes of levers.. The interactive, or multiplier, effect of the brand can be positive or negative. Importantly, this does not mean that the other mix elements do not interact, because they do. However, branding is unique insofar as it is both a lever and an outcome of marketing actions.
3. Individualization and Interactivity
The previous section provided an overview of the six variables in the Internet marketing mix. However, simply specifying that the firm is able to manage these six classes of variables in an online environment does not do full justice to the uniqueness of the Internet environment. Two very important concepts need to be introduced to fully understand the profound implications that the Internet brings to business. These two concepts are. individualization (or customization) and interactivity.
The first concept is individual-level marketing exchange. In addition to high lev-els of interactivity, customers expect to have a personal experience with the firm. Broadcast approaches send the same messages to all members of the target audience.
The Internet enables the firm to engage in customer-specific actions-a broadcast to an audience of one. Equally important, the customer can control the degree of customization by taking action to set the level of customization he or she desires. Hence, the amount of individualization can be controlled either by the firm or by the customer.
Interactivity is defined as the extent to which a two-way communication flow occurs between the firm and customers. The Internet enables a level of customer dialogue that has not previously been experienced in the history of business. Certainly customers could have conversations with retail-store clerks, sales reps, or managers; however, it was not possible at the scale that the Internet affords. Hence, the fundamental shift is one from broadcast media such as television, radio, and newspapers to one that encourages debate, exchange, and conversation.
Pricing can be both inter-active and individualized-indeed, that is the essence of dynamic pricing. And market communications can be both interactive and individualized-that is the purpose of real-time customer service on the Web. Further, more, products and services can be designed in real time by the customer, maximizing both interactivity and customization.
This level of custom dialogue has revolutionized the impact of the Internet on marketing.
Stage Six: Crafting the Customer Interface
The Internet has shifted the locus of the exchange from the marketplace (i.e., face--to-face interaction) to the market space (i.e., screen-tb-face interaction). The key difference is that the nature of the exchange relationship is now mediated by a technology interface. This interface can be a desktop PC, sub-notebook, personal digital assistant, mobile phone, wireless applications protocol (WAP) device, or other Internet-enabled appliance. As this shift from people-mediated to technology -mediated interfaces unfolds, it is important to consider the types of interface design considerations that confront the senior management team.
What is the look-and-feel, or context, of the site?
Should the site include commerce activities?
How important are communities in the business model?
Stage Seven: Evaluating the Marketing Program
This last stage involves the evaluation of the overall Internet marketing program. This includes a balanced focus on both customer and financial metrics
Thanks for the very detailed explanation!
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