E-
Marketing
By
Prof.
Prasad Kulkarni
Module
1:
Introduction to E-Marketing
Introduction to E-Marketing
Learning
Objectives
Marketing
Review
Describe
the marketing planning process
Define
the marketing concept
Explain
the value proposition
Describe
the new rules for e-marketing.
Discuss
the components of e-business.
Compare
and contrast marketing and
e-marketing.
Learning
Objectives
Define
Internet, Web, intranet, extranet, and corporate portal, portal, and
hub.
Identify
several e-marketing challenges and opportunities.
Discuss
the characteristics of the Net’s two generations.
Name
and describe e-marketing models for each of the 4P strategies.
The
Yahoo! Story
Marketing
Concept: Meeting organizational goals
while serving customers needs
Currently
has 500,000 sites classified into 25,000 categories
Currently
the most popular site on the Internet.
3,566
advertisers and merchants use Yahoo!
New
Rules for E-Marketing
Ten
Rules of E-Marketing
Power
Shift from sellers to buyers
Increasing
Velocity
Death
of Distance
Global
reach
Time
compression
Knowledge
management is key
Market
deconstruction
Interoperability
Interdisciplinary
focus
Intellectual
capital rules (Digital City)
Its’
Bigger Than the Internet
Electronic
marketing reaches far beyond the web.
Examples:
Email
and Newsgroups
Web
TV, Cell Phones, and text-only browsers
Bar
Code Scanners
Cable
Modem and DSL connections
What
is E-Business (EB)?
Defined
as the continuous optimization of a firm’s business through digital technology
[EB = EC + BI + CRM + SCM + ERP]
Where,
EI
= e-commerce
BI
= business intelligence
CRM
= customer relationship management
SCM
= supply chain management
ERP
= enterprise resource planning
E-Business
continued
EC
- uses digital technologies to enable buying/selling
BI
- collecting primary/secondary information
CRM
- strategy to satisfy customers and build long-lasting relationships; high
interaction with customers
SCM
– delivery of products efficiently and effectively; high interaction with
distributors
ERP
– optimize business processes and lowering costs
Order
entry and purchasing
Invoicing
and inventory control
What
is E-Marketing?
Marketing:
Use
of 4 “P’s” to meet customer’s needs
E-Marketing:
Use
of technology to increase efficiency of marketing
Increases
company profitability and adds customer value
The
Big Picture
Too
much digital technology creates:
Decreasing
cultural/language differences
Workaholism;
less family time
Social
class divisions because of high literacy requirements
Digital
economies are interdisciplinary
Marketing,
MIS/CIS, Finance, Strategists
Human
Resources, Production/Operations
Networks
In
order of its relative size:
Intranet
smallest
Corporate
portal
Extranet
Hub
Portal
Web
Internet
largest
The
Internet
Statistics:
Forrester.com; ACNielsen
Computer
Industry Almanac estimates that worldwide users will reach 490 million by
2002; and the US is estimated to reach 165 million users
In
2001, consumer online advertising will
grow only 25%, while email and promotions will grow 100% and 38%, respectively.
By
2002, E-Commerce may exceed $1.2 trillion
15
million virtual grocery shoppers predicted by 2007
End
of the Beginning
High
growth, but negative profits
Fewer
E-Companies truly succeed
Must
rely on traditional marketing strategies
Dot-com
drop-outs and mergers occurring
E-business
drops the ‘e’ as electronic business is the way things will be done
E-Marketing
Challenges and Opportunities
Markets
Revenge
of the Consumer
Businesses
Technology
Five
Markets
Business-to-Consumer
(B2C)
Example:
www.iGo.com
Business-to-Business (B2B)
Example:
www.amazon.com
Consumer-to-Consumer
(C2C)
Example:
www.eBay.com
Business-to-Government
(B2G)
Government-to-Consumer
(G2C)
Revenge
of the Consumer
1930s:
Caveat
emptor (“let the buyer beware”)
2000s:
Consumers
have control
What
consumers want:
Privacy
To
safeguard their children
Permission
before being sent commercial email
Businesses
Challenges:
Quality
customer service
Information
overload
Opportunities:
Ways
of generating revenue
Greater
interdependence in their value chain
Technology
Can
lower costs on staff and paperwork
Can
be a costly investment
Security
issues
New
payment instruments
Low
bandwidth
E-Marketing
Delivers
Value = Benefits – Costs
Value
- customer perceptions of the product’s benefits
Benefits
- attributes, brand name, etc…
Add
benefits through mass customization and personalization
Costs
- time, money, energy, and psychic
Lower
costs through 24/7 convenience and one-stop shopping
E-Business
Model
A
method of doing business that contributes to the firm’s profitability whether
by increasing revenue or decreasing costs
Necessary
for models to identify value for the customer
Marketing
Mix Components
Product
Price
Distribution
Marketing
Communication
Relationship
Marketing
Product
Through
E-Marketing numerous new products emerged
Breakthrough
software, hardware, and services that created digital value
Price
Efficiencies
have been manifested through E-Marketing
No
need for a sales force with all order processing, billing and payments are
transacted between customer and Website
Cost
savings return a larger profit margin and lower prices
Distribution
A
primary E-Marketing application that creates customer value
New
ways for selling and distributing products
Affects
all manufacturers, service providers and intermediaries
Models:
Content
Sponsorship Model
Direct
Selling Model
Infomediary
Model
Intermediaries
Model
Content
Sponsorship Model
Companies
create valuable content or services on their Websites
Self-advertising
Examples:
Direct-Selling
Model
Manufacturers
eliminating channel intermediaries and sell directly to consumers
Known
as “Disintermediation”
Infomediary
Model
An
organization that collects and sells information about consumers or businesses
Similar
to a Market Research firm
Intermediary
Model
Brokers
and agents bring buyers and sellers together but neither purchase nor take
possession of the actual products
Brokerage
firms
Agent
firms
E-tailers
are firms that buy products and resell them online
“Click
and mortar” stores
Example:
E-Toys
E-Marketing
Communication
Accomplished
through promotion mix elements:
Advertising
Sales
Promotion
Direct
Marketing
Public
Relations
Models:
Online
Advertising Model
Online
Sales Promotion Model
Content
Publishing Model
Email
Model
Online
Advertising Model
Firms
purchase advertising space on Websites owned by other firms
Does
not include a firm’s own Website
Online
Sales and
Promotion Model
Promotion Model
Sampling
digital products
Allows
consumer to view products before purchasing
Content
Publishing Model
A
company’s Website
The
displaying of a firm’s information about their product offerings on the Website
to Internet users
Brochureware
Does
not involve transactions
Directed
towards stakeholders
E-Mail
Model
Three
types:
Target
Promotions
Companies
target users through research and data mining to send e-mail
Reverse
Channel
User
to firm
Customer
service
Consumer-to-Consumer
Word
of mouth
Relationship
Marketing
E-Marketing
is able to build long-term relationships due to:
Online
FAQs
Automatic
e-mail responders
Customized
Websites
Fax-on-demand
Supply
chains integrated with the firm’s functions
Model:
Community
Building Model
Community
Building Model
Website
developed to create a special interest community
Users
may provide information for products or services
Bring
consumer to concise location, making them more available for communication by a
firm
Creates
social bonds and enhances customer relationships
Marketing
Plan Tasks
Situation
Analysis
Environmental
Factors – Marketers collect and analyze external elements that include economic
analysis, social and demographic trends, and more
Market
opportunity analysis – This entails a supply and demand analysis along with a
SWOT analysis. The SWOT analysis
determines the strengths, weaknesses, opportunities, and threats.
Selecting
Target Market – marketers select the type of customer they are looking to
attract.
Marketing
Plan Tasks continued
Setting
objectives – marketers set the objectives according to the firm’s mission and
resources.
Designing
marketing mix strategies – Develop product, pricing, distribution, and
promotion strategies
Action
Plan – Plan the actual marketing plan implementation
Budget
– Set a budget for the marketing plan
Evaluation
Plan – Continuously evaluate the plan to make sure objectives are met.
Module
2
The
E-Marketing Plan
Overview
of the E-Marketing Planning Process
How
can information technologies assist marketers in building revenues and market
share or lowering costs?
How
can firms identify a sustainable competitive advantage with the Internet when
so little is understood about how to succeed?
Overview
of the E-Marketing Planning Process
The
best firms have clear visions that they translate, through the marketing
process, from e-business objectives and strategies into e-marketing goals and
well-executed strategies and tactics for achieving those goals.
This
marketing process entails three steps:
Marketing
plan creation,
Plan
implementation,
Evaluation/corrective
action.
Overview
Creating
an E-Marketing Plan
E-marketing
plan: It is a guiding, dynamic document that links the firm’s e-business
strategy (e-business model) with technology-driven marketing strategies and
lays out details for plan implementation through marketing management.
The
e-marketing plan serves as a roadmap to guide the direction of the firm,
allocate resources, and make tough decisions at critical junctures.
There
are two common types of e-marketing plans:
The
napkin plan,
The
venture capital plan.
The
Napkin Plan
Dot-com
entrepreneurs were known to simply jot their ideas on a napkin over lunch and
then run off to find financing.
The
big company version of this is the just-do-it. An employee has an idea, and
convinces management to just do it.
These
plans sometimes work and are sometimes even necessary but they are not
recommended when substantial resources are involved. Sound planning and
thoughtful implementation are needed for long-term success in business.
The
Venture Capital E-Marketing Plan
Small
to mid-sized firms and entrepreneurs with start-up ideas usually begin with a napkin
plan without going through the entire traditional marketing planning
process.
BUT
as the company grows and needs capital, it has to put together a comprehensive
e-marketing plan.
Where
does an entrepreneur go for capital?
Sometimes
bank loans,
Most
of the time, it is equity financed,
Private
funds (friends and family),
Angel
investors,
Venture
capitalists.
The
Venture Capital E-Marketing Plan
Investors
are looking for a well-composed business plan, and more importantly, a good
team to implement it.
The
business plan should contain enough data and logic to prove that:
The
e-business idea is solid,
The
entrepreneur has some idea of how to run the business.
The
Venture Capital E-Marketing Plan
9 questions that every business plan should
answer:
Who
is the new venture’s customer?
How
does the customer make decisions about buying this product or service?
To
what degree is the product or service a compelling purchase for the customer?
How
will the product or service be priced?
The
Venture Capital E-Marketing Plan
9 questions that every business plan should
answer:
How
will the venture reach all the identified customer segments?
How
much does it cost (in time and resources) to acquire a customer?
How
much does it cost to produce and deliver the product or service?
How
much does it cost to support a customer?
How
easy is it to retain a customer?
The
Venture Capital E-Marketing Plan
VCs
look for a way to get their money and profits out of the venture within a few
years:
The
golden exit plan is to go public and issue stock in an initial public offering
(IPO),
As
soon as the stock price rises sufficiently, the VC cashes out and moves on to
another investment.
All
VCs’ investments are not successful. But if even one out of 20 is an
Amazon.com, the risk was well worth the reward.
A
Six-Step E-Marketing Plan
Step
1—Situation Analysis
Planning for e-marketing does not mean
starting from scratch but working with existing business, e-business, and
marketing plans is an excellent place to start.
Step
1—Situation Analysis
The
organizational e-business plan: SWOT analysis => e-business strategy.
The
marketing plan: gathers information about the firm’s products, the markets
currently served, and so forth.
The
distribution plan: identifies areas where the products are currently sold and
suggests geographic gaps that might be receptive to e-commerce.
Promotion
plan information: gives clues about how the Internet fits with the firm’s
current advertising, sales promotion, and other marketing communications.
The
firm and brand positioning in the marketplace: Internet planners must decide
how closely Web site content and promotion will follow current positioning
strategies.
The
marketer moves to strategy formulation.
Step
2—Link E-Business with E-Marketing Strategy
Marketers
need to:
Review the marketing and e-business plans,
2 Conduct a strategic planning to help
achieve the firm’s e-business goals + define potential revenue streams,
3 Create supporting e-marketing strategy
for the e-business goals:
A Tier one strategy: marketers design
segmentation, targeting, differentiation, and positioning strategies,
B Tier two strategy deals with the 4P’s
and relationship management by creating strategies around the offer (product),
value (pricing), distribution (place), and communication (promotion),
Further,
marketers design customer and partner relationship strategies (CRM/PRM).
Tier
One E-Marketing Strategic Planning: Segmenting & targeting
Market
opportunity analysis (MOA):
The
demand analysis = market segmentation analyses to describe and evaluate the
potential profitability, sustainability, accessibility, and size of various
potential segments.
The
segment analysis in the B2C market with demographic characteristics, geographic
location, selected psychographic, and past behavior toward the descriptors help
firms identify potentially attractive markets.
Allows
the company to select its target market and understand its characteristics,
behavior, and desires in the firm’s product category.
Tier
One E-Marketing Strategic Planning: Segmenting & targeting
Tools:
Traditional segmentation analyses.
Analyzes
of customer bases using cookies, database analyses, and other techniques,
Supply
analysis: forecasts segment profitability + finds competitive advantages,
Study
of competition to find the company own performance advantages.: strengths and
weaknesses, e-marketing initiatives, …
Identify
future industry changes.
Tier
One E-Marketing Strategic Planning:
Identifying brand differentiation variables
and positioning strategies
Identifying brand differentiation variables
and positioning strategies
The
understanding of the competition + the
target(s)
Differentiation
of the products to provide benefits perceived as important by the target.
The
positioning statement: the desired image for the brand relative to the
competition.
Tier
Two E-Marketing Strategic Planning
The two Tiers are elaborated in an
interactive process:
It is difficult to know what the brand
position should be without understanding the offer that comprises the brand
promise.
The
Offer: Product Strategies
The
organization can:
Sell
merchandise, services, or advertising on the Web site,
Adopt
an e-business model such as online auctions,
Create
new brands for the online market,
Simply
sell selected current or enhanced products in that channel.
A
firm must decide how online product prices will compare with offline
equivalents considering the differing costs of sorting and delivering products
to individuals through the online channel as well as competitive and market
concerns.
The
Offer: Product Strategies
There
are two online pricing trends are:
Dynamic
pricing—this strategy applies different price levels for
different customers or situations. The Internet allows firms to price items
automatically and “on the fly” while users view pages,
Online
bidding—this presents a way to optimize inventory
management.
E.g.
Priceline.com, eBay.com
Distribution
Strategies
Many
firms use the Internet to distribute products or create efficiencies among
supply chain members in the distribution channel.
Direct
marketing—Many firms sell directly to customers, by-passing
intermediaries in the traditional channel for some sales.
Agent
e-business models—Firms such as eBay and E*Trade
bring buyers and sellers together and earn a fee for the transaction.
Marketing
Communication Strategies
The
Internet spawned a multitude of new marketing communication strategies, both to
draw customers to a Web site and to interact with brick-and-mortar customers.
Firms
use Web pages and e-mail to:
Communicate
with their target markets and business partners,
Build
brand images,
Create
awareness of new products,
Position
products using the Web and e-mail.
Relationship
Management Strategies
E-marketing
communication strategies help build relationships with a firm’s partners,
supply chain members, or customers using:
Customer
relationship management (CRM) software to retain
customers and increase average order values and lifetime value,
Partner
relationship management (PRM) software to integrate
customer communication and purchase behavior into a comprehensive database,
Extranets—two
or more proprietary networks linked for better communication and more efficient
transactions among firms (PRM).
Step
3— Formulate Objectives
In
general, an objective in an e-marketing plan takes the form:
Task
(what is to be accomplished),
Measurable
quantity (how much),
Time
frame (by when).
Typical
E-Marketing Objectives
Most
e-marketing plans aim to accomplish multiple objectives such as:
Increase
market share,
Increase
sales revenue,
Reduce
costs,
Achieve
branding goals,
Improve
databases,
Achieve
customer relationship management goals,
Improve
supply chain management.
Objective-strategy matrix presents the
firm’s e-marketing strategies and accompanying goals.
Step
4 — Design Implementation Plan to Meet the Objectives
Select:
The
marketing mix (4 Ps),
Relationship
management tactics,
Other
tactics to achieve the plan objectives.
Devise
detailed plans for implementation.
Check
the right marketing organization is in place for implementation.
Step
4 — Design Implementation Plan to Meet the Objectives
Information
technologies are especially adept at automating these processes, this is why
the information gathering tactics are important:
Web
site forms, feedback e-mail, and online surveys,
Web
site log analysis software helps firms review user behavior at the site and
make changes to better meet the needs of users,
Business
intelligence uses the Internet for
secondary research, assisting firms in understanding competitors and other
market forces.
Step
5 — Budgeting
A
key part of any strategic plan is to identify the expected returns from an
investment.
Returns
are matched against costs to develop a cost/benefit analysis, ROI calculation,
or internal rate of return (IRR)
Determine
whether the effort is worthwhile.
During
plan implementation, marketers will closely monitor actual revenues and costs
To
monitor of results are on track for accomplishing the objectives.
Revenue
Forecast
The
firm uses an established sales forecasting method for estimating the site
revenues in the short, intermediate, and long term.
Inputs:
The firm’s historical data, industry reports, and competitive actions.
An
important part of forecasting is to estimate the level of Web site traffic over
time.
This
number affects the amount of revenue a firm can expect to generate from its
site.
Revenue
streams:
Web
site direct sales, -
Advertising sales,
Subscription
fees, - Affiliate referrals,
Sales
at partner sites, -
Commissions, and other fees.
Budgeting
E-Marketing
Costs
Costs
for employees, hardware, software, programming, and more.
Some
traditional marketing costs may creep into the e-marketing budget
The
cost of a Web site can range from $5000 to $50 million.
Few
of the costs site developers incur:
Technology
costs: software, hardware, Internet access or hosting
services, educational materials and training, and other site operation and
maintenance costs.
Site
design. Web sites need graphic designers to create
appealing page layouts, graphics, and photos.
E-Marketing
Costs
Other
costs site developers incur:
Salaries.
All personnel that work on Web site development and maintenance are budget
items.
Other
site development expenses. If not included in the technology
or salary categories, any other expenses will be here (registration of multiple
domain names and hiring consultants).
Marketing
communication. All advertising, public relations, and
promotions activities, both online and offline, to draw site traffic. Search
engine registration, online directory costs, e-mail list rental, prizes for
contests, and more.
Miscellaneous.
Other typical project costs might fall here—expenses such as travel, telephone,
stationery printing to add the new URL, and more.
Step
6 — Evaluation Plan
Once
the e-marketing plan is implemented, its success depends on continuous
evaluation. The tracking systems should
be in place before the electronic doors open.
What
should be measured? The plan objectives need to be evaluated with:
Balanced
scorecard for e-business
ROI
…
Module
3
E-Marketing
Environment
Idol
Goes Global
American
Idol is broadcast in over 100 countries.
Its
popularity has spawned 39 national versions in countries such as Ethiopia, the
Philippines, and Russia.
The
sharing of popular culture has been enhanced by the convergence of TV,
internet, mobile phones, and messaging services.
Idol
Goes Global, cont.
Check
out international versions that are streamed over the internet:
Music
Idol in Bulgaria: http://musicidol.btv.bg/news/6
Ethiopian
Idol: http://www2.jumptv.com/seo/Ethiopian_Idols/Ethiopian_Idols.htm
Indian
Idol: http://sify.com/indianidol/
Overview
of Global E-Marketing Issues
The
globe is literally a world of opportunities.
Exhibit
4.1 shows that worldwide internet usage increased more than 58% from 2004 to
2007.
Asia
has the most internet users.
Africa
saw the greatest growth in internet use.
North
America has the highest penetration as a percent of the population.
Worldwide
Internet Usage
Ex 4.1
Ex 4.1
Internet
Use Varies by Country
The
world’s largest online markets are the U.S. (215 million users) and China (162
million users).
The
top 10 countries account for 70% of all global users.
Some
smaller countries, such as Norway, Netherlands and Iceland, have the highest
penetration, over 85% of their populations.
Top
Ten Internet Usage Countries Ex.4.2
Developed
Economies
Developed
countries are highly industrialized, use technology to increase efficiency, and
have a high GDP per capita.
Western
Europe
North
America
Japan
Australia
& New Zealand
Developed
countries are ideal for the e-marketing activities discussed in the text.
Emerging
Economies
Have
low levels of GDP per capita and are experiencing rapid economic growth.
Emerging
economies can be found on every continent.
Mexico,
Central & South America
Baltic
States & Eastern Europe
Russia,
Belarus & Ukraine
Africa
Central
& Southeast Asia
China
Importance
of Information Technology
The
internet accelerates the process of economic growth through diffusion of new
technologies.
Bangalore,
India is the center of India’s explosive growth in software and IT.
Internet
marketing differences in emerging economies include:
Fewer
computer users
Limited
credit card use
Lack
of secure online payment methods
Unexpected
power failures
Market
Approaches Ex 4.4
E-Commerce
Payment and Trust Issues
E-commerce
in emerging markets is often hampered by limited use of credit cards and lack
of trust in safely conducting online transactions.
Nepal,
for example, is a cash-based economy and credit cards are scarce.
For
local Nepalis, only Visa, MasterCard, and Himalayan Bank cards are accepted.
In
Bolivia, only 2.3 percent of the population has a credit card.
Credit
card use is virtually non-existent in Ethiopia.
E-Commerce
Payment and Trust Issues, cont.
In
addition to credit card usage, e-marketers working in emerging economies should
understand attitudes toward online purchasing.
A
2007 study in Lithuania found that 51% of internet users had not made an online
purchase because they thought it was too risky.
To
overcome trust issues, eBanka, an internet bank, was established in the Czech
Republic in 1998 to handle secure online purchases.
Technological
Readiness Influences Marketing
E-marketers
must deal with daunting issues of basic technology:
Limited
access to and use of computers and telephones
High
internet connection costs
Slow
internet connections speeds
Unpredictable
power supplies
Computers
& Telephones
Computer
access is unevenly distributed throughout the world.
Exhibit
4.6 shows computer ownership data for selected countries.
Ownership
ranges from 84% in Kuwait to 2% in Bangladesh and Uganda.
Telephones
(and connectivity) can be scarce and expensive.
Many
consumers in countries with emerging economies access the internet from free-standing
shops rather than homes.
Internet
Connection Costs
Countries
with emerging economies often have higher internet-related business costs.
Dial-up
connection costs can vary considerably.
Broadband
connections are developing quickly.
In
2002, 88 countries had broadband vs. 166 countries in 2006.
Broadband
connections are still expensive in most countries.
Wireless
Internet Access
At
the end of 2007, there were 3.25 billion mobile phone subscriptions worldwide.
Countries
with emerging economies have leapfrogged industrial countries in terms of
usage.
Challenges
of wireless e-marketing:
Modification
of Web site content for small screens
Text
entry using tiny keypads
Content
development
Pricing
and secure payments
The
Digital Divide
E-marketers
must consider the social environment in which e-business operates.
Disparities
with regard to technology access can create a digital divide between countries
or populations.
The
digital divide raises challenging questions for global policy, international
business, and entrepreneurship.
Overview
of Ethics and Legal Issues
Ethics:
The
values and practices of professionals,
The
concerns and values of society as a whole,
Directed
toward individual or group endeavors,
Important
contributions to legal developments
=
The experiences and practices of those who work in the field are helpful
to those who are charged with regulation and legal decision-making.
Overview
of Ethics and Legal Issues
Law:
Also
an expression of values,
Created
for broader purposes = national or sometimes international populations,
It
is a public endeavor = made by legislatures such as Congress or Parliament,
enforced by executives or agencies, and interpreted by the courts,
Progress
in the law can be slow, and particularly within the new context of digital
communication.
Ethics
& Ethical Codes
The
study of ethics:
Central
focus = analysis and description of basic concepts as what is right and wrong,
The
examination of responsibilities, rights, and obligations,
Not
limited to purely theoretical boundaries but study all levels of human
interaction,
Important
aspect: the study of professional activities,
Groups
of individuals possessing special skills or knowledge have established codes
and systems of fair practice,
E.g.
The American Marketing Association’s (AMA) Code of Ethics = Professional codes provide members with
guidelines which are specific to their pursuits.
Ethics
& Ethical Codes
Digital
processes and potentialities are so new that ethics is only beginning to adapt
itself to the Computer Revolution.
Critical
issues:
The
ownership of intangible data (intellectual property),
The
role of privacy in a virtual world without walls,
The
extent to which freedom of expression should be allowed,
The
uses of data.
Ethics
& Ethical Codes
Difficulties:
Lack
of comparative historical situations,
The
inability to analogize computers to objects or institutions with which society
has had greater experience,
Electronic
spaces are global in nature. What is accepted in Europe may be rejected in Asia
or America,
Each
participant in electronic marketing has to adhere to professional codes, but
also to contribute to them.
The
Problem of Self-Regulation
Emerging
area of conflict: the role of formal law in the regulation of online conduct.
The
Administration answer: the development of the Internet should be largely left
to the free operation of the market.
The
proper behaviors of participants are typically set forth in ethical codes
developed by trade associations, commercial standards groups and the
professions.
The
Problem of Self-Regulation
Supporters
of the self-regulation:
The
private sector’s is able to rapidly identify and resolve problems specific to
its areas of competence,
Once
consensus is reached, uniformity is achieved through members’ compliance with
ethical codes as well as by ongoing education of providers and consumers,
The
law cannot force participation in these codes, but improved consumer confidence
and enhanced economic opportunities will ensure voluntary compliance.
The
Problem of Self-Regulation
Critics
of self-regulation:
These
incentives are insufficiently compelling,
Perpetrators
of fraud benefit from schemes of short duration and are rarely interested in
the long-term gains offered by adherence to ethical codes,
Commercial
self-interest and pressures to maximize profits compromise the private sphere’s
ability to police itself and only the sanctions the law can provide will make a
difference.
This
debate is far from over but governments are asserting themselves at least in
the area of fraud prevention and in issues involving children’s privacy.
Privacy
The
concept of privacy:
Both
ethical and legal aspects and is relatively new to both disciplines,
Privacy
is a product of the twentieth century: reactions to the phenomena of a maturing
industrial and technological age, including the mass distribution of
newspapers, the development of listening devices and the widespread use of
photography,
Privacy
has always been about information and the means of its delivery.
BUT
lack of definition within the Constitution.
Privacy
The
common law has established a series of privacy violations:
Unreasonable
intrusion into the seclusion of another,
Unreasonable
publicity of another’s private life,
The
appropriation of another’s name or likeness,
The
publication of another’s personal information in a false light.
Privacy
Disagreement
remains:
The
seclusion theory = the ability to remain isolated from society.
This
model encourages laws and ethical standards which are oriented toward
maintaining personal distance and punishing those who cross the limits set by
individuals.
The
access-control:
Places
its emphasis upon laws and standards which enable persons to reasonably
regulate the information which they are giving up.
The
autonomy model:
Define
what constitutes private data = those which are necessary for a person to make
life decisions.
Privacy
Within
society, privacy interests compete against concerns of personal and public
safety, economics and even the social and psychological need for association
with others.
People
are willing to give up personal information to get certain benefits - credit
cards or frequent flyer mileage.
Ethics
and law attempt to provide guidelines in the final decision.
Privacy
within Digital Contexts
Information
plays a pivotal role in the concept of privacy.
Conflicts
about how data should be collected and used.
AMA
Code of Ethics for Marketing on the Internet:
“information collected from customers
should be confidential and used only for expressed purposes.”
Privacy
within Digital Contexts
DoubleClick:
An
online advertising firm,
Collects
and compiles large amounts of personal consumer information,
Developed
a system of over 11,000 Web sites that carry advertising which, when clicked, enables
users to visit product sites,
The
system records the responses (clickstreams) to form a user profile and
transmit individually-targeted advertising,
Active
consent of the users is not required,
100,000
online profiles have been filed.
Privacy
within Digital Contexts
DoubleClick
acquired Abacus-Direct:
Specialized in the acquisition of
off-line consumer data (names, addresses
and buying histories of a large percentage of American households).
Plans
to integrate this data linking real life identities to DoubleClick’s
online personalities.
Complain
was filed by a coalition of privacy, civil rights and consumer groups for
obtaining consent from each subject.
Privacy
within Digital Contexts
How
does it work?
With
cookies:
Packets
of data created within the hard-drive of a user in response to instructions
received from a Web page,
Once
stored, they can be re-transmitted from a user’s computer to a pertinent Web
site.
Privacy
within Digital Contexts
Many
purposes:
Handle
online information, creating such features as shopping baskets to hold
purchases.
Recall
stored sales information to remind users of items already ordered or to suggest
new products.
Store
data = full name, email and postal addresses, phone numbers, a computer’s
geographic location and time logged online.
Normally
automatically executed without any user action.
Cookie
packets may be combined with other digital information and may be transferred
between servers or sold to anyone with the capacity to read computer-generated
data.
User
tracking: when cookies are examined to determine an individual’s online
behavior.
Privacy
within Digital Contexts
This
controversy reflects the unsettled nature of privacy itself:
A
closely-guarded right = the ability to remain secluded from unwelcome intrusion
+ the capability to control the disclosure of personal data.
Advocates
the implementation of policies which allow individuals to be explicitly
informed of any data collection event and to have collection take place only if
there is an affirmative decision to participate or opt-in.
Supporters
of DoubleClick: argue that most users wish to receive the benefits of targeted
advertising.
Privacy
within Digital Contexts
The
preliminary terms of an agreement include:
The
obligation to provide clear notice of data collection,
A
ban on combining existing data with personal information unless explicit
permission,
Data
obtained from cookies will be routinely deleted,
DoubleClick
will initiate an extensive program of consumer privacy education.
There
is a trend toward the reduction of the use of cookies:
Prominence
of privacy policies,
Use
of opt-in routines.
Privacy
within Digital Contexts
Some
cutting edge applications are raising additional issues: JAVA
A
Web-friendly programming language allowing the downloading and running of
programs or applets on individual computers,
Increasingly
used to provide enhancements = dynamic animation, Web-based simulations,
Used
to design programs = hostile applets used to surreptitiously access and
transmit data on hard-drives, including email addresses, credit card records
and other account information.
Privacy
within Digital Contexts
Intelligent
agents:
Programs
which, once released by a user, can function autonomously within the Web to
make electronic decisions,
Tasks:
the searching of sites or the buying of products which conform to an
individual’s tastes or interests,
Critics
worry that the preferences which they hold may be chosen or controlled by
entities other than their “owner.”
Privacy
within Digital Contexts
Cookies,
Java applets and intelligent agents are ubiquitous applications
= Able to function in any online
session, without a user’s knowledge or control.
Online
forms and electronic mail are used to gather information in exchange for
browsing privileges or other benefits.
BUT
most average users are uncertain of the ultimate value of the data they
provide.
Solution:
Consumer education about all uses of revealed data to increase the ability to
make informed judgments.
Privacy
within Digital Contexts
The
collection of material from children:
Congress passed the Children’s Online
Protection Act (COPPA), it requires that Web sites and other online media which
knowingly collect information from children 12 years of age or under:
Provide
notice to parents,
Obtain
verifiable parental consent prior to the collection, use or disclosure of most
information,
Allow
parents to view and correct this information,
Enable
parents to prevent further use or collection of data,
Limit
personal information collection for a child’s participation in games, prize
offers or related activities,
Establish
procedures which protect the “confidentiality, security, and integrity of the
personal information collected.”
Privacy
within Digital Contexts
The
problem of privacy within electronic mail
= Unsettled aspect of online
interaction.
U.S.
Law
= Users who operate email accounts on
private services are assured of their legal privacy through service agreements
with their ISP.
International
Privacy Issues
1998:
The European Union’s Data Protection Directive
= Requires its member states to enact
national laws to protect “fundamental rights + freedoms of natural persons, and
in particular their right to privacy with respect to the processing of personal
data.”
Subjects:
Are
informed on how their data is used,
Are
given opportunities to review and correct information.
International
Privacy Issues
Data:
Use
is restricted to the announced purpose,
Origin
is disclosed.
Procedures
to punish illegal activities are established.
Consumer
collection contains opt-out capabilities.
Sensitive
data collection cannot be accomplished without explicit permission.
Any
international transfer of data is executed only with countries possessing
adequate privacy protection laws.
International
Privacy Issues
2000:
The U.S. Department of Commerce and the European Commission agreement = U.S.
organizations would submit to a series of safe harbor provisions for the
protection of EU citizen data:
Notice
about collection, purpose and use,
Choice
in ability to opt-out of disclosure and third-party dissemination,
Third-party
transfer, protection, and provisions for security, data integrity, redress and
enforcement.
International
Privacy Issues
Norms
representing the present consensus for the minimum requirements essential to
the ethical use of consumer information:
Notice:
Users should be aware of a site’s information policy before data is
collected,
Consent:
Users should be allowed to choose participation or exclusion from the
collection,
Access:
Users should have the ability to access their data and correct it if erroneous,
Security:
Policies to ensure the integrity of data and the prevention of misuse should be
in place,
Enforcement:
Users should have effective means to hold data collectors to their policies.
Digital
Property
Traditionally,
the law has protected intangible or intellectual property through three basic
mechanisms:
Copyright = the right to publish or duplicate the
expressions of ideas,
Patent
law
= the ability to reproduce or manufacture an inventor’s product,
Trademark
= images, symbols, words or other indicators which are registered with the
government and have become positively associated with a product’s identity in
the market.
Digital
Property
Computer-based
communication has posed particularly difficult problems for intellectual
property:
The
electronic medium by which messages are carried
= inventions,
The
messages
= expressions of ideas,
Graphical
and animation objects
= creations
= associated with a commercial entity.
Copyright
Copyright
= the primary means of protecting most on the Internet, including text and
other data.
Limitations
created for the public’s benefit:
The
doctrine of Fair Use: ability to copy without cost, reasonable portions of
protected material for purposes relating to such public activities as
education, news reporting and editorial comment,
The doctrine of First Sale: limits the ability
of a copyright holder to obtain profit from the sale of her work after the
initial time at which the material is sold. Purchasers are subsequently given
the ability to transfer or otherwise dispose of their copy.
Copyright
1997:
The No Electronic Theft Act = The NET Act = copyright protection
for computer content + sanctions when infringement is committed for commercial
or private financial gain or by the reproduction or distribution of one or more
copies of copyrighted works having $1000 or more in retail value.
Proponents
believe that it will encourage innovation by protecting material placed on the
Internet.
Critics
believe that the definition of infringement has been made
problematically broad = electronic distribution without reproduction.
Copyright
1998:
The Digital Millennium Copyright Act:
The
DMCA grant ISP’s protection from acts of user infringement as long as
certain procedures are followed, including the prompt reporting and disabling
of infringing material.
Supporters
claim that it will free ISP’s from liability for its users’ illegal actions and
encourage industry growth.
Critics
believe that the reporting and disabling requirements may cause innocent
behavior to be presumed infringing and wrongfully censored.
Copyright
1998:
The Digital Millennium Copyright Act:
The
DMCA criminalizes the circumvention of software protections and the development
or distribution of circumvention products.
Supporters
believe that this law will increase commercial willingness to place material on
the Internet by deterring online piracy.
Trademarks
Trademark
law is concerned with the ownership of intellectual property which identifies
goods or services.
The
federal Lanham Act:
Trademarks
may be registered and protected with the government,
In
order to pursue, claimants must prove that the mark is protectable,
The
Act also prohibits dilution - the diminishment of the ability to
identify or distinguish a good or service.
Trademark
law has recently been applied to the Internet naming system:
Domains
are unique configurations of letters or numbers which are used to route data,
The
most familiar www.someplace.com.
Trademarks
Trademark
violations:
Similarities
in names,
Cybersquatting:
Registration of domains which resemble or duplicate the names of existing corporations
+ Offer the domain for sale at a price
set significantly higher than that originally paid,
1999:
the Anticybersquatting Consumer Protection Act =
A person is liable to suit if he registers, traffics or sells a domain bearing
a name which is identical or confusingly similar to a protected mark or would
dilute the worth of the mark.
Trademarks
Trademark
violations:
Metatags
= HTML statements which describe a Web site’s contents:
Allow
search engines to identify sites relevant to topics of their inquiries,
It
is possible to insert words or phrases which are calculated to provide optimal
attractiveness, including material protected by trademark.
Keywords
assigned within search engines. Trademark-protected keywords are raising issues
when the result of the search is not directed to the trademark holder.
Hyperlinks which take users to areas other than their
introductory page may cause confusion or deprive the target sites of revenue
obtained through the selling of advertising.
Patents
Patents
are granted, by the United States government, for inventive processes or steps.
Tailored
toward industrial or mechanical concerns.
Creators
of software are attempting to make use of its protections:
Material
is not subject to acquisition through the doctrines of Fair Use or First Sale,
Patent
powers are derived from constitutional concerns, public access to patented
material is assured after the term of the patent has expired + the patent itself is always on file
with the government.
The
use of business patents = activities such as marketing approaches and
methods for conducting commerce.
Patent
protection claimed for reverse online auctions, secure credit card processing,
and incentive-based methods for reading Web site advertising.
Licenses
Licenses
= contractual agreements made between consumers and software vendors which
allow the buyer to use the product, but restrict duplication or distribution.
Within
the computer environment, two license format:
Shrinkwrap
or break-the-seal licenses,
Clickwrap
licenses when a user is required to click a button within a program to
demonstrate acceptance of terms.
Licenses
Effort
to enforce the terms of software licenses = The Uniform Computer Information
Transactions Act.
If
adopted by the states, this model would govern all legal agreements pertaining
to software transactions, including sales.
Supporters:
the majority of software manufacturers and publishers.
Critics:
they argue that UCITA will enforce license provisions including those
restricting copying and resale of material, liability for damages incurred from
defective software, and, it has been suggested, the ability to criticize
software performance.
Trade
Secrets
The
federal Economic Espionage Act of 1996 = Address digital advances + makes it a
criminal offense to divulge trade secrets.
Trade
secrets:
Can
include, but are not restricted to, formulas, plans, market data, algorithms,
programs, codes and models,
May
be stored online or in tangible formats,
Computer-based
disclosures such as emails, downloads, Web publication and similar means are
within the ambit of the Act.
Employees
possessing trade secrets may be prohibited from engaging in similar businesses
for a period of time.
Data
Ownership
Increased
competition on the electronic market
Measures
to obtain the advantages that control of information can provide.
Data
relating to such technical issues as Web site usage:
Have
been easy to access and under informal practices,
Have
often been shared among site owners, marketing professionals, advertisers and
consumers.
Click
data: make information collected from banner
advertisements invisible to site owners and their clients.
Protective
technologies raise new issues concerning the ownership of information.
Data
Ownership
Spidering:
Use of software applications = robots to enter targeted Web sites and
obtain data for the use of its owner.
This
activity constitutes a trespass to property.
The
special protection of data relating to facts:
American
copyright law protects expressions of ideas, but not the ideas
themselves.
Electronic
databases often contain arrangements of facts, there is a movement within the
law to offer protection for specially compiled data.
The
Trade Related Intellectual Property Rights (TRIPs) Agreement of 1995:
Provisions exist within this Agreement to afford this kind of protection.
Module
4
E-Marketing
Research
Chapter
6 Objectives (Cont.)
Describe
several ways to monitor the web for gathering desired information.
Contrast
client-side, server-side, and real-space approaches to data collection.
Explain
the concepts of big data and cloud computing.
Highlight
four important methods of analysis that e-marketers can apply to data warehouse
information.
The
Purina Story
Nestle
Purina PetCare wanted to know whether their websites and online advertising increased
off-line behavior.
Nestle
Purina developed 3 research questions:
Are
our buyers using our branded websites?
Should
we invest beyond these branded Web sites in online advertising?
If
so, where should we place the advertising?
The
Purina Story, Cont.
Combined
online and off-line shopping panel data revealed:
Banner
click-through rate was low (0.06%).
31%
of subjects exposed to Purina ads mentioned the Purina brand compared with 22%
of the no-exposure subjects.
Home/health
and living sites received the most visits from their customers.
The
information helped the firm decide where to place banner ads.
Data
Drive Strategy
U.S.
marketers spend $6.7B annually on marketing research; global spend is $18.9B.
E-marketers
can generate a great deal of data by using surveys, Web analytics, secondary
data, social media conversations, etc.
Marketing
insight occurs somewhere between information and knowledge.
Data
without insight or application to inform marketing strategy are worthless.
Purina,
for example, sorts through hundreds of millions of pieces of data about 21.5
million consumers to make decisions.
Big
Data
Big
data refers to huge data sets that are difficult to manage and analyze.
31%
of marketers would like to collect Web data daily.
74%
collect demographic data; 64% collect transaction data; 35% monitor social
media.
Purina,
for example, sorts through hundreds of millions of pieces of data from about
21.5 million consumers to make marketing decisions.
From
Data to Decision: Nestle Purina
Marketing
Knowledge Management
Knowledge
management is the process of managing the creation, use, and dissemination of
knowledge.
Data,
information, and knowledge are shared with internal decision makers, partners,
channel members, and sometimes customers.
A
marketing knowledge database includes data about customers, prospects and competitors.
The
Electronic MIS
A
marketing information system (MIS) is the process by which marketers manage
knowledge.
Many
firms store data in databases and data warehouses, available 24/7 to
e-marketers.
The
Internet and other technologies facilitate data collection.
Secondary
data provide information about competitors, consumers, the economic
environment, etc.
Marketers
use the internet and other technologies
to collect primary data about consumers.
Most
Common Data Collection Methods
SOURCE
1: INTERNAL RECORDS
Accounting,
finance, production, and marketing personnel collect and analyze data for
marketing planning.
Sales
data
Customer
characteristics and behavior
Universal
product codes (UPCs)
Tracking
of user movements through web pages
Web
sites visited before and after the firm’s Web site.
SOURCE
2: SECONDARY DATA
Can
be collected more quickly and less expensively than primary data.
Secondary
data may not meet e-marketer’s information needs.
Data
was gathered for a different purpose.
Quality
of secondary data may be unknown.
Data
may be old.
Marketers
continually scan the macroenvironment for threats and opportunities, a
procedure commonly called business intelligence.
Public
& Private Data Sources
Publicly
generated data
U.S.
Patent Office
CIA
World Factbook
American
Marketing Association (AMA)
Wikipedia
Ministry of
Economy and Planning (www.mep.gov.sa)
The
Patent Office of the Cooperation Council for the Arab States of the Gulf (http://www.gccpo.org/)
Privately
generated data
comScore
Forrester
Research
Nielsen/NetRatings
Commercial
online databases
Euro
monitor (http://www.euromonitor.com)
Competitive
Intelligence Example
CI
involves analyzing the industries in which a firm operates as input to the
firm’s strategic positioning and to understand competitor weaknesses.
CI
can help firm’s analyze competition as well as assist in strategic planning
Intelligence
cycles would include the following steps:
Define
the intelligence requirements
Collect
and organize information
Analyze
by applying information to the specific purpose and recommending action
Report
and inform others of the finding
Evaluate
the impact of intelligence use and suggest process improvements
Competitive
Intelligence Example (Cont.)
Sources
may include
press
releases,
new
products,
alliances
and co-brands,
trade
shows
third-party,
industry-specific sites
user
conversation in the social media Facebook.
Information
Quality
Secondary
and primary sources have many limitations.
E-marketers
should be wary of data, especially if it is secondary data.
E-marketers
should:
Discover
the website’s author,
Try
to determine if the site author is an authority on the Web site topic,
Check
to see when the site was last updated,
Determine
how comprehensive the site is,
Try
to validate the research data by finding similar information at other sources
on the internet or in hard copy at the library, and
Check
the site content for accuracy.
What
about Wikipedia, is it accurate?
Source
3: Primary Data
When
secondary data are not available, marketers may collect their own information.
Primary
data are information gathered for the first time to solve a particular problem.
More
expensive and time consuming
Current,
more relevant & exclusive
Primary
data collection can be enhanced by the internet:
Online
experiments
Online
focus groups
Online
observation
Content
analysis
Online
survey research
Primary
Research Steps
The
steps to conduct primary research are:
Define
the research problem,
Develop
a research plan,
Research
approach
Sample
design
Contact
method
Instrument
design
Collect
data,
Analyze
the data, and
Distribute
results
Typical
Research problems for E-Marketers
Source
3: Primary Data Collection Methods
In-depth
interviews (IDI) are better done offline
Primary
data collection enhanced by the Internet
Online
experiments
Online
focus groups
Online
observation
Online
survey research
Web
surveys
Online
panels
Advantages
& disadvantages of online survey research
Online
Panels
Online
panels include people who have agreed to be subjects of marketing research.
Participants
are usually paid and often receive free products.
Panels
can help combat sampling and response problems, but can be more expensive than
traditional methods of sample generation.
Ethics
of Online Research
Companies
conducting research on the web often give respondents a gift or fee for
participating.
Other
ethical concerns include:
Respondents
are increasingly upset at getting unwelcomed e-mail requests for survey
participation.
“Harvesting”
of e-mail addresses from newsgroups without permission.
“Surveys”
used to build a database.
Privacy
of user data.
Other
Technology-Enabled Approaches
Client-side
Data Collection
Cookies
PC
meter with panel of users to track the user clickstream.
Server-side
Data Collection
Site
log software can generate reports on number of users who view each page,
location of prior site visited, etc.
Real-time
profiling tracks users’ movements through a website.
Following
the clickstream at FTC.gov
Real-Space
Approaches
Real-space
primary data collection: technology enabled approaches to gather information
offline.
Data
collection occurs at off-line points of purchase and information is stored and
used in marketing databases.
Real-space
techniques include bar code scanners and credit card terminals.
Catalina
Marketing uses the Universal Product Code (UPC) for promotional purposes at
grocery stores.
REAL-SPACE
DATA COLLECTION & STORAGE EXAMPLE
Marketing
Databases & Data Warehouses
Product
databases hold information about product features, prices, and inventory
levels; customer databases hold information about customer characteristics and
behaviors.
Data
warehouses are storehouses for the entire organization’s historical data, not
just for marketing data.
Software
vendors are attempting to solve the website maintenance problem with content
management systems.
The
current trend in data storage is toward cloud computing: a network of online
Web servers used to store and manage data.
Cloud
Computing
Data
Analysis & Distribution
Four
important types of analysis for marketing decision making include:
Data
mining
Customer
profiling
RFM
(recency, frequency, monetary value) analysis
Report
generating
Knowledge
Management Metrics
Two
metrics are currently in widespread use for online data storage:
ROI:
total cost savings divided by total cost of the installation.
Total
Cost of Ownership (TCO): includes cost of hardware, software, labor, and cost
savings.
Module
5: E- Marketing Management
Product
,Price, Promotion and Place
Many
Products Capitalize
on Internet Properties
on Internet Properties
A
product:
A
bundle of benefits that satisfies the needs of organizations/consumers and
for which they are willing to exchange money or other items of value.
Items
such as tangible goods, services, ideas, people, and places.
Many
Products Capitalize
on Internet Properties
on Internet Properties
May
be classified by the purpose for which they are purchased:
Consumer
products = purchased by an individual for personal consumption.
Businesses
sell products to consumers in the business-to-consumer (B2C) market.
Consumers
sell products to one another in the consumer-to-consumer (C2C) market.
Industrial
products = used in the operation of an organization, as components for
manufacture into final product, or for resale (B2B market).
Many
Products Capitalize
on Internet Properties
on Internet Properties
Some
new products are unique to the Internet (search engines).
Other
products use the Internet as a new distribution channel +add unique
technology-enabled services (books).
With
the Internet’s properties of market deconstruction, customer control, and other
e-marketing trends:
Many
challenges,
A
plethora of new opportunities.
The
success of Classmates.com demonstrates
how a new and purely online product can use the Internet’s properties to build
a successful brand.
Many
Products Capitalize
on Internet Properties
on Internet Properties
To
create new products:
Research
to determine what is important to customers,
Design
strategies to deliver more value than do competitors.
In
line with the Sources, Databases, and Strategy model, tier two strategies
involve the marketing mix 4Ps and customer relationship management (CRM).
The
process of designing these strategies is closely tied to the tactics used to
implement them.
The
marketing mix (product, price, distribution, marketing communication) +
customer relationship management (CRM) work together to produce relational and
transactional outcomes with consumers.
Creating
Customer Value Online
Never
has competition for online customer attention and dollars been more fierce.
To succeed, firms must employ that
result in
Customer value = Benefits – Costs.
Creating
Customer Value Online
But
what exactly is value?
The
entire product experience:
Customer’s
first awareness of a product,
All
customer touch points (including the Web site experience and e-mail from a
firm),
The
actual product usage and postpurchase customer service,
The
compliments a consumer gets from friends while using the product.
Value
is defined wholly by the customer.
Value
involves customer expectations; if the actual product experience falls short of
their expectations, customers will be disappointed.
Value
is applied at all price levels.
Online
Benefits
The
Internet technology brings a new set of desired benefits:
Effective
Web navigation,
Quick
download speed,
Clear
site organization,
Attractive
and useful site design,
Secure
transactions & privacy,
Free
information or services,
User-friendly
Web browsing and e-mail reading.
BUT
as Internet technology evolves, user needs change, and the opportunities
expand.
Marketers
must make five general product decisions that comprise its bundle of benefits
to meet customer needs: attributes, branding, support services, labeling, and
packaging.
Attributes
Product
attributes include:
Overall
quality: “you get what you pay for” = higher and consistent quality generally
means higher prices,
Specific
features: Include such elements as color, taste, style, size, and speed of
service.
Benefits
are the same features from a user perspective (i.e., what will the attribute do
to solve problems or meet needs and wants?).
For
example, Yahoo! provides a list of Web site categories (attribute), which helps
users find things quickly online (benefit).
Product
benefits are key components in the value proposition.
Attributes
The
Internet increases customer benefits in many ways that have revolutionized
marketing practice:
The
move from atoms to bits: media, music, software, and other digital products are
presented on the Web.
Product
customization:
Tangible
products such as laptop computers can be sold alone or with many additional
hardware and software items or services to provide additional benefits at a
higher price.
Intangible
products, online research firms can offer many different business services in a
variety of combinations.
Information
products can be reconfigured and personalized very easily, quickly, and
cheaply, as compared to manufactured products.
Attributes
The
Internet offers users the unique opportunity to customize products
automatically without leaving their keyboards.
User
personalization is another form of customization:
Through
Web site registration and other techniques, Web sites can:
Greet
users by name,
Suggest
product offerings of interest based on previous purchases,
Amazon.com
Branding
A
brand includes a name (McDonald’s), a symbol (golden arches), or other
identifying information.
When
a firm registers that information with the U.S. Patent Office, it becomes a
trademark and is legally protected from imitation.
According
to the U.S. government, “a trademark is either a word, phrase, symbol or
design, or combination of words, phrases, symbols or designs, that identifies
and distinguishes the source of the goods or services of one party from those
of others”.
Branding
A
brand is:
A
promise to customers,
A
brand name + its image = the benefits a user desires,
A
way to establish trust for the customer.
Important
online, because of concern over security and privacy issues,
Trustworthy
brand names add to customer-perceived benefits = higher prices,
The
value proposition.
Branding
Customers
and prospects develop brand images based on every brand contact:
One-way
media such as advertising and packaging,
Two-way
communication such as conversations with the firm’s customer service or sales
people on the phone, at trade shows, on Web sites, or in company-initiated
e-mail.
When
using the Internet, a firm must be sure that its online messages and employee
e-mails convey a positive brand image that is consistent with messages from all
other contact points.
Branding
Companies
creating new products for online sale face several branding decisions:
Whether
to apply existing brand names or create new brand names for new products,
Whether
to lend their brand name as a cobrand with other firms,
What
domain name to use for the Web site.
Branding
7
components for building a great global brand:
Research
your corporate constituencies. Information is
critical for global brand building.
Understand
your business. Set guidelines based on global
objectives.
Advance
the vision. Decide on the desired reputation,
create a strategy to support it, and develop a strategic positioning document.
Release
the power of communications. All company
communication should work together to promote the brand.
Branding
7
components for building a great global brand:
Set
up your communications infrastructure. Build a communication
council with the firm’s advertising, public relations, investor relations, and
human resource specialists, both inside and outside the firm.
Include
your employees in the message mix. This is especially
important in a time of PR crisis.
Measure
performance. Track progress toward goals and
determine communication effectiveness.
Using
Existing Brand Names
On the Web
On the Web
An
existing brand name can be used for any new product:
Makes
sense when the brand is well-known + has strong brand equity (value).
For
example, Amazon added music CDs, videos, software, electronics, and more to its
product mix. When products with offline sales introduce online extensions
choosing to use the same brand name (e.g., The New York Times).
Some
firms may not want to use the same brand name online and offline, for several
reasons:
If
the new product or channel is risky, the firm does not want to jeopardize the
brand’s good name by associating with a product failure.
A
powerful Internet success might inadvertently reposition the offline brand.
Sometimes
the firm wants to change the name slightly for the new market or channel, as a
way of differentiating the online brand from the offline brand.
Creating
New Brands
for Internet Marketing
for Internet Marketing
If
an organization wants to create a new Internet brand, a good name is very
important.
Good
brand names should:
Suggest
something about the product (e.g., www.Classmates.com),
Differentiate
the product from competitors (e.g., www.gurl.com),
Be
capable of legal protection.
On
the Internet, a brand name should be:
Short,
Memorable,
Easy
to spell,
Capable
of translating well into other languages.
Cobranding
Cobranding:
When
two different companies put their brand names on the same product.
Common
on the Internet and is a good way for firms to build synergy through expertise
and brand recognition.
For
example:
Sports
Illustrated now co-brands with CNN as CNNSI.
Even
the Web site address displays the cobrand: sportsillustrated.cnn.com.
Internet
Domain Names
Organizations
spend a lot of time and money developing powerful, unique brand names for
strong brand equity.
Using
the company trademark or brand name in the Web address helps consumers quickly
find the site.
For
example, www.coca-cola.com.
Anatomy
of a URL:
A
URL (Uniform Resource Locator) = Web site address = IP address
(Internet Protocol) = domain name.
Categorization
scheme, similar to telephone area codes, that helps computer users find other
computers on the Internet network.
Are
numbers, but because users can more easily remember names, a domain name server
translates back and forth.
Internet
Domain Names
A
domain name contains several levels:
http://
= hypertext
protocol = The browser should expect data using the hypertext protocol—meaning
documents that are linked together using hyperlinks.
www
= world
wide web = Not necessary and most commercial sites register their name both
with and without it.
dell
= second
level domain = The name of the company or the brand name.
com
= top level domain = Firms must first decide in which top level domain to
register. Most businesses in the U.S. want .com,
The
Internet Corporation for Assigned Names and Numbers (ICANN):
A
non-profit corporation,
A
committee of experts to make decisions about protocol and domain name
assignment, registration,
Approves
all new top level names such as the latest: biz, .info, .pro, .name, .coop,
.aero, and .museum.
Registering
a New Domain Name
VeriSign provides domain registering
services for a mere $70/2 years/name.
Problems:
More
than 97% of words in the dictionary already registered as domain names,
The
online name a firm desires may not be available.
A
dictionary name is not necessarily the best option because it already has a
meaning attached to it = difficult to build a competitive advantage.
Registering
a New Domain Name
What
happens if the firm name has been registered by someone else?
Come
up with alternative names: DeltaComm, a software developer was the first to
register www.delta.com before Delta
Airlines (originally www.delta-air.com),
Buy
the name from the currently registered holder.
Many
creative Netizens register lots of popular names and offer them for sale at
prices of up to millions of dollars:
GreatDomains.com
allows users to buy and sell popular domain names.
Support
Services
Customer
support (during and after purchases):
Is
a critical component in the value proposition,
Need
knowledgeable customer service representatives,
Is
critical for some technical products for installation, maintenance problems,
product guarantees, and service warranties.
Customer
service:
Works
to increase customer satisfaction with the firm’s products,
Is
a product benefit = an important part of customer relationship management.
Labeling
Product
labels:
Identify
brand names, sponsoring firms, and product ingredients,
Provide
often instructions for use and promotional materials,
On
tangible products = create product recognition and influence decision behavior
at the point of purchase,
For
online services = provides terms of product usage, product features, and other
information comprise online.
Labeling
Labeling
at Web sites, customers can read:
How
to install and use a software downloaded from the Internet,
Extensive
legal information about copyright use on their Web pages,
Online
labeling can serve many of the same purposes on the Web as offline
Many
brick-and-mortar businesses display the Better Business Bureau logo on their
doors to give the customer a sense of confidence and trust.
The
TRUSTe privacy shield: If firms agree to certain terms of use regarding privacy
of customer information collected at their site, they affix the TRUSTe seal to
their Web sites as part of a label.
E-Marketing
Enhanced
Product Development
Product Development
The
move from atoms to bits adds complexity to online product offers.
Developers
must:
Combine
digital text, graphics, video, and audio, and use new Internet delivery
systems.
Must
integrate front-end customer service operations with back-end data collection +
fulfillment methods to deliver product.
This
creates steep learning curves for traditional firms.
E-marketers
need to consider several factors that affect product development and product
mix strategies with new technologies.
Customer
Codesign
The
power shift to buyers allows for many unusual business partnerships and for
both business and consumer collaboration.
Partners
are forming synergistic clusters to help design customer products that deliver
value.
Internet
technology allows this type of collaboration to occur electronically across
international borders as well.
Customer
interaction in the early and late stages of product development can actually
increase product success.
This
is especially true when product codesign occurs with what is called the “lead
user” of a product.
This
is a key person who uses the product and often innovates himself to solve
product use problems as they occur.
Electronic
Input
Good
marketers look everywhere for customer feedback to improve products.
With
the increase of Web sites inviting customer product ratings, the proliferation
of e-mail “word of mouse,” and the speed and reach of the Net, customers are
quick to spread the word about product strengths and weaknesses.
Savvy
firms monitor customer input electronically and refine products to meet
customers’ needs.
Companies
hire electronic clipping services—firms to scan the Internet looking for
company and product discussion = the electronic version of traditional clipping
services that read print media and clip out articles mentioning the firm and
its brands.
The
electronic input process:
Is
similar to the use of marketing research to support product development;
The
scale is much larger because many customers worldwide can be involved and
provide quick feedback.
Web
Content Development
On
the Web, “content is king.”
Customers
visit Web sites for information, entertainment, and to buy products.
Content
attracts users and keeps them returning.
5
tips for “screaming content:”
Stay
fresh. Update the site every day and at least once on the
weekend. That takes a huge commitment!
Be
relevant and unique. Deliver highly focused content that is
differentiated from competitive site content.
Make
it easy to find. Users want to find information or
products immediately. Also, don’t include hyperlinks to other sites for content
because users don’t often return after they leave.
Serve
a smorgasbord of content. Integrate current news and facts
with longer features and commentary. Include interactive material relevant to
the site, such as quizzes, calculators, searches, and so forth. Vary the format
to include multimedia.
Deliver
content everywhere. This includes Web sites, wireless devices,
and special networks.
Web
Content Development
A
new breed of syndicated content providers has emerged to serve Web developers:
Is
parallel to the Associated Press that feeds news to local and national
newspapers and magazines.
Includes
stock quotes, breaking news, sports updates, weather information, and more—in
all formats from text to video.
An
interesting trend involves users who want text-based content only:
A
small but growing group of Web users does not want the distraction of video, sound,
animation, and other non-text items,
They
favor simple text information,
They
block advertising content with special software and know exactly what they want
online,
They
do not like HTML e-mail.
Important
because mobile handheld devices use mostly text content.
Web
content providers might consider how to pare down the features in special areas
for these users + charge a subscription fee for the content.
Internet
Properties Spur
Other Opportunities
Other Opportunities
Market
deconstruction created a disaggregation and reaggregation of product and
service components to form unusual new products and firms:
These
firms provide bundles of benefits difficult to achieve before the Internet.
The
AutoMall Online.
The
Internet is a great information equalizer:
Fierce
competition + lots of product imitation + short product life cycles.
In
this environment, product differentiation is the key to keep from becoming a
price-driven commodity industry.
Online
auctions: Not long after eBay came online, Amazon.com and others began offering
auctions.
Short
product life cycle: when Frank Sinatra died, BMG’s five-person new-product
development team created a lifetime tribute and a series of product offerings
for the Web site in six short hours.
Firms
must respond quickly to new technology or lose.
Innovation
online is still rewarded.
New-Product
Strategies
for E-Marketing
for E-Marketing
Many
new products were introduced by “one-pony” firms:
=
The firm was built around the first successful product,
Netscape,
Yahoo!, and Classmates.
Other
firms added Internet products to an already successful product mix:
Microsoft.
Product
Mix Strategies
How
can marketers integrate hot product ideas into current product mixes? There are
6 categories of new-product strategies based on marketing objectives and other
factors such as risk appetite, strength of current brand names, resource
availability, and competitive entries:
Discontinuous
innovations are new-to-the-world products never seen before.
On
the Internet = the first Web authoring software, cell phone/PDA combination,
shopping
agent,
and search engine.
There
are many discontinuous innovations yet to come on the Internet.
This
strategy is quite risky, the potential rewards for success are great.
E-marketers
planning discontinuous innovations must remember that their customers will have
to learn and adopt new behaviors¾things they have
not done before.
The
new behavior must be easy and the perceived benefits worthwhile.
Product
Mix Strategies
New
product lines are introduced when firms take an
existing brand name and create new products in a completely different category.
Microsoft
created a new line when it introduced its Internet Explorer Web browser.
Because the Netscape browser was already available, Microsoft’s entry was not a
discontinuous innovation.
Additions
to existing product lines occur when organizations add a new flavor, size, or
other variation to a current product line.
The
New York Times Direct is a slightly different version of the hard-copy edition,
adapted for online delivery. It is yet another product in The New York Times
line, which includes the daily paper, weekly book review, and others.
Product
Mix Strategies
Improvements
or revisions of existing products are introduced as “new and improved” and,
thus, replace the old product.
Web-based
e-mail systems improved on client-based e-mail systems such as Eudora or
Outlook because users could check and send e-mail from any Web connected
computer.
Repositioned
products are current products that are either targeted to different markets or
promoted for new uses.
Yahoo!
began as a search directory on the Web and then repositioned itself as a portal
(an Internet entry point with many services).
Me-too
lower-cost products are introduced to compete with existing brands by offering
a price advantage.
When
America Online and other ISPs were charging per hour rates for Internet access,
several other providers introduced unlimited use at flat rate pricing for
$19.95 per month.
A
Word About ROI
Need
for performance metrics:
As
feedback so firms can assess the success of their e-marketing strategies and
tactics.
When
introducing new products, online or offline.
(The
expected product revenue over time is forecasted) – (marketing and other
expenses) = an estimated ROI for new
products prior to launch.
Payout
= the R & D and other initial costs will
be recovered at a particular date based on projected sales.
Break-even
date = when the product is projected to start making a
profit.
How
long is acceptable? Internet projects had to break even within three months or
they would not get funded. Of course the exact timing varies by industry.
ROI
and break-even are important metrics for selling new product ideas internally
and for measuring their success in the market.
A
Taxonomy for Internet Products
Thousands
of products based on Internet technologies have been introduced.
These
can be classified according to the customers to whom they appeal:
Each
column represents a group of customers,
Each
row in the exhibit represents a type of product.
This
matrix is helpful because it displays areas of new-product opportunity.
New-Product
Trends
Cutting-edge
products and the technologies that make them work create digital value applying
the following concepts:
Each
represents a new brand, A new product line, A discontinuous innovation, A
technology improvement.
New
products (from wireless end user appliances to B2B software) success depends on
how well they deliver customer value by offering desired benefits or by
lowering costs.
New-Product
Trends
Many
new products are unseen by the final consumer:
BUT
they form the engine that drives electronic commerce,
They
are enabling products,
Cisco
Systems makes the hardware and software that powers computer networks.
New
technologies accelerate product change.
Most
important technologies in 2002 = wireless/mobile computing, distributed content
delivery and local caching, digital imaging, clustering and parallel computing,
high scale interoperability, and universal network storage.
New-Product
Trends
4 new-product trends in the B2B market,
with the potential to improve efficiency
and effectiveness in marketing functions
such as sales, distribution, supply chain
management, and marketing research:
Value
chain automation. Software products enable businesses to
perform important marketing functions (value chain).
Outsourcing.
Businesses look for providers of key value chain functions. Application service
providers (ASPs) perform marketing functions on behalf of other businesses.
Information
sharing. Organizations now share internal information with
selected value chain partners. OBI and XML, two variations on electronic data
interchange (EDI), support information sharing.
Centralizing
information access. Corporate portals = a single
integrated interface to all of a company’s data stores = reduce information
search times for their employees = cost savings + effectiveness.
New-Product
Trends
3 new-product trends operate primarily
in the B2C market and have the
power to open up new markets:
Multimedia.
Gains in network performance enables Internet multimedia (from video on demand
to Webisodes).
Assistive
technologies. Clever developments allow for computer
access by persons with a wide range of disabilities + use for everyday
applications such as listening to one’s e-mail while driving.
Convergence
of media. Expect the biggest initial improvements in the
corporate market with gains in consumer markets close behind.
Value
Chain Automation
Value
chain automation:
Benefits
= improvements in efficiency and effectiveness of operations among suppliers, manufacturers,
and the entire distribution channel,
Automates
existing business processes (order execution),
Enables
processes not previously feasible (data mining to uncover consumer behavior
patterns),
Helps
firms solve some of its main difficulties + lower costs = lower prices for
customers.
Enabling
products = expensive,
BUT
properly installed and managed, they can bring millions of dollars to the
bottom line through new market opportunities or cost savings.
Value
Chain Automation
6
benefits by purchasing off-the-shelf software solutions:
Rapid
deployment: Installation team + after-sale support services +
helps to integrate existing systems with
the new technology provided.
Relatively
bug-free rollout of systems:
Service quality of the business immediately improved.
Integrated
solutions: Enabling technologies = integrated solutions that
help with multiple functions in the value chain.
Large
number of features: Increasing competition = more features
offered.
Compatibility
with business trading partners: Improves internal
systems conformity to industry standards + enhances its position in systems
integration.
Cost
savings: Infrastructure products save both time and money.
Promotion
Companies
can buy enabling products to help manage four key promotional activities on the
Net:
Affiliate
Programs:
Sites
pay their affiliates referral fees to help to drive traffic to the affiliate
sponsor,
Low-cost
way to acquire customers,
Keeping
track of the click-throughs and properly crediting the affiliates is a complex
programming task.
Amazon:
The
logo is splashed over the Web sites of some 600,000 Amazon affiliates ,
Each
click through on the logo + merchandise purchase generates revenue for the
associate.
Even
if Amazon were to lose money on the sale by paying the referral fee, it could
make it up on repeat business by some of the referred customers.
Promotion
Targeted
Advertising:
Marketers
go to great lengths to target ads to appropriate demographic and psychographic
segments.
User
surfing patterns form an excellent basis by which to target ads.
DoubleClick
sells services to target ads based on users’ surfing habits + can follow the
user from site to site around the Internet and target ads accordingly.
Personalized
Promotions:
Many
sites create custom Web pages for each user, targeting specific promotions for
each user’s individual preferences.
Dynamically
creating Web pages = a complex programming task.
Firms
such as Vignette automate dynamic creation of Web pages.
Promotion
Sales:
In
the B2B market, enabling software are used to maintain relationships with its
corporate clients.
Vignette
gives customers instant access to pricing information, product availability,
and order lead-time.
Catalog
aggregator:
The
online manufacturer’s rep takes information from multiple vendor databases and
distills it into a single database available for search by the end user.
Enabling
companies help automate the aggregation process.
Product
Configuration
Proper
component configuration = difficult tasks in high-tech products sale:
Well-trained
sales force can properly configure products for end user,
BUT,
many end users prefer to configure their own products online:
For
convenience,
To
speed delivery of the product,
Self-service
= product benefit.
Automatic
configuration requires a software program = expert system.
Enabling
software guide users through the process of product configuration based on
their needs.
Clients
= communications, healthcare, and high-tech manufacturing industries, where
configurations for equipment and services are often complex.
Brokerages
Web
auction sites:
Are
all the rage in the B2B, B2C, and C2C markets.
Difficult
to write + long to test and debug the software.
Key
characteristic = reliability.
Airline,
food, gas, and water industries use reverse auction software to drive down
prices for products purchased from their suppliers.
Payment/Financing:
Barriers
to trading in the B2B market = processing credit for purchases.
Enabling
software = automates providing, verifying, and processing credit.
Key
characteristic = reliability.
Software
support B2B payments + financing + customer credit approvals.
Customer
Service
Generally,
businesses don’t respond very promptly to e-mail inquiries and complaints.
Ideally:
messages should receive a personal response with 48 hours.
BUT
employee costs for e-mail customer service can be prohibitive,
+
businesses prefer to develop a consistent response to similar problems.
Enabling
softwares help route + respond to e-mail customer inquiries:
Immediately
acknowledges e-mail + promises a response within a fixed time frame,
Can
route the message ( scan for keywords) to the appropriate customer service
representative,
Can
call up previously messages + account information to help form a context for
the inquiry,
Can
compose a personalized response using artificial intelligence!
Customer
service representatives accept the generated response or compose an entirely
new response.
Companies
can double the productivity of their e-mail response teams.
Distribution
Goal
= just-in-time (JIT) delivery of products to avoid carrying excessive
amounts of inventory.
Main
difficulty = coordination.
Solution
= enabling software that supports value chain management.
Sun
Microsystems:
Does
not make any of the components that go into its computers,
Coordinates
all interactions in its value chain,
= the activities of its suppliers and
its suppliers’ suppliers to ensure continued viability of the entire value
chain.
Relationship
Marketing
Datamining
customer information reveal important marketing opportunities.
Enabling
software automates the task of profiling customers:
Identify
customers characteristics,
Target
e-mail promotions,
Provide
real-time profiling of consumer behavior dynamic site configuration in response
to that behavior.
Outsourcing
Application
service providers (ASPs) perform off-site value chain
functions for their client businesses.
Example
=outsource payroll: manager logs onto the ASP’s Web site + enters the hour
totals for each employee + hits submit, and a courier delivers the checks the
next day!
Distinction
between application service providers and the enablers = location + support
Enablers:
business license software + install, configure, and maintain the software
on-site,
ASP:
the software resides at the ASP’s site + the business accesses the application
remotely via a Web browser.
Outsourcing
Advantages
of the ASP:
Lower
startup costs,
Lower
or no information technology staff costs,
Lower
switching costs,
Particularly
attractive for small businesses.
Disadvantages
of the ASP:
Lack
of control over key customer data and business processes.
ASPs:
Some
can run an entire business = aggregate almost all of the value chain functions
for the client businesses.
Other
ASPs focus on a single value chain function such as payroll or customer
service.
Information
Sharing
Today
businesses are sharing information with their value chain partners.
Electronic
data interchange (EDI) = generic term for the exchange of
data between businesses in digital form.
Benefits:
Consistent
standards = data do not need to be rekeyed by the receiving business,
Exchange
is easier if the businesses agree on a common format for exchanging data,
BUT,
this is complicated because most businesses store data in proprietary formats.
2
solutions:
Open
buying on the Internet (OBI) = each business translate its data to a
common format for exchange,
XML,
allows each business to keep its own format while sending the instructions for
translation to the receiving business.
Information
Sharing
Extensible
Markup Language (XML):
Extensible
= the language can be extended by the user to accommodate new types of data.
It
has strong support = it is built into Internet Explorer, Netscape Navigator,
the MS-Office suite, etc.
A
number of industry standards groups base their content definitions on XML.
To
better understand XML:
Consider
that a cook who is baking a cake needs both an ingredient list and a recipe to
be successful,
The
ingredient list corresponds to a company’s data,
The
recipe corresponds to XML formatting instructions,
The
company receiving the information must have both in order to decode the
communication.
Centralizing
Information Access
Corporate
portals:
Use
Web-based technology to create sites specifically for a particular company’s
employees.
Are
an extension of an earlier concept, the intranet (site for internal consumption
for corporate information such as news, policies, and procedures).
A
wide variety of corporate information stores—such as sales data, groupware
documents, and calendars.
Translate
data from all of the information stores into a common interface for
presentation to the employee.
Have
the potential to save businesses millions of dollars by reducing the time that
their employees spend searching for information.
Example:
My.yahoo where users can customize the screen display to include categories of
information that they find useful.
Centralizing
Information Access
Extranets
= corporate portals that value chain partners are allowed to access.
For
example, Sun Microsystems: Sun’s suppliers have nearly complete access to Sun’s
production information and use that access to plan their own production
schedules.
Groupware
products such as Lotus Domino:
Used
to coordinate and share information among work teams.
Support
threaded discussion groups. Each thread represents a separate topic. Users add
to the thread by responding to one of the topics. In this way the entire
dialogue and any posted documents are maintained.
Other
applications= e-mail and calendaring.
Most
corporate portals either integrate with existing groupware products or imitate
their functionality.
Multimedia
Real-time
multimedia—sound and video—:
Currently
of fairly low quality when viewed or heard on a computer over the Net.
Limiting
factor = lack of sufficient bandwidth. The quality of transmission is directly
proportional to the bandwidth of the communications channel.
Most
users still connect to the Internet with modems operating at 56K or slower.
BUT:
growing penetration of high-speed access via cable modems, DSL modems, and
wireless technologies.
AND,
Cisco systems + other networking companies are working on technologies for
increased bandwidth at lower prices.
Multimedia
technologies are available:
Conferencing
software,
Webcams,
CD-quality
audio,
Streaming
video,
Internet
telephony VoIP.
Multimedia
Conferencing
software:
Allows
users to hold text, audio, or video conferences over the Internet.
Users
can simultaneously work on shared whiteboards using Microsoft NetMeeting.
Webcam:
Hardware
device that transmits real-time video image over the Web.
can
be used for Internet conferencing or just be fixed on a target.
2
popular Webcam devices= Logitech QuickCamera & Intel’s PC Camera.
Streaming
audio:
Delivery
of live or stored audio on demand over
the Internet.
Users
can start hearing the audio very shortly after clicking on the file without
waiting until the entire file is downloaded before playing it.
Sites
such as Yahoo! Broadcast use its products to rebroadcast radio, TV, and music
over the Internet.
Multimedia
MP3:
Standard
for CD-quality audio.
Began
almost as a renegade movement that has now become mainstream.
WinAmp
= one of the first players to decode MP3 files.
But
how does the user find the files online?
Napster
= first major service to allow users to share MP3 files from their computers
with the entire Net community.
It
maintained a database of MP3 availability but did not actually provide the
music.
Legal
battles with the recording industry finally forced Napster into bankruptcy.
Napster
was still hoping to reemerge from bankruptcy thanks to a partnership with
Bertelsmann AG.
BUT Napster may have trouble winning back market
share from the hundreds of MP3 search tools and services such as Morpheus.
Multimedia
Streaming
video:
Requires
more bandwidth than streaming audio.
More
heavily constrained by the lack of bandwidth online.
BUT
observers see a bright future for live video and video on demand.
broadcast
industry and the video rental business could be threatened by its development.
SonicBlue's
ReplayTV, a competitor to Sony's TiVo, allows users to record broadcast video
and then share it over broadband Internet connections with other SonicBlue
users.
Internet
telephony:
Transmits
phone calls relies on the Web eliminating long-distance charges.
Multimedia
Voice
over Internet Protocol (VoIP):
Major
constraint = bandwidth.
Voice
quality is quite good, but it is not reliable.
Requires
less bandwidth than streaming video, Internet telephony is an attractive
business proposition.
Net2Phone
offers products that can complete long-distance calls off the Net.
Represents
a threat to long-distance phone companies (for international calls).
Assistive
Technologies
Designed
to help people with disabilities operate their computers.
Potential
customers = Millions of people are for these products—not just disabled people.
Assistive
technologies do allow persons with certain disabilities to productively enter
the workforce:
Voice-activated
computers:
Computer
can be completely controlled by voice commands.
In
call centers, the caller interacts with the computer by speaking commands.
Large-type
screen displays. Help people with poor vision see and
navigate on their computer screens.
Assistive
Technologies
Type-to-speech
or braille:
Allows
blind people to interact with a computer.
Reads
Internet pages aloud.
Technologies
are also being built into automobiles such as GM’s OnStar system = drivers can
listen to e-mail messages and stock quotes while driving.
Important
implications for Web page design = designers avoid graphics since the
technology can only read text.
Speech-to-text
telephony. The telecommunications device for the deaf (TDD)
converts speech to text, allowing deaf people to hold telephone conversations or
conference online.
Eye
gaze-to-type:
People
who are completely paralyzed can control a computer using eye gaze-to-type
technologies.
The
user controls her computer by staring at control buttons on the screen.
Three
Types of Convergence
The
marketing opportunities in media convergence are tremendous.
3
types of convergence are attracting attention today:
voice, video, and data on corporate
networks,
wireless devices and the Web,
the Web with broadcast media.
Voice,
Video,
and Data on Corporate Networks
and Data on Corporate Networks
Will
allow corporations to have:
1 single switch for voice, video, and data
communications rather than 3 separate systems.
Cisco
is leading the charge in this market:
Supporting
both the infrastructure and end user appliances such as IP telephones.
Wireless
Devices and the Web
Wireless
devices:
Cell
phones and personal digital assistants (PDAs),
With
Web access + sometimes a global positioning function (GPS),
Race
to see whether cell phones or PDAs will become the preferred platform for
wireless Internet access,
Many
people think these devices are likely to merge = a single device would serve as
a combination cell phone, PDA, and Web browser.
Limitations:
The
screen size of PDAs & cell phones:
Tiny
cell phone screen can be used to check e-mail and retrieve weather, news, and
stock quotes.
BUT
Web content is designed for color on much larger displays.
Web
sites are starting to create content for the Wireless Access Protocol (WAP)
so that it displays correctly on these tiny screens.
Interesting
application running on a PDA is Auctioneer, used to track eBay auctions.
Wireless
Devices and the Web
Bandwidth:
Wireless
networks are much slower than land line networks.
BUT
the market is growing rapidly.
One
technology to watch = WiFi networks built on the Ethernet 802.11b standard + 3G
wireless cell phone networks.
Outside
of the US, the current & potential market for wireless Web access is greater
(a higher penetration rate for mobile phone communications).
Why?
Telephone
companies in other countries usually charge by the minute for local calls. Many
users conclude that if they are going to be charged by the minute anyway, they
might as well have the additional benefit of wireless access.
Consumers
in many countries have to wait years for a telephone line to be installed—at a
high price.
In
Japan, DoCoMo’s i-mode service has attracted millions of users who check
weather forecasts, sports scores, maps, stock trading, banking, etc.
Wireless
Devices and the Web
Wireless
mobility of the future will have 6 components :
Content
provider. The firm creating wireless versions of current Web
content. This might include sites such as travelocity.com and B2B services such
as sales force automation.
Portal
software. These firms—such as Yahoo!, AOL, and Microsoft—will
provide a higher level of personalization, maintaining user preferences for a
wide variety of content.
Data
aggregation agent. Companies such as Yodlee, Acxiom, and
Microsoft keep track of a user’s login and password information for quick
mobile access to banks, stock brokerage accounts, and so forth—a boon to
business travelers.
Infrastructure.
These firms provide wireless Internet access, parallel to non-mobile ISPs.
Transaction
providers. American Express, Visa, and others will serve
online retailers by processing payments.
Mobile
devices. Cell phones + PDAs, or some convergence of the two
platforms, allowing the user to send and receive data.
Broadcast
Media and the Internet
iTV
(interactive TV):
Convergence
is between broadcast media (television and radio) and the Internet.
Result
= single appliance to receive broadcast content over the Internet.
Major
obstacle = lack of bandwidth to support full-motion video.
Cable
modems, DSL modems, and fixed wireless access to the home may provide more
bandwidth.
MSN
TV:
Users
simply browse the Web on a TV screen.
Not
very successful because of the low resolution of TV screens + consumers are not
used to reading on a TV screen.
ABC’s
Enhanced TV:
Users
need to log onto ABC’s Web site while they are watching TV.
Users
can get more information about the current broadcast, play games with other
users, and participate in polls and chats.
Broadcast
Media and the Internet
When
the bandwidth does become available, it is unlikely that the Web will be used
only to serve TV and audio on demand.
A
taste of the future = BrilliantDigital produces multipath movies in which viewers take a more active role.
Future
products depend on the telecommunications industry:
Since
mid 2000: The industry started to collapse.
$2
trillion lost in valuation + numerous high profile bankruptcies.
Markets
were flooded with products and services driving prices down below profitable
levels.
The
products that survive in the long-term will be those that best deliver customer
value.
The
Internet Changes Pricing Strategies
Price
is:
The
amount of money charged for a product or service,
The
sum of all the values (such as money, time, energy, and psychic cost) that
buyers exchange for the benefits of having or using a good or service,
Set
by negotiation between buyers and sellers.
Fixed
price policies:
One
price for all buyers,
A
relatively modern idea = end of the nineteenth century,
Arose
with the development of large-scale retailing and mass production.
Now,
one hundred years later:
The
Internet is taking us back to an era of dynamic pricing:
= Varying prices for individual
customers
The
Internet Changes Pricing Strategies
In
the past, the Internet was used for:
Marketing
communication benefits,
Distribution
channel benefits.
BUT
it has a huge potential to change pricing strategy.
The
Internet properties allow for price transparency = the idea that both buyers and sellers
can view all competitive prices for items sold online.
This
feature would tend to commoditize products sold online, making the Internet an
efficient market.
Buyer
and Seller Perspectives
The
meaning of price depends on the viewpoint of the buyer and the seller.
Each
party to the exchange brings different needs and objectives that help describe
a fair price.
In
the end, both parties must agree or there is no sale.
Buyer
View
For
the buyers: values = benefits – costs
The Real Costs
Today’s
buyer must be quite sophisticated to understand even the simple dollar cost of
a product.
The
seller’s price may or may not include shipping, tax, and other seemingly hidden
elements (costs revealed online at the last screen of a shopping experience).
Promotion
of a new pricing scheme for a long distance telephone company:
Complex
deals,
Some
carriers advertise “$0.07 a minute, period.”
The
Real Costs
How
about the time, energy, and psychic costs that add to a buyer’s monetary costs?
Sometimes:
The
Net is slow,
Information
is hard to find,
Other
technological problems,
Users
can spend more time and energy & become frustrated (psychic cost).
The
Real Costs
Shopping
agents will find the lowest prices online, but the search adds to the time
cost.
A
search for the lowest airfare at Orbitz.com
or Travelocity.com can be minimal
compared to the dollar savings,
BUT
the same may not be true for a book price search.
It
depends on:
The
time it takes to search & the savings as a percentage of the item cost,
How
much familiarity and experience the buyer has with the search engine.
As
bandwidth increases, technology evolves, and firms develop better online
strategies, some of these costs will decline.
Buyer
Control
The
change in power from seller to buyer affects pricing.
Reverse
auction:
Buyers
set prices for new products and sellers decide whether or not to accept these
prices.
Example
= Priceline.com.
In
the B2B market: buyers bid for excess inventory at exchanges + for products at
firms such as Caterpillar.
In
the B2G market :
Government
buyers put out a request for proposal for materials & labor needed,
Businesses
bid for the work,
The
government buyer selects the lowest price = having control over the exchange.
Buyer
Control
Buyer
power online is based largely on the huge quantity of information & product
availability on the Web.
Online
buyers are becoming more sophisticated.
Sellers
are more willing to negotiate = giving power to buyers in the exchange.
Sellers
realize that information technology can help them better manage inventories
& automate frequent price changes.
Buyer
View
Buyers often enjoy many online cost
savings:
The
Net is convenient:
It
is open 24/7 = users can research, shop, consume entertainment anytime.
E-mail
allows asynchronous communication among users at any location and prevents
“telephone tag” with sellers.
The
Net is fast:
Users
can order a product and receive it the following day.
Self-service
saves time:
Customers
can track shipments, pay bills, trade securities, check account balances, and
handle many other activities without waiting for sales reps.
Users
can request product information at Web sites and receive it immediately.
Buyer
View
One-stop
shopping saves time:
Increase
customer convenience,
AutoMall
Online = partner with a number of firms to provide automobile price
comparisons, research about various models and manufacturers, financing and
insurance information, and service options.
Integration
saves time:
Web
portals ( Yahoo! and AOL) = allow users to quickly find many things they want
online.
Some
sites allow users to create individualized Web pages with news, stock quotes,
weather, and other customized information.
Automation
saves energy:
Customers
value simplicity and ease BUT the Net makes some activities more complex,
technology can help.
Customer
computers can keep track of passwords for Web sites and to track previous
purchases at Web sites save time and energy.
Buyer
View
Not
everyone wants to save money in online transactions.
Customer
needs and their view of the value proposition vary,
= Each individual weighs the desired and
perceived benefits against all the costs.
Example
of the value equation tradeoffs = online auctions:
Called
“the winner’s curse,” = Some people
actually pay a higher price for auctioned products than they would pay an online
retailer,
In
the B2B market: car dealers pay significantly more for used automobiles online
than they do offline.
Buyer
View
Some
people prefer to order books from Amazon.com
with overnight delivery, knowing that:
Amazon
prices are often higher than other online booksellers,
The
book is in stock at a local bookstore,
Overnight
delivery costs quite a bit more.
So,
why?
The
Amazon brand name is trustworthy,
These
customers have had excellent previous experiences with Amazon,
They
are familiar with the site and can quickly find what they need,
Those
benefits and time/energy-saving features overcome the higher expense.
Seller
View
Price
= the amount of money they receive from buyers.
Pricing
floor = seller costs for producing the good or service,
Under,
no profit is made,
Above,
marketers set a price to draw buyers from competing offers,
Price
- Cost = Profit
Factors
affecting pricing levels:
Internal
factors = the firm’s strengths and weaknesses from:
Its
SWOT analysis,
Its
overall pricing objectives,
Its
marketing mix strategy,
The
costs involved in producing and marketing the product.
External
factors = the market structure & the buyer’s perspective.
Internal
Factors: Pricing Objectives
Profit-oriented
objective (most common strategy) :
Focuses
on current profit maximization rather than long-term performance,
First
estimate what demand and costs will be at different prices,
Then
choose the price that will produce the maximum current profit, cash flow, ROI.
Market-oriented
objective:
Building
a larger customer base = lower costs & higher long-run profit,
Low
prices generally build market share.
AOL
broadband Internet connection services is low to increase market share.
Product-quality
leadership = high price to cover higher performance quality and high cost of
R&D.
Negotiation
and bidding.
Competition-based
pricing objective:
Price
according to what competitors charge for similar products, paying less
attention to the company's own costs or to demand.
When
one airline drops prices, its competitors usually follow suit.
The
Internet gives firms quicker access to competitive price changes.
Internal
Factors: Marketing Mix Strategy
Successful
companies use an integrated and consistent marketing mix strategy.
Volvo
= upscale brand image:
Sells
high priced automobiles through dealerships,
Marketing
communication = a Web site + offline,
More
than 80% of its customers shop online,
Highly
educated men + live in urban areas = configure a new Volvo on the Web site,
price it, + talk to dealers via e-mail ( Dealers close 10-15% of these leads).
Volvo
uses the Internet to generate sales leads, knowing that its customers are not
likely to buy a high priced item directly from the Internet.
The
Internet is one sales channel + must be used in concert with other marketing
mix elements.
No
proven rules or standard practices on how to price the same product for sale in
both online and offline channels.
Internal
Factors: Information Technology Affects Costs
The Internet Puts Upward Pressure on
Prices:
Reason of the dot-coms failure =
expensive customer relationship management + other software that did not
generate new revenue to cover the sites’ costs.
Factors that put upward pressure on
Internet pricing:
Distribution:
“The
last mile” problem = each product must be shipped separately to its
destination.
Retailers
pass shipping costs on to their customers & reveal it at the conclusion of
the order.
Some
vendors inflate the shipping cost to recoup some of the discount offered.
Affiliate
programs:
Affiliate
sponsors reward the referring Web sites 7- 15% commission on each reference
that leads to a sale.
This
commission inflates the price of the item or lowers company profits.
Internal
Factors: Information Technology Affects Costs
Site
development and maintenance:
Web
site development and maintenance is not cheap.
Development
of a “conservative” site = $10,000 -
$100,000, an “aggressive” site = $1 million or more.
Maintenance
= expensive, with hardware, software, and monthly Internet connection costs.
Customer
acquisition costs (CAC).
The
cost of acquiring new customers online is quite high,
The
average CAC for online retailers is $82.
How
many orders must a firm receive to recoup that cost, and at what price? BUT
customers are not nearly as brand loyal online as offline.
Internal
Factors: Information Technology Affects Costs
The Internet Puts Downward Pressure on
Prices:
Order
processing—self-service:
Customers
fill out their own order forms = no order entry personnel & paper processing.
Average
retail banking transaction costs $0.15 - $0.20 online versus $1.50 offline.
Just-in-time
inventory:
Electronic
data interchange (EDI) drives down costs by coordinating value-chain activities
& allows for just-in-time (JIT) delivery of parts and reduced inventories.
Some
online retailers and offline retailers do not even hold inventory but buy in
response to customer orders.
Overhead:
Online
storefronts lower overhead costs = no rent for retail space & staff .
Warehouses
can be located in areas with low rents, low wages, low taxes, and quick access
to shipping hubs.
Internal
Factors: Information Technology Affects Costs
Customer
service:
$15
- $20 in an offline call center versus $3 - $5 when customers help themselves
on the Internet.
Printing
and mailing:
No
mail distribution & printing costs for their product catalogs.
Once
the catalog is placed online, access carries little or no incremental costs.
The
same holds true for e-mail promotions.
Digital
product distribution costs:
Distribution
costs for digital products are extremely low in the Internet channel.
External
Factors Affecting Online Pricing: Market Structure
Economists recognize 4 types of markets:
Pure
competition:
Many
buyers and sellers trading in a uniform commodity ( corn ).
Product
differentiation, and marketing communication play little or no role.
Monopolistic
competition:
Many
buyers and sellers trade over a range of prices.
Sellers
can differentiate their offers to buyers.
Oligopolistic
competition:
A
few sellers sensitive to each other’s pricing and marketing strategies.
If
a company drops its price, buyers will
quickly switch to this supplier.
Pure
monopoly:
This
market consists of one seller whose prices are usually regulated by the
government.
External
Factors Affecting Online Pricing: Efficient Markets
Efficient markets:
Experience
perfect price competition.
Customers
have equal access to information about products, prices, and distribution.
Lower
prices, high price elasticity, frequent price changes, smaller price
changes, and narrow price dispersion.
Commodity
markets came close to being efficient until the government intervened with
controls.
The
Internet is close to an efficient markets but the behavior of consumers on the
Internet does not bear out all of the economists’ predictions.
External
Factors Affecting Online Pricing: Efficient Markets
Is The Net an Efficient Market?
The
Net present all symptoms of efficient markets,
Access
to information through corporate Web sites, shopping agents, and distribution
channels.
Products
sold exhibit lower prices, high price elasticity, frequent price changes, and
smaller price changes.
BUT
do these factors actually make the Net an efficient market?
Lower
costs can result in lower prices for consumers,
Technology
enables buyers to evaluate and demand appealing prices.
Research
shows that online prices for books and CDs are indeed lower by 9% to 16%.
Does
that mean that all prices online are lower?
No but many factors place a downward pressure on Internet prices,
contributing to efficiency.
Efficient
Markets
Shopping
agents (www.pricescan.com):
Facilitate
consumer searches for low prices by displaying the results in a comparative
format.
High
price elasticity:
Price
elasticity refers to the variability of purchase behavior with changes in
price.
Leisure
travel is very elastic: When the airlines engage in fare wars, consumers snap
up ticket inventories creating huge demand.
For
books and CDs, the online market is more elastic than the offline market.
Reverse
auctions:
Allow
buyers to name their price and have sellers try to match that price.
This
pits sellers against one another and usually drives prices down.
Efficient
Markets
Tax-free
zones:
Most
online retailing takes place across state lines,
Buyers
pay no sales taxes on purchases,
Reduce
total out-of-pocket expenditures by 5-8% per transaction.
Venture
capital:
Venture
capital/angel investors finance many Internet companies,
They
take a long-term view & are willing to sustain short-term losses (<5
years) = time to establish brand equity + grab market share,
No
profit-maximization pricing objective = can offer lower price,
BUT
changes are coming ( the dot-com crash +the 5-year time frames are over for
many early Net firms).
Efficient
Markets
Competition:
Fierce
and very visible.
Frequent
price changes (than the offline market) :
Online
suppliers want to attract price-sensitive consumers,
Vendors
alter their pricing to place higher on the results provided by shopping agents,
In
a computerized environment firms can offer volume discounts in smaller
increments,
Experimentation
is easy online, firms see how demand changes + adjust & change prices as
competition and other factors emerge.
Efficient
Markets
Lower
costs:
Result
in either higher profits or lower prices.
Smaller
price change increments:
Smallest
offline price change = $0.35 / online = $0.01,
Price-sensitive
consumers may respond to even a small price advantage,
Shopping
agents rank their results by price (even small advantage earn a higher
ranking),
It
is difficult to change prices offline = retailers wait until the need for a
price change is even greater.
Is
The Net an Inefficient Market?
The
Web does not act like an efficient market with respect to narrow price
dispersion:
Prices
tend to equalize in commodities markets,
Online
retailer branding and other benefits justify price differences in the minds of
customers.
Greater
spread was found between high/low prices online versus high/low prices offline
for the same items:33% for books and 25% for CDs,
The
online channel is still not completely mature = many buyers do not know about
or use shopping agents.
Related
to the way goods are priced online as well as delivery options, time-sensitive
shoppers, branding, differentiation, switching costs, and second-generation
shopping agents.
How
goods are priced online:
Offline
= fixed prices,
Online
= goods are available for a fixed, a dynamically updated, or an auction price,
PLUS,
shipping & special services make it difficult to compare products.
Is
The Net an Inefficient Market?
Delivery
options:
The
same product delivered under differing conditions (time and place) have
different value to the consumer.
A
product delivered to the door may have considerably more value for some
consumers than one that is bought at the store = Online grocery shopping.
Time-sensitive
shoppers:
Time-sensitive
shoppers may not wish to invest the time and energy required to track down the best
price (complexity of the sites).
Branding:
The
top Web sites get most of the traffic,
Consumers
show a preference for brand when using shopping agents even if that brand does
not offer the lowest price,
The
best-branded Web sites spend millions of dollars to attract customers: Amazon
spends 24% of revenues on promotion, but it can charge 7-12% more than bargain
online retailers.
Is
The Net an Inefficient Market?
Differentiation:
Strong
branding = perceived/real product differentiation + different pricing strategy.
Switching
costs:
Customers
face switching costs when they choose a different online retailer.
Some
customers are not willing to incur those costs and stick with a familiar online
retailer.
Why?
The customer loses access to a familiar interface.
In
the B2B market: it is more effective to build relationships with a limited
number of suppliers rather than offer all items out for bid.
Is
The Net an Inefficient Market?
Second-generation
shopping agents:
Guide
the consumer through the process of quantifying benefits + evaluating the value
equation.
For
benefits ranked high, customers may be willing to pay more.
BizRate
allows consumers to evaluate merchants based on ratings compiled from previous
customers.
Is
the Internet an efficient market? Not yet, BUT it has all the features to move
toward efficiency in the future.
Pricing
Strategies
Price
setting is full of contradictions:
Short
term: If the price is too low profits will suffer/ if it is too high sales
decline.
In
the long run: an initial low price that builds market share can create
economies of scale to lower costs + increase profits.
Information
technology has complicated pricing:
Sellers
can easily change prices according to each buyer’s previous behavior.
BUT
it is a steep learning curve.
Pricing
objectives produce very different results = a low price will build market share
at the expense of maximizing profit.
Buyer
value perceptions vary between rational and emotional, and not everyone reacts
the same way.
Firms
using multichannel delivery systems must consider the varying costs of each
channel and buyers’ differing value perceptions about purchasing on the
Internet versus the brick and mortar store.
Pricing
is a tricky business, guided by data, experience, and experimentation.
Fixed
Pricing
Fixed
pricing (also called menu pricing):
Sellers
set the price and buyers take it or leave it = same price for everyone.
This
is the model most brick-and-mortar retailers use.
Two
common fixed pricing strategies used online:
Price
leadership:
A
price leader = lowest-priced product entry + set the pace for other retailers.
To
implement this strategy, costs must be minimum.
Largest
producer = price leader because of economies of scale.
The
second-lowest-priced item also gain sales, especially if it offers advantages
over the price leader.
Fixed
Pricing
Two
common fixed pricing strategies used online:
Promotional
pricing:
Used
to encourage a first purchase, encourage repeat business, and close a sale.
Carry
an expiration date to create a sense of urgency.
Promotional
pricing on the Internet can be highly targeted through e-mail messages and
research shows high customer satisfaction with Internet purchases.
Dynamic
Pricing
The
strategy of offering different prices to different customers.
To
optimize inventory management,
To
segment customers by product use or other variables.
Airlines
have long used dynamic pricing software to price air travel.
Web-based
technology + database marketing make this pricing strategy much more practical
for companies to apply to segments of any size.
Online
music retailer CDNow offers lower prices on selected products to loyal
customers,
These
customers receive an e-mail message directing them to a special Web page to
view and buy these featured products.
With
the right technology, segments as small as one can be targeted with different
prices
Prices
can be changed daily or even hourly,
Depending
on changes in demand, supply, competition, costs, or other factors.
Dynamic
Pricing
XML
and other technologies make dynamic Web page serving possible.
Allows
database information to be consolidated in a recipe for a Web page.
Marketers
can update product databases instantly and continuously as new product features
are developed and as they decide on price adjustments.
Internet
users receive up-to-date price information on demand from product databases
(information change with the time and user).
Dynamic
Pricing
Dynamic
pricing can be initiated by the seller or the buyer.
2
types of dynamic pricing:
Segmented
pricing = the company sells a good/service at two or more
prices, based on segment differentiation rather than cost alone. Segmented
pricing is usually set by the seller.
Negotiation
=
the company negotiates prices with individual customers. Segmented pricing
involves a one-time price = may be different for different customers + may
change many times before buyers and sellers agree. Negotiation is more often
initiated by the buyer.
Segmented
Pricing
Uses
the Internet properties for mass customization, automatically devising pricing
based on order size and timing, demand and supply levels, and other preset
decision factors.
The
firm uses decision rules to set pricing levels for segments of customers
according to customer behavior.
Is
easier online at the individual level because sophisticated software permits
firms to set rules and make price changes.
Using
cookie files, online sellers recognize individuals and experiment with offers
and prices to motivate transactions: Presents customized recommendations to
each customer.
Online
firms can build loyalty programs, like frequent flyer programs, to offer
special prices to individuals who return and purchase often.
Segmented
Pricing
Effective
when the market is segmentable,
The
different prices reflect real differences in each segment's perceptions of the
product's value + show different degrees of demand.
Appropriate
when the costs of segmentation + segmented pricing do not exceed the extra
revenue obtained from the price difference.
The
firm’s segmented pricing must meet legal and regulatory guidelines.
The
firm must take care not to upset customers who learn they are getting different
prices than their neighbors.
E-marketers
employing segmentation must use customer accepted reasons = discounts to
new/loyal customers.
Geographic
Segment Pricing
A
company sets different prices when selling a product in different geographic
areas.
Seller
knows where the user resides because server logs register the user’s IP address
+ the top level domain name typically indicates country of residence.
Geographic
pricing can help a company better relate its pricing to country-by-country or
regional factors = competitive pressure, local costs, economic conditions,
legal or regulatory guidelines, and distribution opportunities.
The
manufacturer faces price escalation and must price to reflect the higher costs
of transportation, tariffs, and importer margins, among other costs involved in
selling in different locations.
Given
the Internet’s worldwide reach, marketers also may display a special Web page
to those coming in from markets it does not serve = This helps to build
goodwill for the firm’s brand.
Value
Segment Pricing
The
seller recognizes that not all customers provide equal value to the firm.
Pareto
Principle states that 80% of a firm’s business usually comes
from the top 20% of customers.
A+
customers:
A
small group that contribute disproportionately to the firm’s revenues and
profits.
The
most loyal customers who may become brand advocates to their friends and
acquaintances = The frequent flyers.
They
are also brand-loyal frequent customers who provide significant value to the
seller.
When
A+ or A customers appear at the Web site, they will be recognized and receive
special attention.
They
may not be price sensitive = they perceive that the brand/firm offers greater
benefits + has earned their loyalty.
Value
Segment Pricing
B
customers are price sensitive + use the product category more than do C
customers.
C
customers: large group + may be price shoppers or infrequent users of the
product category, not accounting for much of the seller’s revenue.
The
seller’s goal is to keep A customers brand loyal and to move all groups up to a
higher level of value.
Pricing
strategies can help.
Giving
high-value customers the first shot at discounts will reinforce their loyalty.
B
and C customers: might enjoy e-mail blasts with fixed prices so they can be
informed of the firm’s price +The seller can use this technique to build a
database for moving customers up in value.
Negotiated
Pricing
Through
negotiation the price is set more than once in a back and forth discussion.
Haggling
over price is common in many countries; but U.S. consumers have shied away from
such bargaining.
The
spectacular growth of online auctions is changing this.
Many
consumers enjoy the sport and community of an auction while others are just
looking for a good deal.
Auctions
in the B2B market are a very effective way to unload surplus inventory at a
price set by the market.
Bartering
Goods
or services are exchanged for other products rather than cash.
Users
may enjoy tax benefits, but otherwise this is not a particularly profitable
pricing strategy.
Consumers
exchanging/auctioning used items online can hurt sales of new products.
Module
7
Evaluating
performance and opportunities
Online
Expression
The
mass distribution of unsolicited electronic mail = Spam
Users
complain of unwanted intrusion into their affairs,
Information
given to individuals or entities for one purpose may be collected and sold for
mass distribution.
Regulation
needs to be approached with caution: It implicates freedom of expression.
Disagreement
between:
Those
who believe that participation in mass emails should be restricted to those who
voluntarily agree to receive mailing,
Those
who advocate an opt-out only approach.
Online
Expression
ISP:
Questions
about the liability of network owners for defamatory messages posted on its
bulletin boards or other public areas,
For
most courts like publishers, ISP’s are not normally susceptible to suit.
Regulations
for children’s content: use of filtering models have been considered.
The
Platform for Internet Content Selection Rules (PICS): allows the filtering of
sites which are deemed to be inappropriate for minors placing control into the
hands of parents and schools.
Emerging
Issues
A
number of issues have arisen which are particularly unique to the Internet at
its current stage of its development.
The
responses are requiring imagination & creativity.
Online
Governance and ICANN
Need:
A private, non-profit regulatory body which would be responsible for the
administration of the Internet name and address system.
Answer:
The Internet Corporation for Assigned Names and Numbers (ICANN).
Purpose:
The resolution of conflicts which surround the assignment and possession of
domains.
Today,
ICANN is comprised of a governing board which currently faces substantial
criticism for operating under secrecy and for failing to represent the broad
range of online users.
Many
questions remain concerning the ability of any private regulatory organization
to enforce its decisions within the online community.
Jurisdiction
Jurisdiction
is the legal term which describes the ability of a court or other authority to
gain control over a party.
Jurisdiction
is traditionally based upon physical presence, but within the online world,
commonality of physical location is never assured.
The
majority of cases decided within the United States have focused upon the
character and quality of contacts with the forum state, generally, the more
active the involvement, the more likely that jurisdiction will be conferred.
Jurisdiction
Virtual
Magistrate, mediation-oriented programs, have been
developed to resolve online disputes.
= Attempt to tailor their procedures
toward the special circumstances of the Internet:
Advocates
argue that their online orientation will encourage users to work out
difficulties within a non-confrontational framework,
Critics
voice concerns that online arbitration cannot adequately ensure enforcement or
recognition of their judgments.
Jurisdiction
International
disputes:
Goal:
achieve a level of international cooperation is through the mediation of
organizations.
The
WIPO Arbitration and Mediation Center exists to resolve commercial disputes
relating to intellectual property.
The
Model Law on Electronic Commerce by the United Nations Commission of
International Trade Law provides global
uniformity in digital commerce.
Fraud
The
use of deception and false claims to obtain profit is not unique to the
Internet.
The
technical nature of networked communication
The
average person is not in a position to understand exactly how information is
displayed, transferred or stored and this lack of knowledge provides
opportunities for novel deceptions.
E.g.
of abuse = Spoofing:
Use
of email or Web sites to impersonate individuals or corporations,
Used
to extract sensitive information by leading a user to believe that a request is
coming from a reputable source.
Fraud
The
psychology of digital environments. The media is full of stories concerning
technological advances and opportunities for profit.
Most
people are unable to differentiate genuinely worthwhile endeavors from those
presented by mere opportunists.
Many
investment opportunities make use of The Digital Revolution, often
promoting breakthrough technologies and applications.
Fraud
The
problem of consumer fraud is being addressed on several dimensions:
Federal
agencies (the FTC and the FBI) have increased their efforts to track and
prosecute fraudulent conduct,
State
agencies have begun to prosecute criminal activity within their borders.
Sanctions
= stipulated lifetime bans in the conduct of Internet commerce, civil judgments,
forfeiture of property and referrals for criminal prosecution.
The
establishment and prosecution of laws are necessary responses to the problem of
fraud.
Fraud
The
basis of fraud is usually incomplete or false information.
Ability
to evaluate online material is a primary importance.
Solutions
include:
Promotion
and adherence to codes of ethics are one means of inspiring consumer
confidence,
Encouragement
of general consumer education, Professional associations have particular
abilities to establish sites which outline and explain minimum standards and
consumer protections.
