Chapter 1:-
INTRODUCTION
How significant is Internet marketing to businesses? Today, the answer to this question varies dramatically for different products and markets. For companies such as electronics equipment manufacturer Cisco (www.cisco.com), the answer is ‗very significant‘ – Cisco now gains over 90% of its multi-billion dollar global revenue online. It also conducts many of its other business processes such as new product development and customer service online. Similarly, easy Jet (www.easyjet.com), the low-cost European airline gains 90% of its tickets sales online and aims to fulfil the majority of its customer service requests via the Internet. However, the picture is quite different for the manufacturers of high-involvement purchases such as cars or fast-moving consumer goods (FMCG) brands. Here the impact is less significant – the majority of their consumer sales still occur through traditional retail channels. However, the influence cannot be described as insignificant any longer since the Internet is becoming increasingly important in influencing purchase decisions - many new car purchasers will research their purchase online, so manufacturers need to invest in Internet marketing to persuade customers of the features and benefits of their brands. The FMCG manufacturer finds that consumers are spending an increasing proportion of their time on the Internet and less time using other media so the Internet has become an effective way of reaching its target markets. The Internet can be used to increase the frequency and depth of interactions with the brand, particularly for brand loyalists who are the advocates of these brands. For example, drinks brand Tango (www.tango.com) uses competitions and games on its web site to encourage interactions of the consumer with the brand. The media portrayal of the Internet often suggests that it is merely an alternative for traditional advertising or only of relevance for online purchases of books or CDs. In fact, the Internet can be readily applied to all aspects of marketing communications and can and will need to support the entire marketing process. The e-marketing imperative is also indicated by recent research in financial services, media and entertainment, consumer goods and retail organisations with a turnover of £25 million conducted for E-marketing (www.emarketing. com). This showed that online marketing has become a significant part of the marketing mix in many organisations. The organisations in the study were increasing their online marketing spending to an average of around 8% of total marketing budget. Eighty per cent of respondents had increased the amount they spend on online marketing during the last year and 75% expect to increase their spend again over the next year. This book covers all the different ways in which the Internet can be used to support the marketing process. In this introductory chapter we review how Internet marketing relates to the traditional concept of marketing. We also introduce basic concepts of Internet marketing, placing it in the context of e-commerce and e-business.
The Internet and the marketing concept
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Internet marketing, also referred to as i-marketing, web-marketing, online-marketing or eMarketing, is the marketing of products or services over the Internet. The Internet has brought media to a global audience. The interactive nature of Internet marketing in terms of providing instant responses and eliciting responses are the unique qualities of the medium. Internet marketing is sometimes considered to be broad in scope because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media. Management of digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing. Internet marketing ties together creative and technical aspects of the Internet, including: design, development, advertising, and sales. Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO), banner ads on specific websites, e-mail marketing, and Web 2.0 strategies. In 2008, The New York Times - working with comScore - published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found the potential for collecting data upward of 2,500 times on average per user per month. In this section, we introduce the marketing concept, and then consider its relationship to more recent concepts such as Internet marketing, e-commerce and e-business. The word marketing has two distinct meanings in modern management practice. It describes:
The range of specialist marketing functions carried out within many organisations. Such functions include market research, brand/product management, public relations and customer service. An approach or concept that can be used as the guiding philosophy for all functions and activities of an organisation. Such a philosophy encompasses all aspects of a business. Business strategy is guided by an organisation‘s market and competitor focus and everyone in an organisation should be required to have a customer focus in their job.
The modern marketing concept (Houston, 1986) unites these two meanings and stresses that marketing encompasses the range of organisational functions and processes that seek to determine the needs of target markets and deliver products and services to customers and other key stakeholders such as employees and financial institutions. Increasingly the importance of marketing is being recognised both as a vital function and as a guiding management philosophy within organisations. Marketing has to be seen as the essential focus of all activities within an organisation (Valentin, 1996). The marketing concept should lie at the heart of the organisation, and the actions of directors, managers and employees should be guided by its philosophy. Modern marketing requires organisations to be committed to a market/customer orientation (Jaworski and Kohli, 1993). All parts of the organisation should co-ordinate activities to ensure that customer needs are met efficiently, effectively and profitably. Marketing encompasses activities traditionally seen as the sole domain of accountants, production, human resources management (HRM) and information technology (IT). Many of these functions had little regard for customer considerations. Increasingly such functions are being reorientated, evidenced by the importance of initiatives such as Total Quality Management (TQM), Business Process Reengineering, Just in Time (JIT) and supply chain management. Individuals‘ functional roles are undergoing change, from being solely functional to having a greater emphasis on process. Individuals are therefore being encouraged to become part-time marketers. Processes have a significant impact on an organisation‘ s ability to service its customers‘ needs.
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The Internet can be applied by companies as an integral part of the modern marketing concept since:
It can be used to support the full range of organisational functions and processes that deliver products and services to customers and other key stakeholders. It is a powerful communications medium that can act as a ‗corporate glue‘ that integrates the different functional parts of the organisation. It facilitates information management, which is now increasingly recognised as a critical marketing support tool to strategy formulation and implementation. The future role of the Internet should form part of the vision of a company since its future impact will be significant to most businesses.
Without adequate information, organisations are at a disadvantage with respect to competitors and the external environment. Up-to-date, timely and accessible information about the industry, markets, new technology, competitors and customers is a critical factor in an organisation‘ s ability to plan and compete in an increasingly competitive marketplace.
Avoiding Internet marketing myopia Theodore Levitt, writing in the Harvard Business Review (Levitt, 1960), outlined the factors that underlie the demise of many organisations and at best seriously weaken their longer-term competitiveness. These factors still provide a timely reminder of traps that should be avoided when embarking on Internet marketing. 1. Wrongly defining which business they are in. 2. Focusing on: products (many web sites are still product-centric rather than customer-centric); production; technology (technology is only an enabler, not an objective); selling (the culture on the Internet is based on customers seeking information to make informed buying decisions rather than strong exhortations to buy); rather than:
3. 4. 5. 6.
customer needs (the need for market orientation is a critical aspect of web site design and Internet marketing strategy); and market opportunities (the Internet should not just be used as another channel, but new opportunities for adding value should be explored). Unwillingness to innovate and ‗creatively destruct‘ existing product/service lines. Short-sightedness in terms of strategic thinking. The lack of a strong and visionary CEO (Baker (1998) found that this was important to companies‘ using the Internet effectively). Giving marketing only ‗stepchild status‘ , behind finance, production and technology.
Any organisation that sees and hence defines its business in anything other than customer benefit terms has not taken the first step in achieving a market orientation. Any organisation that defines its business by what it produces is said to be suffering from ‗marketing myopia‘ . Such myopia results from a company having a short sighted and narrow view of the business that it is in. If Internet marketing is to become integrated and fully established as a strategic marketing management tool, then the focus of attention needs to move towards understanding its broader applications within the total marketing process rather than just using it as a communication and selling tool. This is not to detract from the capability of the Internet to communicate and sell, but recognises that this is only one important aspect of the marketing process to which the Internet can contribute. The danger for those currently considering developing Internet technology is that the
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focus of such involvement will be too narrow and the true power of the Internet and its potential contribution to the marketing process will be missed. One of the elements of developing an Internet marketing strategy is deciding which marketing functions can be assisted by the Internet. There is a tendency amongst companies first using the Internet to restrict applications to promotion and selling rather than a relationship building and service delivery tool. In later chapters in this book, we explore the full range of marketing applications of the Internet.
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Internet marketing defined Internet marketing The application of the Internet and related digital technologies in conjunction with traditional communications to achieve marketing objectives. Internet marketing or Internet-based marketing can be defined as the use of the Internet and related digital technologies to achieve marketing objectives and support the modern marketing concept. These technologies include the Internet media and other digital media such as wireless mobile media, cable and satellite. In practice, Internet marketing will include the use of a company web site in conjunction with online promotional techniques such as search engines, banner advertising, direct e-mail and links or services from other web sites to acquire new customers and provide services to existing customers that help develop the customer relationship. However, for Internet marketing to be successful there is a necessity of integration with traditional media such as Print and TV
E-marketing defined Achieving marketing objectives through use of electronic communications technology 5
The term ‗Internet marketing‘ tends to refer to an external perspective of how the Internet can be used in conjunction with traditional media to acquire and deliver services to customers. An alternative term is e-marketing or electronic marketing (see for example McDonald and Wilson, 1999 and Smith and Chaffey, 2001) that can be considered to have a broader scope since this refers to the Internet, interactive digital TV and mobile marketing together with other technology approaches such as database marketing and electronic customer relationship management (CRM) to achieve marketing objectives. It has both an internal and external perspective considering how internal and external marketing processes and communications can be improved through information and communications technology. As with many terms with the ‗e‘ prefix, we need to return to an original definition of the topic to more fully understand what e-marketing involves. The definition of marketing by the Chartered Institute of Marketing (www.cim.co.uk) is: Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitability This definition emphasises the focus of marketing on the customer, while at the same time implying a need to link to other business operations to achieve this profitability. Smith and Chaffey (2001) note that Internet technology can be used to support these aims as follows:
Identifying –the Internet be used for marketing research to find out customers needs and wants. Anticipating – the Internet provides an additional channel by which customers can access information and make purchases – understanding this demand is key to governing resource allocation to e-marketing. Satisfying – a key success factor in e-marketing is achieving customer satisfaction through the electronic channel, this raises issues such as is the site easy to use, does it perform adequately, what is the standard of associated customer service and how are physical products dispatched?
A broader definition of marketing has been developed by Dibb, Simkin, Pride and Ferrell (Dibb et al., 2000): Marketing consists of individual and organisational activities that facilitate and expedite satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas. This definition is useful since it highlights different marketing activities necessary to achieve the ‗exchange relationship‘ , namely product development, pricing, promotion and distribution. Since the Internet has now become a primary tool for the delivery of information, businesses of all sizes are using online marketing to increase awareness of their company's goods and services.
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CHAPTER 2:-
What is Online Marketing? In its simplest form, the term online marketing refers to using the power of Internet advertising to generate a response from your audience. Also known as Internet marketing or web marketing, online marketing is used by companies selling goods and services directly to consumers as well as those who operate on a business-to-business model. Common areas of interest within the field of online marketing include:
Affiliate Marketing: In affiliate marketing, a business recruits associates to promote the company's products or services. The associates receive a commission or other similar rewards for every sale, visitor, subscriber, or customer they bring to the company. Amazon.com Associates Central is an example of an affiliate marketing program that Amazon.com uses to encourage private website owners to bring traffic to its site.
Display Advertising: Display advertising involves the use of web banners or banner ads placed on a third-party website to drive traffic to a company's own website and increase product awareness.
Email Marketing: Companies that use email marketing send promotional emails directly to customers. However, it can often be hard to distinguish between spam and legitimate email marketing messages.
Interactive Advertising: Interactive advertising involves the use of animations and other graphic techniques to create ads that engage the viewer and invite participation.
Search Engine Marketing: Search Engine Optimization (SEO), paid placement, and paid inclusion are search engine marketing techniques that companies can use to increase their visibility in the search engine page results from Google and its competitors.
Viral Marketing: Viral marketing is a technique is which companies encourage customers to pass along information about their products or services. Company websites that let visitors email interactive games or funny video clips to their friends are an example of a viral marketing effort.
Online marketing, regardless of the exact method a company chooses to use, offers several benefits. It's convenient, affordable, and provides the opportunity for companies to track results as a campaign progresses. In addition, Internet marketing allows even the smallest of companies to compete in a global marketplace. Online marketing is often related to public relations, customer service, sales, and information management. However, it is important to remember that these fields can be considered separate specialties as well. Glossary of
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Marketing Terms If you're interested in learning more about online marketing, there are many websites that offer glossaries of common marketing terms.
Marketing Terms is a comprehensive website for anyone interested in online marketing. This site features a dictionary with cross-referenced definitions and basic information for beginners, as well as links to in-depth articles that provide the information a marketing professional will need to succeed in today's business environment. For your convenience, this website also includes a printable list of commonly-used Internet marketing acronyms and abbreviations.
Marketing Apprentice offers an easy-to-understand dictionary of terms related to the online marketing industry with a number of cross-references and related links. To use this dictionary, you need to scroll through an alphabetical listing of links and click on the term you wish to learn more about.
Lazworld, an Internet marketing services provider, has prepared a brief glossary of common marketing terms website owners need to know. There is no search engine available, but the entire document can easily be printed for use as a desk reference.
SEO Book is a dictionary devoted exclusively to the search engine aspect of online marketing. Some of the definitions can be a bit technical for the marketing novice, but the information is extremely useful for anyone who is determined to create a successful website.
The American Marketing Association has a dictionary that contains definitions for several online marketing terms as well as general marketing information.
Business models Internet marketing is associated with several business models:
e-commerce – this is where goods are sold directly to consumers (B2C) or businesses (B2B) or consumer to consumer(c2c)
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lead-based websites – an organization that generates value by acquiring sales leads from its website
affiliate marketing – the process in which a product or service developed by one entity (ecommerce business, single person, or a combination) is sold by other active sellers for a share of profits. The entity of the product may provide some marketing material (sales letter, affiliate link, tracking facility) However, the vast majority of affiliate marketing relationships come from e-commerce businesses that offer affiliate programs.
local internet marketing – through which a small company utilizes the Internet to find and nurture relationships, which are to be used for real-world advantage. Local internet marketing uses tools such as social media marketing, local directory listing and targeted online sales promotions.
blackhat marketing – this is a form of internet marketing which employs deceptive, abusive, or less than truthful methods to drive web traffic to a website or affiliate marketing offer. This method sometimes includes spam, cloaking within search engine result pages, or routing users to pages they didn't initially request.
One-to-one approach The targeted user is typically browsing the Internet alone therefore the marketing messages can reach them personally. This approach is used in search marketing, where the advertisements are based on search engine keywords entered by the users.And now with the advent of Web 2.0 tools, many users can interconnect as "peers."
Appeal to specific interests Internet marketing and geo marketing places an emphasis on marketing that appeals to a specific behaviour or interest, rather than reaching out to a broadly defined demographic "On- and Off-line" marketers typically segment their markets according to age group, gender, geography, and other general factors. Marketers have the luxury of targeting by activity and geo location. For example, a kayak company can post advertisements on kayaking and canoeing websites with the full knowledge that the audience has a related interest. Internet marketing differs from magazine advertisements, where the goal is to appeal to the projected demographic of the periodical, but rather the advertiser has knowledge of the target audience—people who engage in certain activities (e.g., uploading pictures, contributing to blogs) so the company does not rely on the expectation that a certain group of people will be interested in its new product or service.
Geo-targeting Geo targeting (in internet marketing) and geo marketing are the methods of determining the geo location (the physical location) of a website visitor with geo location software, and delivering different content to that visitor based on his or her location, such as country, region/state, city, metro code/zip code, organization, Internet Protocol (IP) address, ISP or other criteria.
Advantages Internet marketing is relatively inexpensive when compared to the ratio of cost against the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and purchase products and services at their own convenience. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly. The strategy and overall 9
effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis. Internet marketers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods: pay per impression, pay per click, pay per play, or pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time. Because exposure, response, and overall efficiency of Internet media are easier to track than traditional off-line media—through the use of web analytics for instance—Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns. So finally Internet Marketing refers the online marketing which are related to email and wireless marketing method.
Limitations From the buyer's perspective, the inability of shoppers to touch, smell, taste or "try on" tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services.
Security concerns Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not trust that their personal information will remain private. Some companies that purchase customer information offer the option for individuals to have their information removed from the database, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs. Another major security concern that consumers have with e-commerce merchants is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g., Amazon.com, eBay, Overstock.com), and by leveraging merchant/feedback rating systems and e-commerce bonding solutions. All of these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services. Additionally, the major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have also provided back-end buyer protection systems to address problems if they actually do occur.
Usage trends Online advertising techniques have dramatically been affected by technological advancements in the telecommunications industry. Many firms are embracing a paradigm that is shifting the focus of advertising methodology from traditional text and image advertisement 10
creative‘s to rich multimedia experiences such as those containing more updated technology like HTML, JavaScript, and Adobe Flash. As a result, advertisers can more effectively engage and connect their audience with their campaigns which seek to shape consumer attitudes and feelings towards specific products and services. The paradigm shift from dialup to high speed internet has fuelled these changes. In a national survey between November 30, 2009 and December 27, 2009, the Pew Research Centre found that 74% of American adults (ages 18 and older) use the Internet. The same study found that 60% of American adults use broadband connections at home. 55% of American adults connect to the Internet through a wireless network like a public/private access point, a WiMax network, or a cellular 3G/4G network through a mobile cellular device.
Effects on industries The number of banks offering the ability to perform banking tasks over the internet has also increased. Online banking appeals to customers because it is often faster and considered more convenient than visiting bank branches. Currently over 150 million U.S. adults now bank online, with increasing Internet connection speed being the primary reason for fast growth in the online banking industry. Of those individuals who use the Internet, 44 percent now perform banking activities over the Internet. Internet auctions have become a multi-billion dollar business. Unique items that could only previously be found at flea markets are now being sold on Internet auction websites such as eBay. Specialized e-stores sell an almost endless amount of items ranging from antiques, movie props, clothing, gadgets and much more. As the premier online reselling platform, eBay is often used as a price-basis for specialized items. Buyers and sellers often look at prices on the website before going to flea markets; the price shown on eBay often becomes the item's selling price. It is increasingly common for flea market vendors to place a targeted advertisement on the Internet for each item they are selling online, all while running their business out of their homes. In addition to the major effect internet marketing has had on the technology industry, the effect on the advertising industry itself has been profound. In just a few years, online advertising has grown to be worth tens of billions of dollars annually. PricewaterhouseCoopers reported that US$16.9 billion was spent on Online marketing in the U.S. in 2006. This has had a growing impact on the electoral process. In 2008 candidates for President heavily utilized Internet marketing strategies to reach constituents. During the 2007 primaries candidates added, on average, over 500 social network supporters per day to help spread their message. President Barack Obama raised over US$1 million in a single day during his extensive Democratic candidacy campaign, largely due to online donors. There are several industries that have heavily invested in and benefited from internet marketing and online advertising. While some of these were originally brick and mortar businesses such a publishing, music, automotive or gambling, others have srung, up as purely online businesses, such as digital design and media, blogging or internet service hosting.
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CHAPTER 3
E-commerce and e-business defined Electronic commerce (E-commerce) All financial and informational electronically mediated exchanges between an organisation and its external stakeholders, The terms e-commerce and e-business are often used in a similar context to Internet marketing, but what are the differences between these terms and do the finer distinctions between them matter to the practitioner? In fact, the differences are significant and do matter, since managers within an organisation require a consistent understanding of the opportunities to enable their organisation to have a cohesive strategy to best utilise new technology. Electronic commerce (E-commerce) is often thought to simply refer to buying and selling using the Internet; people immediately think of consumer retail purchases from companies such as Amazon. However, e-commerce involves much more than electronically mediated financial transactions between organisations and customers. Many commentators now refer to e-commerce as both financial and informational electronically mediated transactions between an organization and any third-party it deals with (Chaffey, 2002). By this definition, nonfinancial transactions such as customer enquiries and support are also considered to be part of e-commerce. Kalakota and Whinston (1997) refer to a range of different perspectives for ecommerce: 1. A communications perspective – the delivery of information, products/services or payment by electronic means. 2. A business process perspective – the application of technology towards the automation of business transactions and workflows. 3. A service perspective – enabling cost cutting at the same time as increasing the speed and quality of service delivery. 4. An online perspective – the buying and selling of products and information online. Zwass (1998) uses a broad definition of e-commerce noting the significance of information transfer. He refers to it as: ‗the sharing of business information, maintaining business relationships, and conducting business transactions by means of telecommunications networks‘. The UK government also uses a broad definition: ‗E-commerce is the exchange of information across electronic networks , at any stage in the supply chain, whether within an organisation, between businesses, between businesses and consumers, or between the public and private sector, whether paid or unpaid‘ . Ecommerce@ its.best.uk 1999. All these definitions imply that electronic commerce is not solely restricted to the actual buying and selling of products, but also pre-sale and post-sales activities across the supply chain. When evaluating the impact of e-commerce on an organisation‘ s marketing, it is instructive to identify the role of buy-side and sell-side e-commerce transactions. Sell-side e-commerce refers to transactions involved with selling products to an organisation‘ s customers. Internet marketing is used directly to support sell-side e-commerce. Buy-side ecommerce refers to business-to-business transactions to procure resources needed by an organisation from its suppliers. This is typically the responsibility of those in the operational and procurement functions of an organization. Remember 12
though, that each e-commerce transaction can be considered from two perspectives: sell-side from the perspective of the selling organisation and buy-side from the perspective of the buying organisation. So for organizational marketing we need to understand the drivers and barriers to buy-side ecommerce in order to accommodate the needs of organizational buyers. For example, marketers from RS Components (www.rswww.com) promote its sell-side e-commerce service by hosting seminars for buyers within the purchasing department of its customers that explain the cost-savings available through e-commerce. Sell-side e-commerce E-commerce transactions between a supplier organisation and its customers. Buy-side e-commerce E-commerce transactions between a purchasing organisation and its suppliers.
E-business defined All electronically mediated information exchanges, both within an organisation and with external stakeholders supporting the range of business processes. Let us start from the definition by IBM (www.ibm.com/e-business), who was one of the first suppliers to coin the term: e-business (e‘ biz‘ nis) The transformation of key business processes through the use of Internet technologies. The key business processes referred to in the IBM definition are the organisational processes or units. They include research and development, marketing, manufacturing and inbound and outbound logistics. Complete activity 1.1 to gain an appreciation of the type of processes involved. The buy-side e-commerce processes with suppliers and the sell-side e-commerce processes involving exchanges with distributors and customers can also be considered to be key businesses processes. when a business has fully integrated information and communications technologies (ICTs) into its operations, potentially redesigning its business processes around ICT or completely reinventing its business model… e-business, is understood to be the integration of all these activities with the internal processes of a business through ICT. DTI (2000).
Business or consumer model It is now commonplace to describe Internet marketing opportunities in terms of whether an organization is transacting with consumers (business-to-consumer (B2C) or other businesses (business-to-business (B2B)). those where consumers transact directly with other consumers (C2C) and where initiate trading with companies (C2B). Note that the C2C and C2B monikers are less widely used (e.g. The Economist, 2000), but they do highlight significant differences between Internet-based commerce and earlier forms of commerce. Consumer-to-consumer interactions were relatively rare, but are now very common in the form of customer support and feedback – the community components of sites and online auctions. Indeed, Hoffman and Novak (1996) suggest that C2C interactions are a key characteristic of the Internet that is important for companies to take into account C2C interactions as is shown by activity 1.2. It should be noted before we leave C2C and C2B interactions that although it is useful to identify these separately, both types of site are set up by intermediaries businesses, so they can be considered to be part of B2C.
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Business-to-consumer (B2C) Commercial transactions are between an organisation and consumers. Business-to-business (B2B) Commercial transactions are between an organisation and other organisations (Interorganisational marketing) Consumer-to-consumer (C2C) Informational or financial transactions are between consumers, but usually mediated through a business site. Consumer-to-business (C2B) Consumers approach the business with an offer.
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CHAPTER 4 What benefits does the Internet provide for the marketer? Case study 1.1 highlights the key reason why many companies are seeking to harness the Internet. The reason is an additional source of revenue made possible by an alternative marketing and distribution channel. The marketing opportunities of using the Internet can be appreciated by applying the strategic marketing grid (Ansoff, 1957) for exploring opportunities for new markets and products (Figure 1-5). The Internet can potentially be used to achieve each of the four strategic directions as follows: 1. Market penetration. The Internet can be used to sell more existing products into existing markets. This can be achieved by using the power of the Internet for advertising products to increase awareness of products and the profile of a company amongst potential customers in an existing market. This is a relatively conservative use of the Internet. 2. Market development. Here the Internet is used to sell into new markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customers‘ country. This is a relatively conservative use of the Internet, but it does require the overcoming of the barriers to becoming an exporter or operating in a greater number of countries. Case study 1.1 is an example of an organization using the Internet in this way. 3. Product development. New products or services are developed which can be delivered by the Internet. These are typically information products such as market reports which can be purchased using electronic commerce. This is innovative use of the Internet. 4. Diversification. In this sector, new products are developed which are sold into new markets. DTI (2000) has identified different types of drivers or benefits why companies adopt ecommerce. The main drivers for sell-side e-commerce are:
Cost/efficiency drivers o Increasing speed with which goods can be despatched o Reduced sales costs o Reduced operating costs Competitiveness drivers o Customer demand o Improving the range and quality of services offered o Avoid losing market share to businesses already using e-commerce
The Internet provides Guinness with the opportunity to provide non-core merchandising activity at a relatively low cost. The lure of new sales and the threat of market share erosion has driven many companies on to the Internet, but there are many other benefits of establishing an Internet presence. Consider the example of the parcel courier companies. These companies now provide a range of customer services over the Internet which were traditionally delivered by telephone operators, thus reducing operating costs. In such situations, the online services may give better 24 hour, 7 days a week, 365 days of the year customer service if measured by convenience, but some customers will want the option of the personal touch, and phone services must be provided for this type of customer. Many companies will also reduce the costs of the printing and distribution of promotional material, price lists and other marketing communications.
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Using the Internet for new markets and products For each of the following companies identify which strategy the company has adopted relative to Figure 1-5, Market and product strategic grid. Explain how the new markets or products are exploited. 1. The purchase by the book retailer WH Smith of the Internet bookshop (www.bookshop.co.uk) in 1998 for £9 million. 2. The PC seller Dell Computer (www.dell.com), which now gains over 50% of its revenue from the web site. 3. The software company Microsoft, launched a range of new sites to help consumers purchase cars, holidays, shares and other items. 4. A UK company such as HR Johnson (www.johnson-tiles.com), which is selling tiles to international distributors and has created an extranet to obtain orders over the Internet. In addition to increased sales and reduced costs, the Internet can be used to advantage in all of the marketing functions, for example:
Sales. Achieved through increasing awareness of brands and products, supporting buying decisions and enabling online purchase. Marketing communications. The use of the web site for the range of marketing communication. Customer service. Supplementing phone operators with information available online and other techniques. Public relations. The Internet can be used as a new channel for public relations (PR) and provides the opportunity to publish the latest news on products, markets and people. Marketing research. Through search engines and e-mail alert services, the Internet enables more efficient techniques for finding a range of market information. It also enables new methods for collecting primary research online through focus groups and online questionnaires.
The Internet also changes the way in which companies do business with their trading partners as seen in the section on ‗industry restructuring‘ later in this chapter. To conclude this section, the benefits of an Internet presence can be summarised using the ‗6Cs‘ of, for example, Bocij et al. (1999): 1. Cost reduction. Achieved through reducing the need for sales and marketing enquiries to be handled by telephone operators and the reduced need for printing and distributing marketing communications material, which is instead published on the web site. 2. Capability. The Internet provides new opportunities for new products and services and for exploiting new markets. 3. Competitive advantage. If a company introduces new capabilities before its competitors, then it will achieve an advantage until its competitors have the same capability. For example, customers who transferred to Federal Express because of its new Internet services are likely to be less disposed to revert to an existing courier since they are ‗locked in‘ to using the particular tools provided by Federal Express. 4. Communications improvement. These include improved communications with customers, staff, suppliers and distributors. 5. Control. The Internet and intranets may provide better marketing research through tracking of customer behaviour and the way in which staff deliver services.
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6. Customer service improvement. Provided by interactive queries of databases containing, for example, stock availability or customer service questions. \
How do Internet marketing communications differ from traditional marketing communications? Internet marketing differs from conventional marketing communications because of the digital medium used for communications. The Internet and other digital media such as digital television, satellite and mobile phones create new forms and models for information exchange. A useful summary of the differences between these new media and traditional media has been developed by McDonald and Wilson (1999) which they describe as the ‘6Is of the e-marketing mix‘ . Note that these can be used as a strategic analysis tool, but they are not used in this context here. The 6Is are useful since they highlight factors that apply to practical aspects of Internet marketing such as personalisation, direct response and marketing research, but also strategic issues of industry restructuring and integrated channel communications. By considering each of these facets of the new media, marketing managers can develop marketing plans that accommodate the characteristics of the new media. This presentation of the ‗6Is‘ , is an interpretation of these factors using new examples and diagrams to illustrate these concepts.
1. Interactivity Deighton (1996) was one of the first authors to summarise the key characteristics of the Internet. He identifies the following characteristics inherent in a digital medium (Deighton, 1996):
the customer initiates contact; the customer is seeking information (pull); it is a high intensity medium – the marketer will have 100 per cent of the individual‘ s attention when he or she is viewing a web site; a company can gather and store the response of the individual; individual needs of the customer can be addressed and taken into account in future dialogues.
how traditional media are predominantly push media where the marketing message is broadcast from company to customer and other stakeholders. During this process, there is limited interaction with the customer, although interaction is encouraged in some cases such as the direct response advert or mail-order campaign. On the Internet, it is usually a customer who initiates contact and is seeking information on a web site. In other words it is a ‗pull‘ mechanism unless email is used (this can be considered as a push technique). How the Internet should be used to encourage two-way communication, these may be extensions of the direct-response approach. For example, FMCG suppliers such as Nestle (www.nescafe.co.uk) use their web site as a method of generating interaction by providing incentives such as competitions and sales promotions to encourage the customer to respond with their names, addresses and profile information such as age and sex. Hoffman and Novak (1997) believe that this change is significant enough to represent a new model for marketing or a new marketing paradigm. They suggest that the facilities of the Internet including the web represent a computer mediated environment in which the interactions are not between the sender and receiver of information, but with the medium itself. They say: ‗consumers can interact with the medium, firms can provide content to the medium, and in the most radical departure from traditional marketing environments, consumers can provide commercially-oriented content to the media‘ . The content customers can provide may be directly commercial such as auctioning of their possessions such as via eBay (www.ebay.com) or could include comments on companies and products submitted via a newsgroup. 17
2. Intelligence The Internet can be used as a relatively low cost method of collecting marketing research, particularly about customer perceptions of products and services. In the competitions referred to above Nescafe are able to profile their customers on the basis of the information received in questionnaires. The Internet can be used to create two-way feedback which does not usually occur in other media. Financial services provider Egg (www.egg.com) collects information about their online service levels through a questionnaire that is continuously available in the customer service part of their site. What is significant is that the company responds via the web site to the main concerns from customer; if the length of time it takes to reply to customer service e-mails is seen as a problem it will explain what the organisation is trying to do to resolve this problem. A wealth of marketing research information is also available from the web site itself, since every time a user clicks on a link this is recorded in a transaction log file summarising what information on the site the customer is interested in. Since these log files quickly grow to be many thousands of lines long, analysis software tools are needed to summarise the information contained within them. Log file analysers, of which Web trends (www.webtrends.com) is the most widely used, will highlight which type of products or promotions customers are responding to and how patterns vary through time. This enables companies to respond in real time to buyer behaviour. UK e-tailor Jungle.com uses this technique to change the offers on its home page if customers are not responding to a special offer.
3. Individualisation Another important feature of the interactive marketing communications referred to above is that they can be tailored to the individual unlike traditional media where the same message tends to be broadcast to everyone. The process of tailoring is also referred to as personalisation and is an important aspect of achieving customer relationship management online. Personalisation is often achieved through extranets which are set up with key accounts to manage the buying and after-sales processes. Dell (www.dell.com/premierpages) has set up ‗Premier Pages‘ for key accounts such as the Abbey National where special offers and bespoke customer support are delivered. Another example of personalisation is that achieved by business-to-business e-tailer RS Components (www.rswww.com). Every customer who accesses their system is profiled according to their area of product interest and information describing their role in the buying unit. When they next visit the site information will be displayed relevant to their product interest, for example office products and promotions if this is what was selected. This is an example of what is known as mass customisation where generic customer information is supplied for particular segments i.e. the information is not unique to individuals, but to those with a common interest. The online booksellers such as Amazon (www.amazon.co.uk) use this approach to communicate new books to groups of customers. Gardeners for instance, who have previously purchased a gardening book, will receive a standard e-mail advertising the latest gardening tome. This is again mass customisation. Personalisation Delivering individualised content through web pages or e-mail. Mass customisation Delivering customised content to groups of users through web pages or e-mail.
4. Integration The Internet provides further scope for integrated marketing communications. How it is just one of many different media channels (these channels are also offered by intermediaries). When assessing the success of a web site, the role of the Internet in communicating with customers and other partners can best be considered from two perspectives. First organisation to customer 18
direction, how does the Internet complement other channels in communication of proposition for the company‘ s products and services to new and existing customers with a view to generating new leads and retaining existing customers? Second customer to organisation, how can the Internet complement other channels to deliver customer service to these customers? Many companies are now considering how they integrate e-mail response and web-site call-back into their existing callcentre or customer service operation. This may require a substantial investment in training and new software. Some practical examples of how the Internet can be used as an integrated communications tool are as follows:
The Internet can be used as a direct response tool enabling customers to respond to offers and promotions publicised in other media. The web site can have a direct response or call-back facility built into it. The Automobile Association have a feature where a customer service representative will contact a customer by phone when the customer fills in their name, phone number and a suitable time to ring. The Internet can be used to support the buying decision even if the purchase does not occur via the web site. For example, Dell has a prominent web-specific phone number on their web site that encourages customers to ring a representative in the call-centre to place their order. This has the benefits that Dell are less likely to lose the business of customers who are anxious about the security of online ordering and Dell can track sales that result partly from the web site according to the number of callers on this line. Considering how a customer changes from one channel to another during the buying process is referred to as mixed-mode buying. It is a key aspect of devising online marketing communications since the customer should be supported in changing from one channel to another. Customer information delivered on the web site must be integrated with other databases of customer and order information such as those accessed via staff in the call-centre to provide what Seybold (1999) calls a ‗360 degree view of the customer‘ . The Internet can be used to support customer service. For example Easy Jet (www.easyjet.com), who receive over half their orders electronically, encourage users to check a list of frequently asked questions (FAQ) compiled from previous customer enquiries before contacting customer support via phone.
Mixed-mode buying The process by which customer changes between online and offline channels during the buying Process.
5. Industry restructuring Disintermediation and reintemediation are key concepts of industry restructuring that should be considered by any company developing an e-marketing strategy. For the marketer defining their companies communications strategy it becomes very important to consider a company‘s representation on these intermediary sites by answering questions such as ‗which intermediaries should we be represented on?‘ and ‗how do our offerings compare to those of competitors in terms of features, benefits and price?‘ Disintermediation The removal of intermediaries such as distributors or brokers that formerly linked a company to its customers Reinter mediation The creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation
6. Independence of location Electronic media also introduce the possibility to increase the reach of company communications to the global market. This gives opportunities to sell into international markets that 19
may not have been previously possible. Scott Bader (www.scottbader.com), a business-to-business supplier of polymers and chemicals for the paints and coatings industry, can now target countries beyond the 40 or so it has traditionally sold to via a network of local agents and franchises. The Internet makes it possible to sell to a country without a local sales or customer service force (although this may still be necessary for some products). In such situations and with the restructuring in conjunction with disintermediation and reinter mediation, strategists also need to carefully consider channel conflicts that may arise. If a customer is buying direct from a company in another country rather than via the agent, this will marginalize the business of the local agent who may want some recompense for sales efforts or may look to partner with competitors. Kiani (1998) has also presented differences between the old and new media, which are shown in Table 1.3. Annotations to the differences between the old and new media have been added to the table.
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CHAPTER 5 Online Marketing Strategies As we discovered in my white papers, SEO SEM in a Nutshell and How to Create a Search Engine Friendly Site, search engines exist to help manage and organize massive amounts of information accessible over the Internet. If I had to come up with a successful formula to launch an online marketing campaign and ignite my website performance, it would look something like this . .
1. On-page optimization 2. Site submission 3. Pay-per-click campaign 4. Social networking initiative 5. Third party content management 6. Social bookmarking 7. Web analytics
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(1.) On-page Optimization 1. Ensure that your pages are index able 2. Ensure that Google™ knows about your site 3. Ensure that crawlers can crawl your site and robots and index the site 4. Brainstorm the keywords that your clients would most likely Google™ 5. Develop a one-line mantra and short 30 second elevator pitch 6. Ensure the meta tags on site reflect the keywords, mantra and pitch (2.) Site Submission Submit site to the following directories and websites: 1. www.Business.com 2. www.BOTW.org 3. www.DMOZ.org 4. www.Google.com 5. www.Yahoo.com 6. www.Ask.com 7. www.MSN.com 8. www.Netscape.com 9. www.Live.com (3.) Pay-Per-Click Campaign 1. Establish https://adwords.google.com account 2. Define monthly budget 3. Define keywords & target locations 4. Define marketing copy and call to action 5. Test various marketing copy alternatives 6. Optimize campaign for efficiency, performance, ranking 7. Integrate AdWords account with Analytics account for traceability 8. Monitor and adjust campaign based on performance expectations (4.) Social Networking Initiatives 1. Establish accounts on the following social networking sites: a. www.LinkedIn.com b. www.FaceBook.com c. www.YouTube.com d. www.MySpace.com e. www.Flickr.com
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f. www.Amazon.com 2. Create consistent profile using defined keywords 3. Link accounts back to primary site to build inbound links (5.) 3rd Party CMS 1. Establish accounts on the following blog sites: a. www.Wordpress.com b. www.Blogger.com 2. Create about page based on mantra, elevator pitch, product/service offerings and descriptions. 3. Provide regular (minimum of one article per week per blog), unique, relevant content, tagged and optimized for lead generation and conversion. 4. Include social book marking tiles, links to professional social networking profiles, and references to network of resources, friends and primary web site. (6.) Social Bookmarking 1. Establish accounts on the following blog sites: a. www.Technorati.com b. www.Del.icio.us c. www.Digg.com 2. Drop social bookmarking tiles on all sites within the network 3. Actively visit each page of each website in the network and bookmark (7.) Web Analytics 1. Ensure that http://www.google.com/analytics/ is effective on site 2. Determine website visitors call to action 3. Set up conversion goals to track web site visitor calls to action 4. Ensure connectivity between Google™ Ad words and Google™ Analytics 5. Produce, monitor, and disseminate analytics weekly/monthly reports
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Marketing your online store involves more than just registering your Web site with a couple of search engines and waiting for the world to beat a path to your door.
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As the number of shoppers on the Internet has grown, so too has the number of Web sites and land-based businesses clamouring for a piece of the multi-trillion-dollar e-commerce pie. As many Internet companies have discovered, even with a multi-million dollar marketing campaign, it‘s difficult to get the attention of Internet users – even for just a split second. After all, Internet users are bombarded with so many advertisements every day and see so many Web sites, it‘s hard for any one firm to stand out. One of the most difficult jobs you‘ll have as an e-commerce merchant is figuring out what blend of offline and online marketing techniques to use to promote your Web site. If you‘re a small business, that challenge is even greater on a tight budget. The right marketing mix depends on many factors, including the types of products you are selling, the types of people you are trying to target, and, of course, your marketing budget. In this guide, we‘ll review a variety of different techniques for raising the profile of your online store and attracting shoppers to your Web site. Marketing your Web site is not an easy task, nor is it a short one – you‘ll need to work hard and work continuously to make sure that your online store doesn‘t get lost among the billions of pages of information on the Web.
(1) Know Your Audience! The key to successful marketing is very simple: know your audience. Before you spend any time or money on marketing, you need to know who your target market is. What types of customers are most likely to buy the types of products you are selling? For example, males or females? What age bracket? What income bracket? Are you trying to reach people with certain interests or skills? Once you know the profile of your typical customer, you need to find ways of reaching customers with that demographic profile. This may involve online advertising, offline advertising, or a combination of the two. But don‘t even begin to think about spending money on marketing until you‘ve spent time thinking about who you are trying to reach. You may even need to do some market research to uncover this information. We can‘t emphasize this step enough. Your marketing efforts won‘t be successful unless you are spending your marketing dollars in the right places.
(2) Your Brand Name One of the most important marketing assets that you have is the name of your online store. Give it careful consideration. You should pick a name that‘s easy to remember yet distinct from other similar names on the Internet. Closely related to the issue of picking a name is choosing a suitable domain name. The domain name is the part of your Web site address that appears after ―www.‖ For example, the domain name for the Office Depot is officedepot.com and the domain name for Eddie Bauer is eddiebauer.com. Office Depot‘s Web site is at www.officedepot.com and Eddie Bauer‘s Web site can be found at www.eddiebauer.com. To avoid confusing your customers, you will want to have a domain name that is as close as possible to your organization‘s name. This will also make it easier for customers to find your Web site. For example, customers looking for Eddie Bauer‘s Web site would probably start by typing www.eddiebauer.com into their Web browsers. In addition to being close to your business name, your chosen domain name should be short, easy for your customers to remember, and intuitive. Finally, keep in mind that you don‘t have to have ―www‖ in your Web address. Some organizations have chosen to drop it entirely, e.g. CBS promotes itself simply as CBS.com. In addition, you can, with the help of the technical folks who support your site, sometimes use words or characters in front of your actual domain name, and get an extra ―identity hook‖ that might be unique enough to draw attention to your site. One such example of this is the Web site Beer.com, which gained some attention during the 2000 Olympics. It ran an ad that used the address mmm.beer.com – indeed, during the commercial, the graphic showed the ―www‖ flipping over to become ―mmm,‖ as the announcer mimicked the ―mmmm‖ or ―tastes good‖ sound. There was a huge increase in traffic to the site. It‘s important that both your brand name and your Web 26
site address be as distinctive as possible to avoid confusion with other similar companies selling on the Internet. There are tens of thousands of merchants on the Internet all vying for attention, making it difficult for online merchants with similar names to get noticed. Even if the domain name you want is available, you should find out if similar names currently used by online stores might compete with yours. Many online merchants have found it necessary to change their names because their names were being confused with other similar names on the Internet. When trying to come up with a name for your online store, consider getting a group of friends or colleagues together to brainstorm with you. Alternatively, you could hire a market research firm to hold focus groups with consumers. Issues to Consider When Choosing a Name for Your Online Store
Can you get a Web site address (i.e., domain name) for that name? Is the name too long? Is the name easy to pronounce? Are there other Web sites or online stores with similar-sounding or similar-looking brand names or domain names? Is your name unique or distinctive enough? Is your name memorable and does it make an impression? Is the name consistent with the image you want to project?
If you really want to have a domain name that someone else has already registered, you could approach the owner and see if he/she is interested in selling the domain name to you. Many companies register domain names but never activate them. Even a company that is using a domain name may consider selling it to you for the right price. Finally, if you believe that someone else has registered a domain name that infringes on a trademark that you own, you can pursue legal action against the owner of the domain name in question. Alternatively, an appeals process exists for domain names, and it might be possible for you to launch an appeal to see if the other party can be forced to give up the name. To learn about this option, visit a domain name registrar, and read about the international domain name appeals process. You can also visit the ICANN Uniform Domain Name Dispute Resolution Policy site at www.icann.org/udrp/udrp.htm for more information. Which raises an important point – it might be a good defensive manoeuvre for you to register as many domain names as possible early on, related to your store name, your product names, or other words and phrases that, when used as a domain name, might help drive traffic to your store. How to Get a Domain Name To get a domain name, you can go to any one of the accredited domain name registers on the Internet, including Register.com (www.register.com). You can get a complete list of accredited domain name registrars on the Inter NIC Web site at www.internic.com. The list can be viewed alphabetically or by geographical location. You don‘t need to have a Web site in order to register a domain name and most registrars will hold your domain name for you until you are ready to activate it on your online store. Many browser based storefront solutions allow you to set up a domain name for your online store when you are setting up your account. This removes the need for you to go directly to a domain name registrar. Once you have registered a domain name, you want to make sure that no one is registering similar names, or taking out a trademark similar to your name. To automatically track your name, consider using a service like Name Protect (www.nameprotect.com). One of Name Protest‘s services will constantly monitor new US trademark applications and domain name registrations for you and flag any applications/registrations that are identical or very similar to your domain name. It‘s a great way to keep informed of any potential threats to your brand name. This service will also help you identify companies that may be trying to register your domain name as a trademark. This is a potentially serious situation as you could lose your domain name if a trademark similar to your brand name is granted to someone else.
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(3) Offline Marketing Perhaps the most important piece of advice we can give you in this guide is this: Don‘t restrict your advertising and promotional efforts to the Web. Online stores often rely too heavily on online advertising at the expense of more traditional advertising vehicles that may actually produce better results. Throughout this guide, we‘ll review a number of different ways for you to promote your online store on the Web. But it‘s important not to get too dependent on online marketing for your success. Think about the types of customers you are trying to attract and what the best methods would be to reach those customers. Rather than spending your money advertising on the Web, you may find that a more effective strategy would be to place advertisements in a couple of well-targeted magazines. For example, Noggintops (www.noggintops.com), an online hat retailer, has spent very little on Internet advertising. Instead, the company did some marketing research and identified a number of magazines that appealed to the company‘s target market: outdoorsmen. Ads featuring the company‘s Web site address were then placed in those magazines. In fact, the bulk of Noggintop‘s marketing budget has been spent on offline ads. Our point is that you shouldn‘t ignore traditional advertising vehicles. Think about how you can use both print (e.g. newspapers, magazines, journals) and broadcast media (radio and television stations) to reach your target audience. Be realistic with your expectations. In years past, many Internet companies invested millions in television ads with often disappointing results. Many companies quickly learned that brands can‘t be built overnight. It can take years to build a successful and recognized brand name. That being said, if you develop any print or broadcast advertising, make sure that your Web address is featured prominently in your ads. You may want to even consider purchasing advertising for the sole purpose of promoting your Web site It is important to use your imagination when looking for ways to raise awareness of your Web site. Don‘t limit yourself to radio, television, and print media. Why not advertise your Web address in buses or subways, or on the transfers handed out by your local transit authority? How about on newspaper polybags (the plastic bags that newspapers are wrapped in when they are delivered to your front door)? Or in movie theatres? Some organizations have even gone so far as to include their Internet addresses on bananas! The possibilities are endless. In many respects, marketing a Web site is no different than marketing any product or service. The challenge is to find innovative ways to get the word out.
(4) Your Retail Store If your business has a brick-and-mortar retail presence, use it to promote your online store aggressively. Include your Web site on your receipts, invoices, and shopping bags, and print it on your catalogs and sales literature. Make sure that your Web address is advertised prominently both within your store and outside if you can. Many retailers, unfortunately, don‘t leverage their retail presence in this way.
(5) Gift Certificates Brick-and-mortar stores give out gift certificates, so why not online stores too? Consider offering an online gift certificate that your customers can give to a family member or a friend. Gift certificates purchased online make great last-minute gifts because they can be sent by e-mail to arrive almost instantly. The recipient can then visit the store‘s Web site and apply the gift certificate toward the purchase of any products offered by the store. How does it work? Online stores that offer this service let you pay with your credit card and the gift certificate is delivered to the recipient by e-mail as soon as the payment is authorized. The gift certificate is essentially an e-mail message with a number attached to it. The recipient can redeem the certificate on their next purchase at that online store. When the recipient proceeds to check out of the store, they will be asked to provide their certificate number. The value of the gift certificate will then be deducted from the total amount of the purchase. Electronic gift certificates not only make great gifts – they‘re a great way to drive new customers into your online store!
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(6) Cross-Selling You should get in the habit of cross-selling products in your online store to increase sales. This means that where possible, product pages on your online store should feature accessories or complementary products that your customers may be interested in. For example, consider what Smith & Hawken has done in their online store (www.smithandhawken.com). Whenever a customer views a product, complementary products are displayed on the right-hand side of the page. For example, a customer may select a bench. Smith & Hawken realizes that customers who are interested in purchasing a bench may also be interested in purchasing a matching chair or table. That‘s why there is a section called ―Also Look At:‖ where complementary products are displayed, including an armchair and table. As you might expect, if you look at the Web page advertising for the armchair, the bench is recommended as a complementary product. The idea here is to try and upsell customers. Eddie Bauer employs a similar strategy on its Web site (www.eddiebauer.com). Customers looking at a specific piece of clothing can ask to see coordinating products by clicking on a link. As you can see, cross-selling is an excellent strategy to increase overall sales in your online store.
(7) Product Referral Services Many people find out about Web sites through word of mouth. So make it easy for your customers to tell other shoppers about your online store. For example, as customers are browsing through your Web site, they may come across products that their friends, co-workers, or family members may be interested in. Or they may want to tell a friend or family member about a product they would like to receive as a gift. That is why you should make it easy for customers to refer friends and relatives directly to specific product pages on your site. For an excellent example of how this can be done, visit RadioShack‘s online store (www.radioshack.com). At the bottom of every product page on the site is a graphic that says, ―e-mail this page to a friend.‖ Customers who click on that icon will be taken to another Web page where they are asked to provide the name and e-mail address of a friend. The recipient will receive an e-mail message that invites them to visit RadioShack‘s online store. A referral mechanism like this is an effective way to bring more people into your Web site.
(8) Affiliate Programs Many online merchants have built successful affiliate programs for their online stores. An affiliate program involves paying owners of other Web sites a commission for referring customers to your online store. In other words, you reward other Web sites for sending new customers to you. The idea is to find Web sites with visitors who are likely to be interested in your products. To this end, Web site owners usually try to find merchants who sell products or services related to their own Web sites. A Web site with movie reviews may try to affiliate with a merchant who sells movies, and a Web site devoted to golf may align itself with a Web site that sells sporting goods or athletic apparel. It‘s in a Web site owner‘s best interests to identify merchants with compatible products because it will increase the likelihood of making lots of sales. For example, suppose you sell travel guidebooks. You could sign up travel agencies to your affiliate program and invite them to create links from their Web sites to yours. You would then pay the travel agencies a commission on any book sales and/or leads you get from their customers. Online retailers with affiliate programs compensate customers in different ways. Some merchants pay affiliates strictly for sales (pay-for-sale), while other merchants compensate affiliates simply for sending a potential customer their way (pay-per-lead). Other programs may compensate affiliates if a person clicks on an advertisement, regardless of whether that person turns into a lead or ends up purchasing a product. This is called a pay-per-click program. Affiliate programs can be extremely powerful because they allow you to increase your revenues by having your brand name displayed on dozens if not hundreds of complementary Web sites. There are literally thousands of affiliate programs on the Web. For an example, visit the online store for Staples (www.staples.com) and read about their affiliate program. Web sites that sign up can earn a percentage of every sale for referring customers to Staples.com. There is no cost for affiliates of Staples to sign up, but they must first agree to the 29
program‘s terms and conditions and then complete an online application form that requests information about their Web site. If a Web site is approved into the program, Staples will provide the owner with a selection of Staples.com graphics that can be placed on the Web site and linked to Staples.com. Every time someone clicks on the link and proceeds to buy something from Staples.com, the Web site owner will be paid a commission. Staples.com says its affiliate program has been a success, with over thirty thousand Web sites signing up since the program was first created. The commission that you offer your affiliates is up to you. Some firms, like Staples, offer a percentage of sales; other firms offer flat fees. Commission structures can range from less than 1 percent to as high as 50 percent. Flat-fee commissions, on the other hand, can range anywhere from $0.05 to $50.00, or more. Affiliate programs are popular because they‘re an inexpensive way of attracting customers to your Web site. In essence, you are getting other Web sites to market your online store for you. Moreover, it doesn‘t cost a lot to get such a program underway. Best of all, you may only have to pay affiliates if they generate sales or leads for you. Affiliate programs do have a number of drawbacks, however. It can be a burden to keep track of all of your affiliates and process all of the commission checks. Keep in mind that the number of affiliates you have really has no direct bearing on how successful your program will be. For example, even though Staples.com has over thirty thousand affiliates, what really counts is the number of affiliates that are sending significant amounts of business to Staples.com. A lot of online stores have found that many of the Web sites that sign up for their affiliate programs bring in very little business. That is why when you are setting up an affiliate program, your focus should not be on signing up as many Web sites as possible, but finding those Web sites that can generate the most sales for you. Obviously, it‘s hard to screen Web sites in advance but eventually you will discover which affiliates are valuable and which are immaterial to your business. As you might imagine, setting up an affiliate program can take a lot of time and effort, especially once you begin to sign up hundreds of affiliates. You need to screen applicants, track sales from each affiliate, prepare commission checks, and spend time on other administrative functions that take you away from running your online store. For this reason, many online retailers hire organizations called affiliate program providers that specialize in running affiliate programs on behalf of online stores. We‘ve listed some of the more popular affiliate program providers in the table below. Affiliate Program Providers My Affiliate Program www.myaffiliateprogram.com Commission Junction www.cj.com LinkShare www.linkshare.com The cost of using an affiliate program provider varies depending on the affiliate provider. For example, some companies charge a one-time fee plus they receive a monthly commission based on a percentage of affiliate sales. Others may charge a one-time setup fee, an annual renewal fee, plus a percentage of your payout – the amount of money you pay your affiliates. Still others have no set up fee, or commission charge but have a flat monthly fee. Which affiliate program provider is best? It all depends on what you are looking for. Services and program features vary from one affiliate program provider to the next, so make sure you carefully consider all your options before making a final decision. One of the major benefits of using an affiliate program provider is that these organizations will help you find Web sites that can begin linking to your online store immediately. If you‘re a small business with very little brand name recognition, how is anybody going to find your Web site to learn about your affiliate program? Affiliate program providers maintain a directory of participating online stores so that interested Web sites can quickly find merchants they want to work with. If you‘re interested in setting up an affiliate program for your online store, start by getting in contact with the various affiliate program providers we listed earlier in the guide. When comparing affiliate program providers, think about the following questions:
How much does the affiliate program provider charge you to set up an affiliate program?
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As explained earlier in the guide, affiliate program providers have different pricing schemes, so make sure you understand how you will be charged. Also find out if there is a minimum escrow amount that you must give the affiliate program provider (this money is used to pay commissions to your affiliates).
What types of affiliate programs are offered? As noted earlier, there are three basic types of affiliate programs that you should be familiar with: 1) pay-per-click programs—you pay a Web site for referring a visitor to your online store regardless of whether a sale results or not 2) pay-per-lead programs — you pay a Web site for referring a visitor to your Web site to fill out a form or perform another action that may lead to an online or offline sale 3) pay-per-sale — you pay a Web site for referring a visitor to your Web site who immediately buys a product or service
What type of performance tracking is provided? How sophisticated is the performance tracking? What information do the performance reports contain? How frequently are the reports updated? Are the reports delivered by e-mail in addition to being available on the Web? How user-friendly is their affiliate management software? What account management features does their software offer? How easy is it for you to update or replace the ads being served by your affiliates? What tools exist for communicating with your affiliates, both through the affiliate program provider‘s Web site and by e-mail? Can you target certain affiliates with special offers? Who issues the commission payments to your affiliates? Do you have to, or will the affiliate program provider do that for you? How does the affiliate program provider guard against fraud? For example, what happens if the same person clicks on a link to your Web site 50 times – do you have to pay for that? Is there any flexibility with regard to payout rates? Can you customize payout rates for different affiliates or do you have to give the same commission structure to everyone? Does the affiliate program provider offer any client services to assist you with the implementation of your affiliate program, or are you expected to do it on your own? What technical support is available for both affiliates and merchants? Are any consulting services offered? How easy is it for Web site owners to join an affiliate program and create links from their Web sites to yours? To get the answer to this question, we recommend you visit some of the leading affiliate program providers‘ sites and try signing up with some of their merchants. By doing this, you‘ll get a first-hand look at how the process works from an affiliate‘s point of view. What types of link options are available for your affiliates? Does the affiliate program provide support for e-mail-based affiliate programs? For example, how easy is it for an affiliate to include links to your Web site in their e-mail messages to customers? How many affiliates are part of the company‘s network? What is the company doing to recruit new affiliates into their network?
(9) Permission Marketing You may have heard the term ―permission marketing‖ before. It refers to a method of online marketing where the merchant asks permission from online shoppers to market to them directly by e-mail. Permission marketing is also known as ―opt-in e-mail.‖ Permission marketing follows two main principles. First, you only market to those customers who have specifically told you that they are interested in receiving e-mail message from you. Second, you must give away something in order to get a customer‘s e-mail address. In other words, shoppers are more likely to give you their e-mail address if you give them an incentive or reward for doing so. This incentive could be a 31
discount on a future purchase, entry in a sweepstakes or contest, or just the promise of relevant advice by e-mail. The easiest way to undertake permission marketing is by establishing a mailing list that customers can join. You can then use the mailing list to send out promotional messages to your customers. The trick is to give your customers an incentive to join your mailing list. For an example of how a permission-based e-mail marketing program can be implemented, consider what Payless ShoeSource (www.payless.com) did on their online store. They ran a contest on their home page for a ―dream trip to Tahiti.‖ Customers were invited to enter their e-mail address into a box on the screen. Once a customer entered his/her e-mail address, a new page appeared inviting the customer to join Payless ShoeSource's mailing list. The contest was the ―hook‖ to get customers to spend a few minutes filling out the form that is required to join the mailing list. Once customers joined the Payless mailing list, they were automatically entered into the vacation contest. Keep in mind that if you are going to set up a mailing list for your customers, you should clearly tell your potential customers how they can leave the list, and about any other conditions that might apply to the list. Don‘t restrict yourself to your Web site when collecting e-mail addresses from customers. If you have a retail store, have your salespeople at the checkout counter ask customers for their email addresses. Similarly, if you have a call center, collect e-mail addresses from customers when they call in. But regardless of how you collect the information, make sure you let customers know how you intend to use it. For example, if you have a retail store, have your salespeople say something like this to your customers: ―We frequently send out notices of sales and other promotions by e-mail. If you have an e-mail address, Mr. Smith, I‘d be happy to add it to our database so that you‘ll receive advance notice of our special events‖. By asking customers for their e-mail addresses in this fashion, you‘re clearly stating why you‘re asking for the information and giving the customer an incentive to provide his or her e-mail address to you. (10) Search Engines and Web Directories Many online shoppers use a search engine or a Web directory when they are trying to find something on the Internet. A search engine is a Web site that indexes the contents of millions of Web pages. A Web directory, on the other hand, organizes Web sites by category so that they can be easily browsed by Internet users. Unlike search engines, directories are usually compiled by human beings. In the following table, we‘ve listed the names and addresses of the most popular search engines and Web directories. Making sure that your Web site is registered with all of these sites is one of the most important things you can do to draw traffic to your store. Why all of them? Your customers (and potential customers) won‘t all be using the same search engine or Web directory. Some people use Excite, some use AltaVista, some use Lycos, etc. By registering with all the major search engines and Web directories, you have the best chance of being found by online shoppers regardless of what search engine or Web directory they are using. Popular Search Engines AltaVista
www.altavista.com
AOL.COM Search search.aol.com Ask Jeeves www.askjeeves.com Google www.google.com Overture www.overture.com Excite www.excite.com FAST www.alltheweb.com HotBot www.hotbot.com Lycos www.lycos.com MSN Search search.msn.com Popular Web Directories Look Smart www.looksmart.com 32
Open Directory www.dmoz.org
Project
Yahoo! www.yahoo.com
(11) Search Engine Optimization As we noted at the beginning of this guide, there are billions of Web pages on the Internet and thousands upon thousands of online stores, all clamoring for attention. When you submit your Web site to a search engine, you typically don‘t have any control over where your Web site will show up in the site‘s results list when someone searches for your company name or a keyword related to your business. For example, suppose you open an online store selling pasta products. If someone goes to a search engine, and types in the word ―pasta‖, you‘re not going to be very happy if your Web site shows up on the seventh page of results. Most people won‘t bother looking past the second or third page of results when they are doing a search on the Internet. In fact, many people won‘t even bother looking beyond the first page of results. This means that if your Web site doesn‘t show up in the top ten or so results for a specific search such as ―pasta‖, the chances of your Web site being seen by Internet users diminishes considerably. Hence, an important part of online marketing involves a process known as search engine optimization — ensuring that your Web site receives prominent placement on all the major search engines. Ideally, you want your Web site to show up on the first page of results when a potential customer searches for a keyword related to your business. Before we go any further, you need to understand three things. First, there is no simple method or magical formula for achieving good rankings on search engines. Second, every search engine uses different ranking criteria. This is why the same search performed on different search engines will yield different results. It is also why your Web site may be ranked number one on one search engine but appear in the twentieth position on another. Third, search engines are constantly changing the algorithms they use to index Web sites, so your site‘s ranking on any given search engine may be in a continual state of flux. Most search engines provide some information on their Web sites to help you understand how they rank Web pages. Visit each search engine, read the help files, and try to accommodate as many of the suggestions as possible. For example, the Lycos search engine (www.lycos.com) has a page of information on its Web site with several tips and pointers to help you optimize your Web site‘s ranking in their index. (12) Online Shopping Directories Most of the major search engines and Web directories have shopping areas on their Web sites that showcase selected merchants and that list hundreds of merchants by product category. Many Internet users use one of these shopping directories when looking for online merchants to buy from, so it‘s a good way to get exposure for your online store. However, to get included in a search engine or Web directory‘s shopping directory, or to become one of its ―featured stores‖ or ―premier merchants‖, you usually need to be an advertising partner or be using the site‘s online storefront software. To become an advertiser, you will need to get in contact with the search engine or directory‘s advertising department for details about pricing. America Online, for example, has advertising agreements with a number of large retailers that give these retailers prominent positioning on AOL‘s shopping directory. It is important to point out that these types of advertising opportunities are often targeted are larger, established retailers as opposed to small businesses, so depending on your advertising budget and the size/profile of your business, you may find that this type of advertising opportunity is not practical or affordable. (13) Online Advertising and Sponsorships One of the most popular online marketing strategies is to advertise on or sponsor other Web sites that attract the types of people who may be interested in buying your products and services. Suppose, for example, you sell luggage products. Why not advertise your online store on Web sites that attract travellers? For example, you might want to approach a travel Web site, such as one of the popular travel-booking services like Travelocity.com, about sponsoring a section of their site. In addition, many of the popular travel magazines like Condé Nast Traveller have their own Web 33
sites, and accept advertising. Most Web sites that accept advertising have a section somewhere on the site that provides contact information for advertising inquiries as well as a general overview of advertising and sponsorship opportunities. Before choosing to advertise on or sponsor any Web site, make sure that the site is reputable. You don‘t want to advertise on any Web site with a doubtful reputation or poor credibility. You should also obtain audited statistics that tell you how many visitors the site receives on a daily, weekly, and monthly basis. Also try to obtain as much demographic information as you can – data that will tell you what types of people the site attracts, including average age, income, and spending habits. You want to ensure that the Web site is attracting the same types of people who buy your products; otherwise your advertising dollars are being wasted. You should also find out what types of advertising or sponsorship packages are available and how much they cost. Will the Web site let you track how well your ad is performing? How frequently can you access usage statistics? (14) Keyword-Based Advertising Many Web sites, including many of the major search engines and Web directories, offer keyword based advertising. Here‘s how it works. You purchase one or more words and/or phrases related to your business. When a customer searches for any of those words, an advertisement for your Web site will appear. The advertisement may be a banner ad or another type of online advertisement that you create. For example, suppose your own a business that sells pools and spas. You could purchase the word ―pools‖ on Yahoo! so that whenever someone searches for that word, a banner ad for your company will appear on the search results screen. Keyword-based advertising doesn‘t necessarily involve banner ads. For example, Google (www.google.com), one of the Internet‘s most popular search engines, allows you to create text ads for your company that will be displayed whenever an Internet user searches for a keyword that you‘ve selected. Google‘s program, called AdWords (adwords.google.com), is affordable for small businesses because there is no monthly minimum spending limit and it costs just $5 to set up your account. (15) Links from Other Web Sites One of the least expensive online marketing techniques, but perhaps one of the most effective, is getting links from other Web sites. Contact suppliers and manufacturers you work with to see if they will link from their Web sites to yours. Why is this important? Customers often visit the Web sites of manufacturers or suppliers when they are researching a purchase. If the manufacturer provides a link from their Web site to yours, the customer may end up making the purchase online from you. This manufacturer benefits from the sale as well, given that you are selling more product, so it‘s in the manufacturer‘s best interest to link to you. You should also contact any industry associations you belong to and ask if they will link to you. The idea is to try and get as many Web sites to link to you as possible. As noted earlier, this can even help you with your placement on search engines since many search engines take a site‘s links into account when they decide where to rank it. If you want to see how many other Web sites are linking to you, a really useful resource is a Web site called LinkPopularity.com (www.linkpopularity.com). Just enter your Web site address into the box on the LinkPopularity.com Web site. The site will generate a free report listing all of the Web sites linked to yours. You can also use the LinkPopularity.com site to monitor how many Web sites are linking to your competitors‘ Web sites. If appropriate, you can contact these Web sites directly and ask that they link to your online store, too! 16) Monitor Activity on Your Web Site Once you invest in an online store, you owe it to yourself to monitor how well your investment is paying off. The number of sales you receive is only part of the picture. You also want to be able to track the number of people who visit your online store, where they come from, and which search engines and directories they use to find you. This information is vital to your business because it will help you assess whether your marketing activities – both online and offline – are succeeding or failing. If you don‘t already receive daily traffic statistics from your Internet service provider, Web hosting service, or online store service, or if the reports you receive don‘t provide enough detail, consider signing up for one of many the third-party Web site analysis services. In the 34
box below, we‘ve listed some of the more popular programs that will allow you to monitor how your customers are using your Web site. Popular Web Site Analysis Programs HitBox www.hitbox.com Omniture www.omniture.com WebTrends www.webtrends.com About PayPal PayPal makes it quick, easy, and affordable for businesses of all sizes to accept credit card payments online. If you already accept credit cards online, add PayPal as a payment option and get access to a global network of 50 million member accounts. PayPal‘s reputation for convenience, ease-of-use and security has made us the preferred payment method for millions of buyers worldwide.
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What Makes Online Advertising Effective? How to make online advertising more effective? Five studies by ARF, IAB, C|Net.com, MSN and DoubleClick all concluded that online advertising builds the brand (Briggs, 2001, v.1 no 3). Companies will find, however, that the degree to which online advertising improves metrics such as brand awareness, purchase probability and brand perceptions will vary based on the size, placement and format of the ad. Below we will discuss different sizes and formats of online advertising and how the returns from an online advertising budget can be improved. Before a company can determine how to increase the ROI from online advertising, it must determine the goals for its online advertising. This is necessary because online advertising serves different purposes. Online ads can help to increase brand awareness, brand perception and click through rates, while they can also help to increase conversion rates, or the number of people that go to a Web site and actually purchase a product. For an online publication that is concerned with ROI, an increase in click through and page views may be the most important performance metric, while a company such as IBM may simply want to increase the number of people that believe it is a technology leader. When an online ad increases one of these performance metrics, it is considered effective. Ad size. As you might expect, larger ads help to improve branding metrics. On average, an improvement of 40% (for single ad exposure) can be seen in the Skyscraper (160x600 pixels) and Large Rectangle (360x300 pixels) online ads compared to smaller ads (468x60). This success could be seen when Vaniqa, a product from Bristol-Myers, began advertising online. Starting with 23% brand awareness, Vaniqa increased brand awareness to 30% after consumers had one exposure to a Skyscraper ad. This was a 30% overall lift in brand awareness. The Large Rectangle format had even better success for the company with an overall 10-point gain or 43% lift in brand awareness (Briggs, 2001). Technology. New technologies also improve the effectiveness of online advertising. Flash and DHTML appear to have the most potential in enhancing online advertising effectiveness based on two studies that were completed. Flash technology allows an advertiser to develop a small size file with rich graphics. Diameter found that Flash technology increased branding metrics by 71 percent for three ads that were tested. DHTML was found by Dynamic Logic to increase brand awareness by 19%. Audio and video were also found to improve branding performance by 14 percent and 9 percent respectively Companies have become aware of the more effective forms of advertising and have been pleased with the results. Miller Brewing Company has been using Macromedia Flash technology for the past few years in promotional efforts. According to Gina Shaffer, Miller‘s senior digital marketing manager, ―One particular campaign created with Macromedia Flash was 110 times more effective by a click through measurement than our banner ads and buttons. Clearly, as we look for effective ways to engage consumers online, we consider these one of our top tools‖ (Fortune 500, 2001). Ad positioning. Good positioning of an ad can also increase brand effectiveness. In a Double Click survey, it was found that interstitial ads could be up to 194 percent more effective in increasing brand effectiveness. When it comes to an ad that pops up over a Web page, Diameter found this placement to be slightly less effective (52% lifting) than the same size ad placed directly on a Web page (55% lifting, Briggs, 2001). Creative elements. Within the online ad creative elements can affect ad performance. Dynamic Logic found that the number of elements within a banner ad is related to overall brand awareness. Uncluttered ads, or those with 16 or fewer elements, are more effective than cluttered ads. In cases where ads had 16 or fewer elements, the brand awareness had a lift of 14%, compared to a 3% lift from cluttered banners. Elements are defined as an individual word, logo or graphic (Carlon & Hislop, 2001). Dynamic Logic also completed research that showed a consistent logo is an important part of an online advertisement. As online creative becomes more animated, logos are often shown less frequently. To test how ―omnipresent logos‖ (campaigns where the creative 36
contains the brand or logo 100% of the time) compared to ―sporadic logos‖ (campaigns where logos are NOT present all of the time), Dynamic Logic evaluated its AdIndex database. Campaigns with omnipresent logos had a 7% lift in brand awareness, while sporadic logos saw only a 3% lift. The message association metric had similar results, with omnipresent logos seeing a 33% lift compared to a 17% lift for ads with logos that were sporadic (Carlon & Hislop, 2001.) ACNielsen recently conducted research todetermine how creative elements affect ad recall, or the ability of a consumer to remember an ad. When branding was used consistently in each frame of an ad, ad recall and other brand metrics improved for almost all ads that were tested. Ad exposure. How many times does a person see your ad before the message association begins to level off? Research by Dynamic Logic has indicated that 1 exposure leads to a 5.6% liftin brand awareness, 2-3 exposures add a 64% lift in brand awareness, while 4 or more exposures add an approximate 10.4% lift in brand awareness. After five exposures, however, returns were found to have diminishing returns (Carlon & Hislop, 2001; Morgan Stanley Dean Witter, 2001). Are click through the best way to measure whether an ad is effective? Click through do not necessarily lead to more conversions. The Summer 2001 Online Advertising Report found that people who viewed an online ad and went to the site at alter time by typing in the URL, were 60% more likely to repeat their conversions than people who clicked through the ad initially. Only a quarter of the conversions attributed to ads are from direct click through. The rest of the conversions occur after the ad is viewed, but are most likely to occur within 24 hours of the first ad impression (Engage Study, 2001). How can a company get the most for its money? The standard payment for banner ads has often been based on CPM rates (Liz Claiborne, 2001). But many companies would like a selection of ways to pay for online ads. Some companies are now paying for their advertising by performance. One company that offers this type of payment system is Commission Junction that is currently working with Liz Claiborne. Using Commission Junction, Liz Claiborne only pays for ads when a sale is made (Liz Claiborne, 2001). Another company, Global Network Inc., has also introduced a new pricing model for advertisers. CAPP (Client Alternative Pricing Plan) allows companies to choose how they would like to pay for advertising from CPM, click through rates, lead generation rates, or actual sales conversion. This helps companies to choose from a model that will help to best meet their objective. For example, a company that wants to increase conversion may pay a premium, while a company just interested in branding may pay a flat rate (Global Network, 2001) How did it all begin? Internet advertising began in 1994, when the first commercially available Web browser, Netscape Navigator 1.0, was released. As Web browsers became more enhanced over time, advertising has changed to better utilize these enhancements. Online advertising began as simple banner ads, while companies can now use banner ads as well as destination sites, micro-sites, popups, and even advertisements that affix themselves over a competitor‘s ads. The Internet has essentially become the only medium where users can view ads, request and receive information, make an instant purchase, and save time and money. Advertising banners account for 54% of total online advertising revenues and are the predominant advertising vehicle on the Web, with full-size banners still receiving the most advertising impressions (Morgan Stanley Dean Witter, 2001). Banners let viewers request free samples, register to win contests, and order products. They are able to build brand awareness and are now better at generating awareness than television or print advertising. 75% of respondents to a survey by Forrester reported that Internet users sacrificed TV viewing to use the Internet. As Web browsers were enhanced and became able to support better graphics and more Web sites, micro-sites and destination sites began to explode. Micro-sites contain small clusters of brand pages, which are hosted by content sites or networks. They enable advertisers to communicate deeper product benefits and collect customer information without 37
incurring the cost of a full-blown Web site, which can cost millions to create and maintain. Web sites or destination sites use information, entertainment, and high-product values to pull users in and keep them coming back. Basically, companies use the Internet as a full channel for exchanging information with customers. Pop-ups have become another tool that works in conjunction with banner ads. When a person another browser on top of the site the user is viewing. It has the same benefits as a banner visits a Web page, an advertisement opens in ad but brings more attention directly to the advertisement. A recent technology that was introduced is called Gator. It has allowed companies to advertise on rival companies‘ sites by selling ads that are designed to block banners on sites such as Yahoo with pop-ups of the exact same dimensions, completely obscuring the original ad. As the customer scrolls down their screen, the new advertisement stays affixed so the viewer cannot tell that it is not the ad originally placed on the site. This technology, however, has been seen as unfair competition. For this reason, Gator and the IAB have announced that they will work together to develop a new version of the software, which will ―support Web publishers efforts‖ (Gator and IAB, 2001).
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Case study 1.1 gives one example of such applications of the Internet. Case study 1.1 Hamleys reaches new customers using the Internet Hamleys toy shop in London‘s Regent Street seems quintessentially British, so it may come as a surprise to learn that the majority of the sales from its website are to the US. This is not an accident, however. The content and appearance of the shop‘s e-commerce site have been carefully designed to attract a very particular kind of customer: those who have the money to spend on expensive toys, but little time to visit toy shops.While its London store stocks approximately 40,000 toys, the site offers only a small fraction of that number. There are already numerous toyshops online offering cheap, plentiful toys aimed at the mass market.Hamleys wanted to differentiate itself, so it called in Equire, an e-commerce company specialising in designing and hosting websites for retailers of luxury items, including Links of London and jewellers Van Peterson.Hamleys and Equire decided to use the website to sell goods it was difficult to obtain anywhere else: Steiff bears, die-cast figures and other collectors‘ items. Apart from collectors, says Pete Matthews, Equire founder and chairman, customers tend to be parents and grandparents looking for unusual gifts.An article in the New York Times before Father‘s Day, for example, resulted in the site selling a large number of gold-plated models of the James Bond Aston Martin.Because the brand name is crucial to the kind of customers Hamleys wants to attract, the look of the site (www.hamleys.com) is also distinctive, with numerous graphics and animations, a prominent Hamleys logo on each page and menu options with names such as Collectables, Exclusive and Executive.As well as designing and hosting the website, Equire manages all other aspects of the e-commerce operation, including holding the stock in its warehouse, taking care of orders and delivery, and running the customer care centre.Its financial arrangement with Hamleys is unusual: instead of charging a large fee for hosting the site, it charges a smaller fee and takes a cut of the revenue. The idea is that it has a stake in making sure the site works, giving the customer confidence that it will do the job well. It also means a smaller investment for the customer. "The typical cost of implementing an infrastructure like ours would be in the many millions of dollars. Typically, Equire‘s customers don‘t contribute anything like that," says Mr Matthews.Because of the site‘s target customers, speed of delivery is important. Some ecommerce sites have become notorious for not being able to fulfil orders quickly or efficiently. But Mr Matthews says most of the US orders are delivered within three days - and many in fewer than that.The Hamleys site uses the Broadvision e-commerce platform, which is integrated with the call centre, the fulfilment centre and Equire‘s despatch partners, who allow online tracking of every parcel. "When an order comes in, it automatically informs the customer-care centre. At the same time, it tells the fulfilment centre an order has come in and needs to go out today. It gets picked, packed, gift-wrapped and despatched and is then tracked throughout its life via our despatch partners, UPS and Parcelforce," says Mr Matthews. Returns are low - less than two per cent.Recently, Hamleys has announced a drop in profits. Part of its plan for drawing in more revenue is to expand the website to include a wider range of toys: 50 per cent of calls and e-mails to the customer care centre are inquiries about toys not stocked on the site.Instead of simply increasing sales to existing customers, the site has given Hamleys the opportunity to attract many new customers who, according to Mr Matthews, spend more on an average visit to the site than visitors to the London shop. Other planned improvements include greater emphasis on "personalisation", so that customers will be guided to their particular interests.Mr Matthews believes his company has a model that works. "Over a period of five years, we‘re able to deliver a very healthy net margin, their revenues flow to the bottom line, they have no depreciation or amortisation to consider, while we deliver them net incremental revenue, and we help to build brand franchise outside their immediate geography." Source: Financial Times (2000b) HAMLEYS: Where to buy a gold-plated model of James Bond‘s Aston Martin. Financial Times. http://www.ft.com/ftsurveys/spbf9a.htm. By Kim Thomas. Questions: 1. What best practice principles of marketing / e-marketing does this case indicate. 2. Visit the web site (www.hamleys.com) and assess changes in strategy since the article was written. 39
CASE STUDY 1.2 RS COMPONENTS RS Components (www.rswww.com) is part of Electro components plc is a distributor of electronic components for example in the motor trade. In the mid 1990s it launched a CD-ROM of its catalogue, which featured tens of thousands of products. The CD had a 25,000 print-run, but the company was surprised that its stocks of the CD were soon depleted. This was an early indication of demand from consumers for interactive services. At the same time, Internet adoption was increasing, so the organization decided to develop a transactional web site. It launched a transactional site for the 107 000 products in its catalogue in February 1998. In its first six months 44 000 customers registered as users of the site and there have been 84 000 repeat visits. The average order value is £81 and the average site visit across all 280 000 site visits is 23 minutes. Traditionally RS Components operated in the business-to-business sector by selling direct to garages or through distributors. A benefit of the new site has been that a tenth of all registrations were from private individuals who represent a new customer sector. The web site uses personalisation software from Broadvision to tailor over 50 different versions of the home page to different types of visitors. Further capabilities that are unavailable via other channels are:
the facility for online users to check on stock availability return to unfinished orders which are interrupted part-way through different parcels can be sent to different fulfilment addresses from a single order
The company has made a substantial investment and commitment to new media spending £2.5 million on the new system to 1998. Bernard Hewitt, head of Internet trading at RS Components, justified this expenditure saying: ‗We‘ re this committed to new media because we believe in the future. No one like us is doing anything close to what we‘ re doing. It isn‘ t just about a site, it‘ s about the whole integrated way of doing business on a very substantial scale.‘ In the first eight months from when the site was introduced RS Components (rswww.com) recorded:
280 000 sessions (visits); 44 000 registered customers; 84 000 repeat visits; 23 minutes average time on site; £81 average order value. 10 per cent private rather than trade.
In 2001, the results from the web site are as follows:
350,000 site registrations. 80,000 visits per month. 53,000 repeat visits each month. 8,000 new registrations each month. 8%of sales in the UK are Internet-based amounting to £30 per year. Each of Electro components' operating companies in 26 countries an internet trading site with on-line catalogue, in all major languages including Chinese and Japanese. In Japan, online sales are 20% of total sales. Europe (Austria, Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Spain and the UK) is served by one central hub, the European Internet Trading Channel (Euro ITC), which manages 10 different catalogue offers, 7 different languages and 11 currencies (including the euro). Support, fulfilment and content, however, remain local.
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Source: Revolution Magazine, November (1998) and Keith Laroche, E-commerce sales manager, RS Components speaking at eMarketplaceWorld, February 6th 2002. Electrocomponents plc corporate web site (http://www.electrocomponents.com/about_us/ecommerce.htm) Questions 1. Explain how the company has used the Internet to achieve each of the ‗6Cs‘ of cost reduction, new capability, competitive advantage, communications improvement, improved control and customer service. 2. Compare the facility the Internet provides to measure the way the site is used with a traditional phone or fax-based ordering system. 3. What does the extent of the investment made by the company suggest about the directors‘ commitment to the Internet?
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