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Marketing on the Internet

E-Marketing (2nd Edition)

Judy Strauss & Raymond Frost

Chapter 1

© Prentice Hall 2001

Chapter 1:
Introduction to E-Marketing
Learning Objectives
 Marketing Review
– Describe the marketing planning process
– Define the marketing concept
– Explain the value proposition
 Describe the new rules for e-marketing.
 Discuss the components of e-business.
 Compare and contrast marketing and
Learning Objectives
 Define Internet, Web, intranet, extranet,
and corporate portal, portal, and hub.
 Identify several e-marketing challenges
and opportunities.
 Discuss the characteristics of the Net’s two
 Name and describe e-marketing models for
each of the 4P strategies.
The Yahoo! Story
Click here

 Marketing Concept: Meeting organizational goals while

serving customers needs

 Currently has 500,000 sites classified into 25,000


 Currently the most popular site on the Internet.

 3,566 advertisers and merchants use Yahoo!

 New Rules for E-Marketing

Ten Rules of E-Marketing
1. Power Shift from sellers 6. Knowledge
to buyers management is key

2. Increasing Velocity 7. Market deconstruction

3. Death of Distance 8. Interoperability

4. Global reach 9. Interdisciplinary focus

5. Time compression 10. Intellectual capital rules

(Digital City)
Its’ Bigger Than the Internet
 Electronic marketing reaches far beyond
the web.

 Examples:
– Email and Newsgroups
– Web TV, Cell Phones, and text-only browsers
– Bar Code Scanners
– Cable Modem and DSL connections
What is E-Business (EB)?
 Defined as the continuous optimization of a firm’s
business through digital technology

[EB = EC + BI + CRM + SCM + ERP]

• EI = e-commerce
• BI = business intelligence
• CRM = customer relationship management
• SCM = supply chain management
• ERP = enterprise resource planning
E-Business continued
 EC - uses digital technologies to enable buying/selling

 BI - collecting primary/secondary information

 CRM - strategy to satisfy customers and build long-

lasting relationships; high interaction with customers

 SCM – delivery of products efficiently and effectively;

high interaction with distributors

 ERP – optimize business processes and lowering costs

– Order entry and purchasing
– Invoicing and inventory control
Pure Pure dot-com
Level of business impact Business transformation (E*Trade)
(competitive advantage, Play
industry redefinition)

Enterprise Click and Mortar


Effectiveness Customer
(Incremental sales, Business Process relationship
customer retention) management

Efficiency Brochureware,
(Cost Activity Order processing

Exhibit 1 - 2 Level of commitment to e-business

Source: adapted from
What is E-Marketing?
 Marketing:
– Use of 4 “P’s” to meet customer’s needs

 E-Marketing:
– Use of technology to increase efficiency of
– Increases company profitability and adds
customer value
The Big Picture
 Too much digital technology creates:
– Decreasing cultural/language differences
– Workaholism; less family time
– Social class divisions because of high literacy

 Digital economies are

– Marketing, MIS/CIS, Finance, Strategists
– Human Resources, Production/Operations
 In order of its relative size:

– Intranet smallest
– Corporate portal
– Extranet
– Hub
– Portal
• Lycos
• Excite
– Web
– Internet largest
The Internet
 Statistics:; ACNielsen

 Computer Industry Almanac estimates that

worldwide users will reach 490 million by 2002; and
the US is estimated to reach 165 million users

 In 2001, consumer online advertising will grow only

25%, while email and promotions will grow 100%
and 38%, respectively.

 By 2002, E-Commerce may exceed $1.2 trillion

 15 million virtual grocery shoppers predicted by

End of the Beginning
 High growth, but negative profits

 Fewer E-Companies truly succeed


 Must rely on traditional marketing strategies

 Dot-com drop-outs and mergers occurring

 E-business drops the ‘e’ as electronic business is

the way things will be done
Exhibit 1 - 4 Entering the Second Generation of E-Business
Source: Adapted from the Gartner Group.
E-Marketing Challenges and
 Markets

 Revenge of the Consumer

 Businesses

 Technology
Five Markets
 Business-to-Consumer (B2C)
– Example:

 Business-to-Business (B2B)
– Example:

 Consumer-to-Consumer (C2C)
– Example:

 Business-to-Government (B2G)

 Government-to-Consumer (G2C)
Revenge of the Consumer
 1930s:
– Caveat emptor (“let the buyer beware”)

 2000s:
– Consumers have control

 What consumers want:

– Privacy
– To safeguard their children
– Permission before being sent commercial email
 Challenges:
– Quality customer service
– Information overload

 Opportunities:
– Ways of generating revenue
– Greater interdependence in their value chain
Exhibit 1 - 5 Uses Mass Customization to Personalize
Web Pages
Source: is a registered trademark or
trademark of, Inc. in the United States and/or other
countries. © 2000 by All rights reserved.
 Can lower costs on staff and paperwork

 Can be a costly investment

 Security issues

 New payment instruments

 Low bandwidth
E-Marketing Delivers
Value = Benefits – Costs

 Value - customer perceptions of the product’s


 Benefits - attributes, brand name, etc…

– Add benefits through mass customization and

 Costs - time, money, energy, and psychic

– Lower costs through 24/7 convenience and one-stop
E-Business Model
 A method of doing business that
contributes to the firm’s profitability
whether by increasing revenue or
decreasing costs

 Necessary for models to identify value for

the customer
Marketing Mix Components
 Product

 Price

 Distribution

 Marketing Communication

 Relationship Marketing
Marketing Mix Component Chapter Business Model

Product 4 Digital value through new products

Cost reduction using e-marketing

Price 4 Negotiation
Segmented pricing

Content sponsorship
Direct selling
Broker: Online exchange
Online auction
Distribution 5 Agent: Manufacturer’s agent
Affiliate program
Virtual mall
Shopping agent
Reverse auction
Buyer cooperative
E-tailer Bit vendor
Tangible products

Online advertising
Marketing Communication 6 Online sales promotion
Content publishing

Relationship Marketing 7 CRM

Community building

Exhibit 1 - 6 Selected E-Business Models

 Through E-Marketing numerous new
products emerged

 Breakthrough software, hardware, and

services that created digital value
 Efficiencies have been manifested through

 No need for a sales force with all order

processing, billing and payments are
transacted between customer and Website
– Cost savings return a larger profit margin and
lower prices
 A primary E-Marketing application that creates
customer value

 New ways for selling and distributing products

 Affects all manufacturers, service providers and


 Models:
– Content Sponsorship Model
– Direct Selling Model
– Infomediary Model
– Intermediaries Model
Content Sponsorship Model
 Companies create valuable content or
services on their Websites

 Self-advertising
– Examples:
• Yahoo!
Direct-Selling Model
 Manufacturers eliminating channel
intermediaries and sell directly to

 Known as “Disintermediation”

 Dell Computers
Infomediary Model
 An organization that collects and sells
information about consumers or businesses

 Similar to a Market Research firm

 Hoover’s
Intermediary Model
 Brokers and agents bring buyers and sellers
together but neither purchase nor take possession
of the actual products
– Brokerage firms
• E-Trade, E-Bay, Metalsite
– Agent firms
• Travelocity

 E-tailers are firms that buy products and resell

them online
– “Click and mortar” stores
– Example: E-Toys
E-Marketing Communication
 Accomplished through promotion mix elements:
– Advertising
– Sales Promotion
– Direct Marketing
– Public Relations

 Models:
– Online Advertising Model
– Online Sales Promotion Model
– Content Publishing Model
– Email Model
Online Advertising Model
 Firms purchase advertising space on
Websites owned by other firms

 Does not include a firm’s own Website

 Dogpile
Online Sales and
Promotion Model
 Sampling digital products

 Allows consumer to view products before


 E-Music
Content Publishing Model
 A company’s Website

 The displaying of a firm’s information about their

product offerings on the Website to Internet users

 Brochureware

 Does not involve transactions

 Directed towards stakeholders

 Pure Fishing
E-Mail Model
 Three types:

– Target Promotions
• Companies target users through research and data mining to
send e-mail
• Bulk Email Software Marketing

– Reverse Channel
• User to firm
• Customer service
• Bass Pro Shops

– Consumer-to-Consumer
• Word of mouth
Relationship Marketing
 Customer Relationship Marketing (CRM)

 E-Marketing is able to build long-term

relationships due to:
– Online FAQs
– Automatic e-mail responders
– Customized Websites
– Fax-on-demand
– Supply chains integrated with the firm’s functions

 Model:
– Community Building Model
Community Building Model
 Website developed to create a special interest

 Users may provide information for products or


 Bring consumer to concise location, making them

more available for communication by a firm

 Creates social bonds and enhances customer


 Ivillage
Marketing Plan Tasks
 Situation Analysis
– Environmental Factors – Marketers collect and
analyze external elements that include economic
analysis, social and demographic trends, and more
– Market opportunity analysis – This entails a supply
and demand analysis along with a SWOT analysis.
The SWOT analysis determines the strengths,
weaknesses, opportunities, and threats.

 Selecting Target Market – marketers select the

type of customer they are looking to attract.
Marketing Plan Tasks continued
 Setting objectives – marketers set the objectives
according to the firm’s mission and resources.

 Designing marketing mix strategies – Develop

product, pricing, distribution, and promotion

 Action Plan – Plan the actual marketing plan


 Budget – Set a budget for the marketing plan

 Evaluation Plan – Continuously evaluate the plan to

make sure objectives are met.
1. Situation analysis
—Environmental factors
—Market opportunity
analysis (demand, supply, and
SWOT: strengths, weaknesses
opportunities, threats)

2. Select target market(s)

3. Set objectives

Environmental Scan

4. Select marketing mix:

Product, price, distribution promotion

5. Action plan (tactics)

6. Budget

7. Evaluation plan

Exhibit 1 - 7 Marketing Plan Tasks

Review Questions
1.List the 10 new rules for

Which in your mind is the

most important and why?
Question 1:

 Power shift from sellers to buyers.

 Increasing velocity.
 Death of distance.
 Global reach.
 Time compression.
 Knowledge management is key.
 Market deconstruction.
 Interoperability.
 Interdisciplinary focus.
 Intellectual capital rules.

The most important is the first—Power shift from

sellers to buyers. This is because it affects all marketing
strategies. A good case probably can be made for each
of the others, however.
2. Define e-business
and e-marketing
Question 2:

E-business is the continuous optimization of a firm’s business

activities through digital technology. It involves attracting
and retaining the right customers and business partners. It
includes digital communication, e-commerce, online
research, and it is used by every business discipline. The
following formula is simply a graphical representation of
important e-business components.
EB = EC + BI + CRM + SCM + ERP

E-marketing is the use of electronic data and applications for

planning and executing the conception, distribution,
promotion, and pricing of ideas, goods, and services to create
exchanges that satisfy individual and organizational
objectives. It affects traditional marketing by increasing
efficiency in traditional marketing functions, and the
technology of e-marketing transforms many marketing
3. How many users are
connected to the Internet

How many in the United

Question 3:

Approximately 266 million users are connected to the Internet

worldwide and 122 million of those are in the United States.
Note: This number will have increased since publication.
4. Explain the difference
between intranet, extranet,
and corporate portal.
Question 4:

Intranet—A network that runs internally in a

corporation but that uses Internet standards such as
HTML and browsers.

Extranet—An intranet to which value chain partners have

admission for strategic reasons.

Corporate Portal—A second-generation intranet. The goal

of a corporate portal is to merge all of the employees’
information and communication needs into a single
interface. Thus, corporate portals access internal
documents, data warehouses, groupware, e-mail, and
calendars, in addition to the Web. From largest to smallest:
Extranet, Corporate Portal, Intranet. The latter two are
usually proprietary to the firm’s employees, while an
Extranet is open to a firm’s partners, customers, and other
selected stakeholders.
5. Explain the difference
between a portal
and a vertical portal.

Give examples of each.

Question 5:

A portal is a point of entry to the Internet. Many portals such

as Yahoo!, Lycos, and Excite were originally just search
engines. What makes them portals is that they now provide
many services in addition to searching.
A vertical portal is a portal that specializes in one topic,
market, or product area. An example is
that specializes in women’s issues concerning the home.

Note: This review question requires outside research due to

an omission in the text.
6. Explain how a higher-priced
item can deliver more value.
Question 6:

Value includes customer perceptions of the product’s benefits:

specifically its attributes, brand name, and support services.
Subtracted from benefits is the cost in acquiring the product:
monetary, time, energy, and psychic. Higher priced items can
deliver more value by adding more benefits or by lowering time,
energy and psychic costs.
7. What is a business model?
Question 7:

A business model is a method of doing business that

contributes to the firm’s profitability either by increasing
revenue or decreasing costs.
8. How are business models
related to customer value?
Question 8:

When firms decrease costs through e-marketing, they can

pass this along to customers via lower prices.
E-marketing can also lower costs by saving customers
time and making it easier to purchase products. Many
business models increase customer benefits, thus
enhancing value.
9. What is the difference
a broker and an agent?
Question 9:

Brokers and agents bring buyers and sellers together but

neither purchase nor take possession of the products.
Brokers assist in the negotiation and don’t actually represent
either side, whereas agents tend to represent either the buyer
or seller, taking a commission for their work.
10. What are three ways in
which e-mail can be used for
marketing communication?
Question 10:

The first concerns e-mail to target promotions to specific

users. The targeting can be very sophisticated—for
example, targeting users when they are most receptive to a
promotional offering based on data mining of past purchase
The second form of e-mail is the reverse channel: from the
user to the firm.
The third form of e-mail is from consumer to consumer.
This is the modern-day equivalent of word of mouth.
The End.