E Marketing

E-Marketing, 3rd edition

Judy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 1: The Big Picture

© Prentice Hall 2003

The Emergence of E-Marketing: The Google StoryWhat is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

The Google story shows:

Markets always welcome an innovative new product providing customer value.

Customers trust good brands.

Well-crafted marketing mix strategies can be effective in helping newcomers enter crowded markets.

Key questions for corporations:

How to use information technology profitably ?

How to understand what technology means for their business strategies?

How time-tested concepts by marketers can be enhanced by the Internet, databases, wireless mobile devices, and other technologies?

What’s next after the rapid growth of the Internet and the dot-com bubble has marketers wondering ?

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

What is E-Marketing?

E-Marketing is the application of a broad range of information technologies for:

Transforming marketing strategies to create more customer value (more effective segmentation, targeting, differentiation, and positioning strategies),

More efficiently planning and executing the conception, distribution, promotion and pricing of goods, services, and ideas,

Creating exchanges that satisfy individual consumer and organizational customers’ objectives.

What is E-Marketing? Alternative definition:

E-marketing is the result of information technology applied to traditional marketing.

E-marketing affects traditional marketing in two ways:

Increases efficiency in traditional marketing functions, The technology of e-marketing transforms many

marketing strategies.

Results: new business models that add customer value and/or increase company profitability.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

What Is E-Business?

E-business “is the continuous optimization of a firm’s business activities through digital technology”

Digital technologies = information technology are things like computers and the Internet, that allow the storage and transmission of data in digital formats (1’s and 0’s)

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

The Big Picture Easy, inexpensive, and quick access to digital

information transforms:- economies, - societies, - governments, - businesses.

Digital information enhances economies through: more efficient markets, more jobs, information access, communication globalization, lower barriers to foreign trade and investment, and

more.

Uneven impact of the Internet across the globe:

530 million users connected to the Internet worldwide = 8.5% of the global population,

Developed nations = 15% of the world’s population = 88% of all Internet users,

U.S. Internet users = 182 million = 64% of the population,

Indigenous peoples in remote locations gaining health,

legal, and other advice, or selling native products using the Internet.

Undesirable changes created by a networked world

Societies change as global communities based on interests form,

Worldwide information access slowly decreases cultural and language differences,

Easy computer networking = work and home boundaries are blurring = more convenient work = encourage more workaholism and less time with family.

Undesirable changes created by a networked world

Class divisions will grow, preventing the upward mobility of people on lower socioeconomic levels and even entire developing countries,

Digital divide: Internet adoption occurs when folks have:

Enough money to buy a computer, The literacy to read what is on Web pages, The education to be motivated to do it.

The digital environment is enhancing processes and activities across the entire organization:

Cross-functional teams using computer networks to share and apply knowledge for increased efficiency and profitability,

Financial experts communicate shareholder information online, file required government statements, and invent new ways to value risk, etc.,

Human resources personnel use the Net for electronic recruiting and training; an increasing number are managing organizational knowledge and workflow through corporate Web portals.

The digital environment is enhancing processes and activities across the entire organization:

Production and operation managers can adjust manufacturing based on the Internet’s ability to give immediate sales feedback resulting in truly just-in-time inventory and building products to order,

Strategists are leveraging the Net to apply the firm’s knowledge in building and maintaining a competitive edge (easy access to data).

Important e-business benefits according to U.S. top executives:

Building better quality customer relationships,

Finding more business partners and other development opportunities,

Building better brand visibility.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

Tough Times

The first generation of e-business was like a gold rush = creation of a Web presence and experimentation.

Results: Huge sales and market share, BUT little was brought to the bottom line and profit was

negative, Since January 2000, however, over 500 Internet firms have

shut down in the U.S. alone.

E.g: CDNow, Lycos, DoubleClick, E*Trade, and Amazon.com

The “trough of disillusion” is based 30% on the technology recession and 70% on disappointment with e-business results.

Tough Times

Marketers return to their traditional roots and rely on well-grounded strategy and sound marketing practices.

During the dot-com shakeout from 2000-2002, there was much industry consolidation:

Some firms, such as Levi Strauss, stopped selling online = not efficient + created channel conflict.

Other firms merged, E.g. e-business firm took over a traditional firm =

AOL purchased Time-Warner.

The Most Important Benefits of E-Business to U.S. ExecutivesSource: “Key Business and Marketing...” (2002)

Benefit % Mentioning

Better quality customer relationships 61More business development opportunities 50Better brand visibility 50Drive fat from supply chain 42Reduce time-to-market 33Increase customer quantity 25

What will the future be?

Gartner Group predicts that a true e-business model will emerge, and by 2008 the “e” will be dropped, making electronic business just part of the way things are done.

Some say that “E-business has become just business. E-commerce has become just commerce. The new economy has become just the economy (Aronica and Fingar 2001).

” Others say that this is far from the truth—for them, e-business will always have its own models, concepts, and practices.

Charles Schwab has already gone through the entire cycle allowing e.Schwab.com to cannibalize the larger brick-and-mortar securities firm in 1998.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

There is Hope After the Trough of DisillusionSource: Adapted from Raskino and Andren of Gartner Research (2001)

Technology Peak of Trough of Slope of Plateau of Trigger Inflated Disillusion Enlightnment Profitability Expectation 1990-1996 1999 2000 2001 2002 2003 2004 2005 2006 Equity times Debt Times Positive Cash Flow

Visibility

Dot-com peak

U.S. Recesssion E-Business

becomes “just business”

E-Marketing in Context: Where does e-marketing fit into this picture?

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP)

E-Marketing Environment Legal Factors Technology E-Business Markets

What’s Next?

Overview

Environment, Strategy, and Performance (ESP)

Business environment: legal, technological, competitive, market-related, and other environmental factors external to the firm = Opportunities and Threats,

SWOT analyses = Strengths and Weaknesses,

E-business strategies + e-business models + e-marketing plans = Help the firm accomplish its overall goals,

Determine the success of the strategies and plans by measuring results.

= Performance metrics, specific measures designed to evaluate the effectiveness and efficiency of the e-

business and e-marketing operations.

P

Legal - Ethical Technology Competition Other factors

E-Business Strategy/ Model

Performance Metrics

SWOT

E-Marketing Plan

E-Marketing Strategy

Implementation Marketing Mix/CRM

Markets

Internet E

S

Exhibit 1 - 1 E-Marketing in Context: the ESP Model

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

Key environmental factors affecting e-marketing

1. Legal,

2. Technological

3. Market-related factors

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

Legal Factors

Current and pending legislation can greatly influence e-marketing strategies:

Privacy: Difficult to legislate + Critical because consumers yield personal information over the Internet

Opt-out e-mail: when users must uncheck a Web page box to avoid being put on a company’s e-mail list,

Difficult for governments to balance freedom of expression against consumer needs,

New technology brings new opportunities for fraud: enforcement is difficult

in a networked world.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

Technology

Technological developments influence:- The composition of Internet audiences,- The quality of material that can be delivered to

them.

E-marketing is evolving through software advances: Technologies can target consumers according to their online behavior to give a firm a distinct competitive advantage.

Technology

Technology lowers costs: Many firms have saved money on staff and paperwork via electronic order processing, billing, and e-mail.

Technology requires costly investments: - Web page development costs millions of dollars, - E-commerce operations require expensive hardware and

software,- New technologies continue to emerge, which make

current investments obsolete, - Putting technology to use entails a steep learning curve.

What is the Internet?

The Internet is a global network of interconnected networks:

- Millions of corporate, government, organizational, and private networks,

- The Internet consists of computers with data, users who send and receive the data files, and a technology infrastructure to move, create, and view or listen to the content.

What is the Internet?

Three important types of networks form part of the Internet:

Intranet = A network running internally in a corporation + using Internet standards (HTML and browsers) = a mini-Internet but only for internal corporate consumption,

Extranet = An intranet with value chain partners + the access is normally only partial,

Web = The portion of the Internet that supports a graphical user interface for hypertext navigation with a browser (Netscape / Internet Explorer). The Web is what most people think about when they think of the Internet.

It’s Bigger Than the Internet

Electronic marketing reaches far beyond the Web: Many e-marketing technologies exist

= Customer relationship management, supply

chain management, and electronic data interchange arrangements predating the Web,

Non-Web Internet services such as e-mail and newsgroups

= Effective avenues for marketing.

It’s Bigger Than the Internet The Internet holds more than one Web:

The Web that most users access from PCs,

Subsets of the Web with content specially formatted for the unique display properties:

Web TV, Personal digital assistants, Cell phones, Text-only browsers.

It’s Bigger Than the Internet

Offline electronic data-collection devices such as bar code scanners.

Portion of the Web containing high-bandwidth content for users who have either cable modems or digital subscriber loop (DSL) connections.

Internet Properties and Marketing Implications

Marketers who grasp what Internet technologies can do will be better poised to capitalize on information technology.

Internet properties:- Create opportunities beyond those possible with the

telephone, television, postal mail, or other communication media,

- More effective and efficient marketing strategy + tactical implementation + change the way marketing is conducted.

E.g. The idea of digitizing data (bits not atoms) has transformed media and software delivery methods + created a new transaction channel.

Internet Properties and Marketing ImplicationsInternet technologies have changed traditional

marketing in a number of critical ways:

Power shift from sellers to buyers, Death of distance, Time compression, Knowledge management is key, Interdisciplinary focus, Intellectual capital rules.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

E-Business Markets Once marketers identify appropriate markets,

information technology facilitates relationships before and after the transaction with:

Prospects, Customers,

There are three important markets that both sell and buy to each other:

Businesses, Consumers, Governments.

Partners, Supply chain members.

To Business To Consumer To GovernmentInitiated byBusiness

Business-to-Business(B2B)FreeMarketswww.freemarkets.com

Business-to-Consumer (B2C)CDNowWww.cdnow.com

Business-to-Government (B2G)Western AustralianGovernment Supplywww.ssc.wa.gov.au/

Initiated byConsumer

Consumer-to-Business(C2B)Better Business Bureausitewww.bbb.org

Consumer-to-Consumer(C2C)eBaywww.ebay.com

Consumer-to-Government(C2G)GovWorkswww.govworks.com

Initiated byGovernment

Government-to-Business(G2B)Small BusinessAdministration sitewww.sba.gov

Government-to-Consumer(G2C)California state siteWww.state.ca.us

Government-to-Government(G2G)GovOne Solutionshttp://www.govonesolutions.com/

Exhibit 1 - 1 E-Business MarketsSource: Marian Wood (2001) with minor adaptation (p. 2)

Business Market- It is huge: more businesses are connected to the

internet than consumers.- It is transparent to consumers: it involves proprietary

networks that allow information and database sharing.

E.g. FedEx, the package delivery firm:- Its customers can schedule a package pick-up using the Web

site, - Track the package using a PC or handheld PalmPilot,

- Pay the shipping bill online.

Consumer Market E-marketers must understand consumers in

potential geographic segments:

Iceland and Denmark = 2 of the most wired countries in the world = 60% Internet penetration,

Consumers in many countries pay by the minute for local phone access = determine the kind of casual surfing practiced by Internet users.

Consumer Market

The consumer market is huge and quite active online:

28% of consumers said they have shopped online or plan to shop online in the next six months,

15% purchased offline as a direct result of online information,

U.S. consumers are the biggest online shoppers, spending US$53 billion in 2001, an increase of nearly 20% from 2000.

Revenge of the Consumer The rebellion started with television channel surfing using the

remote control. Consumers did not seem to appreciate that commercials pay for broadcast TV programs.

At the start of the 21st century, consumers have control via the mouse. When television, radio, print media, entertainment, and shopping all converge seamlessly on a computer-like device, consumers will truly have information on demand.

Consumers are more demanding and more sophisticated, and marketers will have to become better at delivering customer value.

Consumer NeedsWhat do customers want in the information economy?

Privacy: Customers want marketers to keep their data confidential + don’t want to be bothered by sales calls at home during dinner,

To safeguard children from objectionable sites,

Want marketers to ask permission before sending commercial e-mail messages,

Want e-commerce to provide convenience, self-service, speed,

good customer service, personal attention, and value.

Consumer Needs

Fortunately, e-marketing can meet all these needs:

With mass customization individuals can contact firms over the Internet and receive responses tailored to their needs,

Business can also customize and personalize products and communications to strengthen long-term relationships with customers.

E.g. Amazon.com presents personalized Web pages to users

Exhibit 1 - 1 Amazon.com Uses Mass Customization to Personalize Web PagesSource: www.amazon.com Amazon.com is a registered trademark or trademark of Amazon.com, Inc. in the UnitedStates and/or other countries. © 2000 by Amazon.com. All rights reserved.

Government Market The U. S. government is the world’s largest buyer,

purchasing over $200 billion in goods and services every year (see www.isbdcorp.org/gmag).

Add to this the purchasing power of U.S. states, counties, cities, and other municipal agencies, and this makes for a huge market.

Small and large businesses usually have an equal chance of selling to governments + government Web sites announce their buying needs in advance of the bidding process.

Government Market

Businesses wishing to sell to governments face challenges unique to this market:

Follow rules regarding qualifications, paperwork, etc.,

Must compete to be on the government list of approved suppliers + compete for specific contracts through a bidding process,

Have to conform to very particular timely delivery of quality products at reasonable prices.

The Emergence of E-Marketing What is E-Marketing? What Is E-Business?

The Big Picture Tough Times E-Marketing in Context

Environment, Strategy, and Performance (ESP) E-Marketing Environment

Legal Factors Technology E-Business Markets

What’s Next?

Overview

What’s Next?

Regardless of the current disillusion with e-business, many solid successes exist today and exciting new growth areas will soon emerge.

Seven trends that will help businesses move forward into e-marketing : Integrating IT software, Boom in Web services, Collaboration software, Dealing with too much data,

Data security, Wireless is here to stay, Growth in portable computing.

Key Terms

Business-to-Business (B2B) Business-to-Consumer

(B2C) Business-to-Government

(B2G) Consumer-to-Consumer

(C2C) Digital technology E-business E-commerce E-marketing Extranet

Information technology Internet Intranet Mass customization Performance metrics Web Web services

Review Questions

1.Define e-business and e-marketing.

2.What are performance metrics and why are they important?

3.What are some of the key legal issues that affect e-marketing?

4.How does technology both raise and lower costs for companies?

5.As a technology, how does the Internet compare with the telephone?

6.What are some of the marketing implications of Internet technologies?

7.What are the three main markets of e-business, and how do they differ?

8.In the context of e-marketing, what does “revenge of the consumer” mean?

Discussion Questions

1. As a marketer, do you agree with the U.S. executives who say “better quality customer relationships” is one of the most important e-business benefits? Why?

2. As a consumer, are you likely to benefit when e-business becomes “just business” in the near future? Explain your answer.

3. Some economists suggest that the increase in e-commerce within the B2B market will lead to greater competition and more goods and services becoming commoditiesthat is, solely competing on price. How do you think this is likely to affect buyers within the B2B market? How would it affect sellers?

4. What concerns about consumer privacy are raised by the increased use of wireless computing and handheld devices outside the home or workplace?