Proposal First Draft Word

7/23/2019 Proposal First Draft Word

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An investigation of the relationship between internet

marketing performance and firm performance

Yue Jiao

Introduction:

Internet marketing which uses internet to promote or market products and services is

considered as the fastest way to reach consumers and business. It quickly replaces

traditional advertising media such as TV, radio and leaflet and becomes the most

popular strategies in marketing for companies. It has been considered as an essential

business tools. Internet marketing provides the opportunity for company to increase

market share, expand into new markets, promote new services and improve the

competition in the same industry. It also provides more comprehensive, accurate and up

to date information for reference, assists customers in making decision among multiple

choices on what products or services they need. Most people think that internet

provides equal chance for all kinds of companies regardless the size to promote their

products/service, explore new markets and ultimately make more profits. However it

may not be the case. This study tries to evaluate internet marketing by measuring its

performance and investigate its relationship with firm performance.

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Background:

The importance of the Internet marketing for a company depends on the nature of its

products and services, the buyer behavior as well as its primary target customers

(Chaffey, D., Ellis-Chadwick, F., Mayer, R., & Johnston, K. 2009). The positive impact of

internet use on marketing in industrial organizations has been addressed in many

studies(Cronin, Mary J. 1994;Mehta, Raj and Sivadas 1995; Stump, R., and Sriram, V.

1997), however, most of the studies researching on internet marketing/ digital marketing

have been either descriptive or theoretical. The role of the internet in business has been

investigated by George J. Avlonitis and Despina A. Karayanni in the study of The impact

of Internet use on Business-to-Business Marketing by an empirical method. Data

collected by an email survey of 130 business to business organizations. The conceptual

model was tested by path analysis. The key construct in this study was use intensity of

the internet. It was measured by two variables, the use of the internet tools and internet

budget. Internet enhance business performance in term of sales performance and

efficiency is suggested at the end of this study. However, use intensity of internet is not

strong enough to draw a conclusion on internet improves business performance.

Moreover, this study has limitations regarding the measurement of use intensity of

internet. In order to be more accurate, actual average daily commercial use, for

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Size of firm

Internet Marketing Performance

Create Brand Awareness

Generate Leads

Firm Performance

Profitability

Growth

Cstomer satisfaction

!m"loyee Satisfaction

#y"e of firm

example, hours of stay online, number of employee who are using internet, and number

of emails with professional content received everyday should be tracked (Avlonitis, G.,

and Karayanni, D, 2000). So there is still a lack of accurate measurement to assess

Internet marketing. A more comprehensive measurement is needed to understand

internet marketing. This study is trying to find out a more accurate measurement to

assess internet marketing and its impact on business in a way of combining subjective

indictor and objective indicator.

Conceptual model and Hypotheses

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H2

H1

H3


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This study is trying to find out the relationship between internet marketing performance

and firm performance, and how this relationship moderated by the size of the firm as

well as the type of the firm. Three Hypotheses has been raised in order to address this

problem.

H1: Internet marketing performance has positive relationship with firm performance.

H2: The relationship between internet marketing performance and firm performance is

moderated by size of the firm.

H3: The relationship between internet marketing performance and firm performance is

moderated by type of the firm.

Constructs and measurements:

Two main constructs in this study are internet marketing performance and firm

performance.

Internet marketing performance:

The performance of internet marketing is defined in this study as the extent to which

internet assists a company to achieve its objectives by using internet marketing. Various

marketing studies indicates that using marketing performance measurement data in

marketing decisions has positive performance implication. (Kannan, Pope, & Jain, 2009;

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Mintz & Currim, 2013). The performance measurement process can be defined as

following steps:

1.Map measurement objectives to project or business goals.

2.Identify specific key performance indicators that align with objectives.

3.Establish performance benchmarks or target to gauge success (Murdough, 2013)

In this study, this process is adopted to measure the performance of internet marketing.

An interview were conducted to investigate the purpose of adopting internet marketing in

2006. A total of 25 respondents, who were represented four categories of company

(retailing; government/not-for-profit; business to business and manufacturing/service) all

mentioned brand awareness creation and leads generation as either a primary or

secondary purpose of using internet marketing (Ray Welling, Lesley White, 2006).

Brand awareness creation is an important goal in many companies marketing

strategies. Brand awareness is the extent to which a brand is recognized and recalled

by potential customers. With a higher level of understanding, brand awareness can be

defined as the percentage of customers who know the product in the market, or the

association of the brand with the product category (E Macdonald,B Sharp, 2003). When

people use one product or service designed by or about one company, or the company

gains increased exposure to its brand (Donna L. Hoffman, Marek Fodor, 2010). Brand

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awareness, in the context of internet marketing, is reflected by branded traffic which is

measured by the number of website visit and the number of keyword search.

Regardless the ultimate goal of using internet, whether it is financial, behavioral or

strategic, most companies are expecting to attract a high volumes of branded traffic

(Ray Welling, Lesley White, 2006). Branded Traffic refers to the amount of data across

the internet that comes from visitors who search keywords that include any reference to

company's brand such as name, keywords of the particular products or services.

Achieving a large amount of branded traffic is also an prerequisite for companies to

reach their higher-level goal.

Leads is known as contact information. Leads generation refers to generate customers

interest or inquiry into a business products or services through the Internet. Poor

performance of internet marketing is much like a sales brochure which does not

generate leads, but merely provides information for customers who already know to

look you up on the internet. The key performance indicator is Capture leads, which is

measured by the number of name, phone number, email collected by e-newsletter.

Key performance indicator Measured by

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Brand awareness creation

(Branded Traffic)

Number of website visit and number of keyword search

Leads generation

(Capture Leads)

Number of name, phone number, email collected by e-

newsletter.

Firm Performance:

The narrowest conception of firm performance centers on the use of simple outcome-

based financial indicators that are assumed to reflect the fulfillment of the economic

goals of the firm (Dess, G. G., & Robinson, R. B. 1984). Firm performance was always

assessed by its financial performance indices, such as return on investment, return on

assets. However, considering the potential strategic and competitive implications of

revealing these sensitive information, it can be predicted that not all the companies are

willing to report their current financial performance. In the meantime, the financial

indices which are reported in the public are always outdated (Li, Eldon Y., Ja-Shen

Chen, and Yuan-Ho Huang,2006). In order to circumvent the perceived risk of obtaining

inaccurate performance data, an indirect approach for collecting data was used. Rather

than directly collecting financial performance data by asking respondents to report their

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key indices, people were asking to assess and report how well their firm performed

during last 3 year by comparing to their major competitor in term of profitability, growth,

customer satisfaction and employee satisfaction (Tippins, M. J., & Sohi, R. S. 2003,

Santos, J. B., & Brito, L. A. L. 2012).

Profitability in this study is defined as the ability of a firm to make a profit and the ability

to generate returns. It can be reflected by several financial ratios such as return on

assets, return on investment, and return on equity. Firm growth is defined as essentially

expansion. It measures the ability to make company larger, enhance markets as well as

increase profits and cash generation. It can be reflected by a number of pertinent

statistics, such as overall sales, number of staff, market share and turnover.

In addition to these two financial based performance indicator, customer and employee

satisfaction are also considered as key performance indicators to measure firm

performance. customer satisfaction measures how products and services supplied by a

company match or exceed customer expectation. It is the best indicator of the likelihood

of a customer will make a purchase in the future. High customer satisfaction associates

with high willingness-to-pay and thus increase the value created by the company as well

as the reputation. Employee satisfaction refers to whether employees are happy and

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contented with their job or work environment. In other word, it describes whether current

job can fulfill employees need and desire. It is often related to the investment in human

resources practices such as investment in training and developing, Wages and rewards

policies, Career plans (Santos, J. B., & Brito, L. A. L. 2012). Higher level of employees

satisfaction results in a higher level of productivity. It increases employee morale; such

that employees are more willing to work harder to improve the firm performance.

Key performance indicator Measured by

Profitability

Return on Assets, Return on investment, Return on

equity

Growth

Market-share growth, Asset growth, Net revenue

growth, Net income growth, Number of employees

growth

Customer Satisfaction

Number of complaints, Repurchase rate, New customer

retention, General customers satisfaction, Number of

new products/services launched

Employee Satisfaction

Turn-over, Investments in employees development and

training, Wages and rewards policies, Career plans,

Organizational climate, General employees satisfaction

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Moreover, This study tries to further investigate the relationship between internet

marketing performance and firm performance by employing two moderators: size of firm

and type of firm. Internet marketing is suggested as a major marketing strategy for

small businesses. Internet provides equal chance for companies regardless the size to

promote their products/service, explore new markets and keep track of customers'

preferences. Small business should benefit more due to cost saving and be more

competitive. However, Small companies have limited capability of information

management to compete with large company. Information management capability has

positive association with firm performance in term of customer management, process

management and performance management (Mithas, S., RAMASUBBU, N., &

Sambamurthy, V., 2011). In the other hand, given the lack of brand name and credibility

of small business, larger companies may achieve more benefits in term of gaining the

access to larger markets and increase customer volume by using internet marketing.

Considering the impact of size of the firm on internet marketing, the relationship

between internet marketing performance and firm performance may also be effect,

probably in the same direction.

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All customers need information to evaluate products or service provided by a company

and make a purchase decision, however B2B purchasing agents and individual B2C

shoppers focus on different aspects. In particular, B2B purchasing agents are more

concerned than are B2C consumers with obtaining specific information, such as delivery

conditions and pricing option (Bridges, E., Goldsmith, R. E., & Hofacker, C. F, 2005).

Under the assumption of same capability of providing information by internet marketing,

B2B will interact with the company more frequently to require specific information and

thus that objectives of band awareness creation and leads generating are achieved. So

type of firm is considered as another moderator which affects the relationship between

internet marketing performance and firm performance in this study.

Methodology and data collecting

A self-analysis and reporting survey is designed to gather the data. Surveys are emailed

to executives who have sufficient knowledge about the companies and involve a lot with

internet marketing. A diverse sample of 200 companies are selected including 100 B2B

and 100 B2C. The companies should have their own on-going website and adopt

internet marketing as one of marketing strategies for at least three years.

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Executives are asked to assess the performance of internet marketing by reporting the

extent to which internet assists a company to achieve its objectives. As we mentioned

above, two primary objectives of using internet marketing are brand awareness creation

and Leads generation. According to performance measurement process, the

performance of each key performance indicator of the objectives can be described as

percent complete:

Performance of indicator $ actal %ale&target %ale'())*

This needs executives have a target value for each indicator of the objective in their

mind. Actual data can be collected by Web analytics. Web analytics is adopted by

companies to understand and optimize internet usage by the means of collecting,

analyzing and reporting internet data ( Chaffey and Patron, 2012). It serves as a tool

that collect clickstream data regarding the source of website traffic. For some small

business which have limited budget and do not have a completed information system,

Google analytics can be used to collect clickstream data for free. In the meantime,

subjective performance questions are asked to assess the internet marketing

performance with four items covering recognition, recall, top-of-mind, and brand

knowledge (Homburg, C., Klarmann, M., & Schmitt, J. 2010) regarding to the objective

of brand awareness creation; two items covering interests and inquiry regarding to leads

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generation. The combination of subjective questions and objective data provides a more

accurate and comprehensive measurement of internet marketing performance.

As for firm performance, executives are asked to judge their companys performance as

compared to the competition for each indicator. subjective and objective performance

indicators proved to be positively correlated (Dawes, J. 1999). A correlations (p


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marketing performance, and thus that present a better firm performance ultimately. So

size of the company should have significant effect on the relationship between internet

marketing performance and firm performance. A significant effect should be also

expected with the moderator type of firm. B2B companies are more willing to show

their interests and requests for more specific information regarding to the provided

products or service. B2B purchase agents frequently interact with company, such as

register newsletter, download products introduction, email communicate with more detail

and specific concerns will definitely improve internet marketing performance in term of

brand awareness creation and leads generation.

In the end, this study still has limitation. The internet marketing has been narrowed

down to the website use in this study for purpose of data collecting. The measurements

of brand awareness creation and leads generation are limited. In order to get more

accurate description of two key performance indicators, more measurements should be

considered. However, this study is merely introducing a way which combines subjective

indicator and objective indicator together to measure a constructer. Further improvement

is still needed when more knowledge of internet marketing is available.

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Appendix 1: Survey sample

1. Type of your company: B2B ____ B2C ____

2. Size of your company: 250 ____

3. Bran a!arene"" crea#ion: $%ea"e inica#e #&e e'#en# #o !&ic& you i"a(ree #o a(ree !i#& fo%%o!in(

"#a#emen# )a"e on a "e*en-poin# "ca%e: +"#ron(%y i"a(ree, #o +"#ron(%y a(ree,

S#ron(%y i"a(ree eu#ra% S#ron(%y a(ree

T&e eci"ion-maer" of our po#en#ia% cu"#omer"&a*e &ear of our )ran.

1 2 3 4 5 /

T&e eci"ion-maer" amon( our po#en#ia%cu"#omer" reca%% our )ran name immeia#e%y!&en #&ey #&in of our prouc# ca#e(ory.

1 2 3 4 5 /

ur )ran i" of#en a# #&e #op of #&e min" of #&eeci"ion-maer" in po#en#ia% cu"#omer firm" !&en#&ey #&in of our prouc# ca#e(ory.

1 2 3 4 5 /

T&e eci"ion-maer" can c%ear%y re%a#e our )ran #oa cer#ain prouc# ca#e(ory.

1 2 3 4 5 /

1.

4. ea" (enera#ion: $%ea"e inica#e #&e e'#en# #o !&ic& you i"a(ree #o a(ree !i#& fo%%o!in( "#a#emen#

)a"e on a "e*en-poin# "ca%e: +"#ron(%y i"a(ree, #o +"#ron(%y a(ree,

S#ron(%y i"a(ree eu#ra% S#ron(%y a(ree

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T&e eci"ion-maer" of our po#en#ia% cu"#omer"are in#ere"#e in our prouc#" or "er*ice

1 2 3 4 5 /

T&e eci"ion-maer" of our po#en#ia% are !i%%in( #oreuire more informa#ion a)ou# our prouc#" or

"er*ice

1 2 3 4 5 /

2.

5. &a# i" #&e percen# comp%e#e re(arin( #o num)er of !e)"i#e *i"i# 67c#ua% num)er8 Tar(e#

num)er100;

90 ____

4. &a# i" #&e percen# comp%e#e re(arin( #o num)er of ey!or" "earc& 67c#ua% num)er8 Tar(e#

num)er100;

90 ____

5. &a# i" #&e percen# comp%e#e re(arin( #o num)er of name p&one num)er emai% co%%ec#e )y e-

ne!"%e##er 67c#ua% num)er8 Tar(e# num)er100;

90 ____

/. =irm performance: $%ea"e inica#e #&e e'#en# #o !&ic& you i"a(ree #o a(ree !i#& fo%%o!in(

"#a#emen# )a"e on a "e*en-poin# "ca%e: +c%ear%y !or"e, #o +c%ear%y )e##er,

C%ear%y !or"e ear%y "ame C%ear%y )e##er

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o re#urn on a""e#"

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec#

#o re#urn on in*e"#men#

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o re#urn on eui#y

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o mare# "&are (ro!#&

1 2 3 4 5 /

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*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o a""e#" (ro!#&

1 2 3 4 5 /


#o ne# re*enue (ro!#&

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o e# income (ro!#&

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o num)er of eemp%oyee (ro!#&

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o num)er of comp%ain#"

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o repurc&"in( ra#e

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o ne! cu"#omer re#en#ion

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o (enera% cu"#omer "a#i"fac#ion

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o ne! prouc#"8"er*ice" %aunc&e

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o Turn-o*er

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o in*e"#men# in emp%oyee e*e%opmen# an#rainin(

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o !a(e an re!ar" po%icie"

1 2 3 4 5 /

*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o career p%an for emp%oyee

1 2 3 4 5 /

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*er #&e %a"# #&ree year" &o! &a" your firmperforme re%a#i*e #o your compe#i#or" !i#& re"pec##o or(aniza#iona% c%ima#e

1 2 3 4 5 /


#o (enera% emp%oyee" "a#i"fac#ion

1 2 3 4 5 /

3.

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1 Chaffey, Dave, et al. Internet marketing: strategy, implementation and practice.

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4.Cronin, Mary J.: Doing Business on the Internet: How the Electronic Highway Is

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Business Marketing. Industrial Marketing Management, 441-459 (2000).

8.Kannan, P. K., Pope, B. K., & Jain, S. Pricing digital content product lines: A model

and application for the National Academies Press. Marketing Science, 28(4), 620

636 (2009).

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Proposal First Draft Word