E-MarketingRafiuddin Ahmed. Assistant Professor, Department of Marketing, University of Dhaka

Chapter 1: Introduction and Overview– The Big Picture

Overview:

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

The Big PictureTough Times

E-Marketing in ContextEnvironment, Strategy, and Performance (ESP)

E-Marketing EnvironmentLegal FactorsTechnology

E-Business MarketsWhat’s next?

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:1. How to use information technology profitably?2. How to understand what technology means for their business strategies? 3. How time-tested concepts by marketers can be enhanced by the Internet, databases, wireless mobile

devices, and other technologies?4. What’s next after the rapid growth of the Internet and the dot-com bubble has marketers wondering?

What is E-Marketing?

E-Marketing is the application of a broad range of information technologies for: 1. Transforming marketing strategies to create more customer value (more effective segmentation,

targeting, differentiation, and positioning strategies),2. More efficiently planning and executing the conception, distribution, promotion and pricing of goods,

services, and ideas,3. Creating exchanges that satisfy individual consumer and organizational customers’ objectives.

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

E-marketing affects traditional marketing in two ways:1. Increases efficiency in traditional marketing functions,2. The technology of e-marketing transforms many marketing strategies.

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

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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 Big Picture

Easy, inexpensive, and quick access to digital information transforms:1. Economies2. Societies3. Businesses4. Governments

Digital information enhances economies through:1. More efficient markets2. More jobs3. Information access4. Communication globalization5. Lower barriers to foreign trade and investment and more.

Uneven impact of the Internet across the globe:1. 530 million users connected to the Internet worldwide = 8.5% of the global population,2. Developed nations = 15% of the world’s population = 88% of all Internet users,3. U.S. Internet users = 182 million = 64% of the population,4. 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

1. Societies change as global communities based on interests form,2. Worldwide information access slowly decreases cultural and language differences,3. Easy computer networking = work and home boundaries are blurring = more convenient work =

encourage more workaholism and less time with family.4. Class divisions will grow, preventing the upward mobility of people on lower socioeconomic levels and

even entire developing countries, 5. Digital divide: Internet adoption occurs when folks have:

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

The digital environment is enhancing processes and activities across the entire organization:1. Cross-functional teams using computer networks to share and apply knowledge for increased efficiency

and profitability,2. Financial experts communicate shareholder information online, file required government statements, and

invent new ways to value risk, etc., 3. Human resources personnel use the Net for electronic recruiting and training; an increasing number are

managing organizational knowledge and workflow through corporate Web portals. 4. 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, 5. 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:

1. Building better quality customer relationships,2. Finding more business partners and other development opportunities, 3. Building better brand visibility.

Tough Times

The first generation of e-business was like a gold rush = creation of a Web presence and experimentation.Results: 1. Huge sales and market share, 2. BUT little was brought to the bottom line and profit was negative,3. 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. 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:

1. Some firms, such as Levi Strauss, stopped selling online = not efficient + created channel conflict. 2. Other firms merged

E.g. e-business firm took over a traditional firm = AOL purchased Time-Warn

The Most Important Benefits of E-Business to U.S. Executives

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 25What will the future be?

Source: “Key Business and Marketing...” (2002)

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.

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

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

Environment, Strategy, and Performance (ESP)

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

2. SWOT analyses = Strengths and Weaknesses,3. E-business strategies + e-business models + e-marketing plans = Help the firm accomplish its overall

goals,4. 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.

E-Marketing Environment

Key environmental factors affecting e-marketing1. Legal, 2. Technological 3. Market-related factors

Legal Factors1. Current and pending legislation can greatly influence e-marketing strategies:2. 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,3. Difficult for governments to balance freedom of expression against consumer needs,4. New technology brings new opportunities for fraud: enforcement is difficult in a networked world.

Technology1. Technological developments influence:

a. The composition of Internet audiences,b. The quality of material that can be delivered to them.

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

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

4. Technology requires costly investments: a. Web page development costs millions of dollars, b. E-commerce operations require expensive hardware and software,c. New technologies continue to emerge, which make current investments obsolete, d. Putting technology to use entails a steep learning curve.

What is the Internet?

The Internet is a global network of interconnected networks:1. Millions of corporate, government, organizational, and private networks, 2. 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.

Three important types of networks form part of the Internet:1. Intranet = A network running internally in a corporation + using Internet standards (HTML and

browsers) = a mini-Internet but only for internal corporate consumption,2. Extranet = An intranet with value chain partners + the access is normally only partial, 3. 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:

1. Many e-marketing technologies exist: Customer relationship management, supply chain management, and electronic data interchange arrangements predating the Web,

2. Non-Web Internet services such as e-mail and newsgroups:Effective avenues for marketing.

The Internet holds more than one Web:1. The Web that most users access from PCs, 2. Subsets of the Web with content specially formatted for the unique display properties:

a. Web TV, b. Personal digital assistants, c. Cell phones, d. Text-only browsers.

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:1. Create opportunities beyond those possible with the telephone, television, postal mail, or other

communication media, 2. 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 technologies have changed traditional marketing in a number of critical ways:1. Power shift from sellers to buyers,2. Death of distance, 3. Time compression, 4. Knowledge management is key, 5. Interdisciplinary focus, 6. Intellectual capital rules.

E-Business Markets

Once marketers identify appropriate markets, information technology facilitates relationships before and after the transaction with:1. Prospects, 2. Customers,

There are three important markets that both sell and buy to each other: 1. Businesses, 2. Consumers, 3. Governments.

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:

1. Its customers can schedule a package pick-up using the Web site, 2. Track the package using a PC or handheld PalmPilot, 3. Pay the shipping bill online.

Consumer Market

E-marketers must understand consumers in potential geographic segments:1. Iceland and Denmark = 2 of the most wired countries in the world = 60% Internet penetration, 2. Consumers in many countries pay by the minute for local phone access = determine the kind of casual

surfing practiced by Internet users. The consumer market is huge and quite active online:

1. 28% of consumers said they have shopped online or plan to shop online in the next six months,2. 15% purchased offline as a direct result of online information,3. 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 Needs What do customers want in the information economy?

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

2. To safeguard children from objectionable sites, 3. Want marketers to ask permission before sending commercial e-mail messages, 4. Want e-commerce to provide convenience, self-service, speed, good customer service, personal

attention, and value. Fortunately, e-marketing can meet all these needs:

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

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

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

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:

1. Follow rules regarding qualifications, paperwork, etc., 2. Must compete to be on the government list of approved suppliers + compete for specific contracts

through a bidding process, 3. Have to conform to very particular timely delivery of quality products at reasonable prices.

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 :1. Integrating IT software, 2. Boom in Web services, 3. Collaboration software, 4. Dealing with too much data,

Key Terms

1. Business-to-Business (B2B)2. Business-to-Consumer (B2C)3. Business-to-Government (B2G)4. Consumer-to-Consumer (C2C)5. Digital technology6. E-business7. E-commerce8. E-marketing Extranet

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

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

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