CHAPTER 2

LITERATURE OVERVIEW

2.1 Marketing Definition

Marketing is a process, which is a method of doing an activity generally

involving a series of procedures. The mission of marketing is to attract and

retain customers.

According to Mohammed, Fisher, et.al., 2002, p 3, “The classical marketing

approach involves four broad steps: market analysis, market planning,

implementation, and control.” Market analysis involves searching for

opportunities in the marketplace with unique skills. Market planning requires

segmentation, target market choice, positioning, and the design of the

marketing mix (4Ps). Market implementation includes the systems and

processes to go to market with marketing program and marketing control

refers to the informal and formal mechanisms that can be used by marketing

managers to keep the marketing program run well.

2.2 Internet Marketing

“Internet marketing is a process of building and maintaining customer

relationships through online activities to facilitate the exchange of ideas,

products, and services that satisfy the goals of both parties.” (Mohammed,

Fisher, et.al., 2002, p. 4).

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Internet marketing has become an important component of marketing

nowadays. Globalization has forced marketers to move forward with no

boundaries and Internet is one of the most accurate tools to use.

The goal of Internet marketing is not only build relationships with online

customers but the main goal is to build offline as well as online relationships.

2.3 Eight basic steps of marketing for non-profit

organization

Marketing is an unfamiliar concept for many nonprofit organizations. These

organizations understand that marketing is more than just the old sense of

making a sale or obtaining a donation. Marketing is a way to satisfying the

consumer and donor needs.

According to Laura Schneider (www.marketing.com), there are eight steps

that will suggest marketing ideas that could make a significant difference.

1. Define the target, research similar organizations and associations.

2. Determine the desired outcome of marketing efforts.

3. Using the information gathered in Step 1 and 2 develop brochures and

marketing materials that describe the benefits, services, donation

opportunities, and values of organization.

4. Develop public relations strategy.

Be sure to use the media, other associations that are reaching out to the

same target market.

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5. Develop and maintain a professional Internet presence by creating a

web site. A web site can be used as a great resource to display useful

information, news, monthly newsletters, events, create community,

share alternatives to donating money, and showcase the benefits of

organization.

6. Research and maintain prospect and customer databases. Do not let

these resources be wasted. Use them for special mailings, follow-up

telephone calls, event invitations, alliance development, research

profiling, and market segmentation.

7. Show and advertise the results and objectives that organization

achieves.

8. Always actively search for alliances with other organizations,

commerce, government, advertising media, and business. This step

alone often brings the most benefit to nonprofit organizations.

2.4 Seven Stages of Internet Marketing

Like a traditional marketing program, an Internet Marketing program involves

a process called The Seven Stages as shown in Figure 2.1 below. These seven

stages should be coordinated and internally consistent while the process

should be loop back continuously.

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Figure 2.1 The Seven-Stage Cycle of Internet Marketing

According to Mohammed, Fisher, et. al., 2002, p. 8 the Seven Stages of

Internet Marketing are framing the market opportunity, formulating the

marketing strategy, designing the customer experience, crafting the customer

interface, designing the marketing program, leveraging customer information

through technology, and evaluating the results of the marketing program as a

whole.

2.4.1 Stage One: Framing the market opportunity

Many companies begin opportunity framing from their experience about a

market or a technology. This stage involves the analysis of market

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opportunities. There are six steps, which can be used to evaluate the

attractiveness of the opportunity. Figure 2.2 below lists the steps that firms

should satisfy in order to frame market opportunity, as well as the benefits of

each step. It is important to note that these steps are not necessarily sequential

but it depends on the situation in which company could step into this process

at any point

Figure 2.2 Framework for Market Opportunity

Six steps in analyzing Market-Opportunity Framework:

1. Investigate the opportunity in an existing or new value system.

The value system is the entire chain of suppliers, distributors, competitors,

buyers, and intermediaries that bring an existing offering to market

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therefore, a value system connect the processes and activities within and

among firms that creates benefits for intermediaries and end consumers.

Value is created from the first inputs through to the end: customer

purchase, usage and disposal activities.

e

As shown in Figur

a lens that yields id

types:

1. Trapped value

This value can

lowering searc

systems by com

2. New-to-the-wo

Three ways t

Internet and

Figure 2.3 Three types of Basic Valu

e 2.3 above, firms should look at the value system with

eas about new business possibilities. Three basic value

be obtained by creating more efficient markets by

h and transaction costs and creating more efficient value

pressing or eliminating steps in a current value system.

rld value

o create this value are customizing offerings using

digital flexibility to make product more attractive,

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building efficient community through Internet, and introducing new-

to-the-world functionality or customer experience.

3. Hybrid value

This value can be created by disrupting current pricing to make the

market more efficient, enabling ease of access to enhance the access

point and degree of communication between relevant exchange

partners, and radically extend reach by delivering cost effective.

2. Identify unmet or underserved customers needs.

The customer decision mapping process can be used to systematically

define unmet or underserved needs, by mapping the customers’ activities

and choices in assessing a specific experience within a value system.

Mapping the customer decision process may help generate new ideas

about unmet or underserved need.

3. Determine target customer segments.

Figure 2.4 Segmentation Approach

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4. Assess resource requirement to deliver the offering.

The company needs to bring new offering through its own resources and

potential partners in order to win the market.

5. Assess competitive, technological, and financial attractiveness of

opportunity.

There are four areas that can be used to determine the character and

magnitude of the opportunity:

• Competitive intensity.

Factors related in competitive intensity are:

i. The number and identity of competitors as shown below

in Figure 2.5 the Eastman Kodak competitors profile

ii. The strengths and weaknesses at delivering benefits from

the competitors

Figure 2.5 Competitor Profiling-Eastman Kodak

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• Customer dynamics

Elements of the customer dynamics for the market are:

1 The level of unmeet need

2 The level of interaction between major customer segments

3 The rate of growth

• Technology vulnerability

These include the impact of the penetration of enabling

technologies and impact of new technologies on the value

proposition.

• Microeconomics

This opportunity includes the market size and level of profitability.

6. Conduct a go/no-go assessment.

At this point, company should have a clear picture of marketing

opportunity and able to describe the value system for the industry and

have the strong sense for how intervention into value system and customer

decision process could create new benefits, enhance existing ones, or

unlock value traps in the current system.

2.4.2 Stage two: Formulating the Marketing Strategy

Traditionally marketing strategy consists of segmentation, targeting, and

positioning, and then supported by the marketing program which involves the

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marketing mix- price, product, promotion and distribution. As shown in

Figure 2.6 below, all of these decisions are interdependent and interrelated

and cause difficulties in decision-making process.

Figure 2.6 Marketing Strategy Decisions

Segmentation is defining market into subunits of customers who are similar in

value within the product category or in terms of cost to serve, and

characteristics to a particular marketing program.

Targeting is the process of identifying and selecting the market segment,

which are most attractive to the firm because of profitability, cost to serve,

accessibility, growth potential, or other criteria.

Positioning is about affecting consumers’ perceptions of the product by

designing the marketing message so that the product is perceived to be both

unique and valued by the target market.

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Internet marketing strategy is based upon corporate, business-unit, and overall

marketing strategies of the firm. This linkage shown in Figure 2.7 aligned the

marketing strategy goals, resources, and actions with the business unit

strategy.

Figure 2.7 Corporate, Business-Unit, and Marketing Strategy

2.4.3 Stage three: Designing the customer experience

Customer experience refers to a target customer’s perception and

interpretation of all the stimuli encountered while interacting with a firm.

The experience hierarchy can be used to further explore customer experience.

The hierarchy includes three stages of customer experience

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2.4.3.1 Stage one: experiencing functionality

There are five core principals for experiencing functionality, as listed

below:

! Usability and ease of navigation

This is measured by how well a website anticipate a user’s needs and

creates and intuitive path that allows the user to achieve goals.

! Speed

Refer to the time required to display a web page on the user’s screen.

! Reliability

Describe the extent to which a website experiences periods of

downtime or times when user cannot access its pages because of

planned maintenance of system crashes.

! Security

Security will provide trust to the viewer of the website. Combining

security and convenience will lead to customer confidents, which

enhanced the customer experience.

! Media accessibility

Websites need to be simplified and specifically designed for multiple

platforms.

The website must offer the ability to download various media

platforms.

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2.4.3.2 Stage two: experiencing intimacy

The second stage of the experience hierarchy is an experience that

invites intimacy with the firm. This stage consists of:

1 Customization

Customization is a website’s ability to change itself for each user.

2 Communication

Communication refers to the dialogue between the site and its

users. There are three forms of communication, firm-to-user

communication, user-to-firm communication, and two-way

communication.

3 Consistency

Consistency is the degree to which a customer experience at a

website or retail store is replicable over time.

4 Trustworthiness

Trustworthiness is a trait that is established over time, after users

have had several opportunities to evaluate a company’s services.

5 Exceptional value

If a firm offers exceptional values for the products, the customers

can become convinced and believed that the products are the best.

6 Shift from consumption to leisure activity

The website is designed so that customers will prefer visiting the

website to other work or leisure activity.

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2.4.3.3 Stage three: Experiencing evangelism

In the final stage, the customer feel compelled to spread the word

about the product or brand. This stage consists of:

1 Taking the word to the market

The customers have a clear emotional connection with the product

or the brand and are likely to develop a passion for telling its story

and they will put considerable energy to convince others.

2 Active community membership

The customers in this stage will look for people who share the

same passion and form community participation.

3 “The company cares about my opinions”

The firm shows to the customers that they are unable to manage

the experience without the user, and the user is welcome to help

the firm.

4 Defender of the experience

In this stage, the customer takes great pleasure in telling others

about the product or service.

2.4.4 Stage Four: Crafting the customer interface

The design of customer interface is a primary means for creating an effective

marketing program and customer experiences.

The 7Cs Framework is used a bridge between the strategic goals of the

business and the challenge of designing and implementing an effective

customer interface.

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2.4.4.1 The 7Cs Framework

1 Context

Captures its aesthetics and functional look-and-feel. Some sites

have chosen to focus heavily on interesting graphics, colors, and

design features.

Two key dimensions of context are function and aesthetics.

2 Content

Defined as all digital subject matter on a website.

Four dimensions of content are offering mix, appeal mix,

multimedia mix, and content type.

3 Community

Defined as a set of interwoven relationships built upon shared

interests. This sense of community can encourage customers to

return to a website, because:

• Community can create attractive content

• Community can make certain activities possible or easier, thus

satisfying needs not attainable individually

4 Customization

Defined as a site’s ability to modify itself to each user.

Dimensions of customization: personalization (login registration,

cookies, personalized e-mail, content and layout configuration,

storage, agents), tailoring by site (tailoring based on past user

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behavior, tailoring based on behavior of other users with similar

preferences)

5 Communication

Refers to the dialogue that unfolds between the website and its

users. This communication can take three forms: firm-to-user,

user-to-firm, or user-to-user. Dimensions of Communication are

broadcast, interactive (e-commerce dialogue, customer service,

user input), hybrid.

6 Connection

Defined as the network of links between the site and other sites.

Dimensions of connection: links to sites, home site background,

outsourced content, percentage of home site content, pathway of

connection.

7 Commerce

Defined as transactional capacity of a site.

Dimensions of commerce: registration, shopping cart, security,

credit card approval, one-click shopping, orders through affiliates,

configuration technology, order tracking, delivery options.

2.4.5 Stage Five: Designing the Marketing Program

In this stage, firm should have a clear strategic direction. Moreover, the firm

should have decided the target segment and the specific positioning in the

customer mind.

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This stage entails designing a particular combination of marketing actions.

The framework used to accomplish this task is the Marketspace Matrix

(Figure 2.8). The Internet marketer has six classes of levers (product, pricing,

communication, community, distribution, and branding) that can be used to

create target customer awareness, exploration, and it is hoped, commitment to

the firm’s offering.

The traditional 4Ps of marketing are Product, Price, Promotion, and Place /

Distribution. All four of these choices are part of the Internet Marketing Mix,

plus two new elements: Community and Branding.

Figure 2.8 The Marketspace matrix Figure 2.8 Marketspace Matrix

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1. Product

The product is the service or physical good that a firm offers for

exchange. A wide range of products forms is being offered on the

Internet, including physical goods (e.g., clothing), information-

intensive products (e.g., The Wall Street Journal online), and

services (e.g., online grocers). Frequently, the offerings are a

combination of all three forms. In the course of building customer

relationships, the firm can use a variety of products levers to build

enduring customer relationships.

2. Pricing

As firms strive to grow their profits, they often focus on decreasing

production costs or increasing product demand. In doing so, firms

tend to neglect one of the most important strategic areas involved

with growing profits: pricing. Price is an increasingly important

marketing lever and the Internet has created an entirely new

category of pricing tools for new new-economy firms to use.

Bundling is one pricing strategy that best suited for true Internet

products. Indeed, bundling can be thought of both as a product

strategy and a pricing strategy. There are two types of Bundling:

Pure Bundling which occurs when a firm offers its products only

as part of bundle and Mixed Bundling that involves selling goods

both individually and in bundles. The bundle price is generally less

than the sum of individual component prices. Mixed bundling is a

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particularly easy and profitable pricing strategy to implement for

Internet electronic service products.

3. Communication

Marketing communication is an attractive activity that informs one

or more groups of the target customers about the firm and its

products. This communication includes all type of firm-level

communications: public relations, the use of sales representatives,

and online advertising. Advertising and other forms of

communication such as television and direct mail can make target

customers aware of firm’s offerings.

4. Community

Community is a set of interwoven relationship built upon shared

interests that satisfy its member’s needs that are not attainable

individually. One of the unique aspects of the Internet is the speed

with which communities can be formed. Equally important is the

impact that these communities can have on the firm. Communities

can be leveraged to build awareness (e.g., user to user

communication to make others aware of a product promotion),

encourage exploration (e.g., user groups discussing which

automotive options to purchase or not), and commitment (e.g.,

bonds between users lead to deepening involvement with the site).

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5. Distribution

A distribution channel is the system of organizations involved in

the process of making a product or service available for

consumption or use. Marketing channels facilitate the exchange of

goods and services between buyers and sellers. The Internet, as

any other marketing channel, has emerged as a way to better serve

the needs of one or more customer segments. The Internet is a

direct substitute for the distribution systems of both online and

offline firms channel.

There are essentially two objectives of channels intermediaries:

efficiency and effectiveness. Channel efficiency can be defined as

the amount of resources required by a distribution system to make

a product or service available for consumption or use. The addition

of the channel intermediary reduces the number of interactions that

the manufacturer must undertake, although it is important to note

that the total number of interactions has actually increased.

The intermediary plays an even more important role in terms of

channel effectiveness, or the ability of the channel to perform

functions that create value for customers.

6. Branding

According to the American Marketing Association, a brand is a

name, term, sign, symbol, or design, or a combination of them

intended to identify the goods and services of one seller or group

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of sellers and to differentiate them from those of the competition.

Branding plays two roles in marketing strategy. First, branding is

an outcome or result of the firm’s marketing activities. Marketing

programs affect how consumers perceive the brand, and hence its

value. Second, branding is a part of every marketing strategy; each

marketing activity is enhanced if the brand is strong, or suppressed

if the brand is weak.

2.4.6 Stage Six: Leveraging Customer Information Through Technology

There are three emphases in this stage as shown in Figure 2.9. First, is on the

implementation sequence of each decision. Second, the stages of each process

involve problem definition, data collection, data organization, data analysis,

and data utilization. Third, is the marketing research that used to evaluate and

targeting markets and support strategic marketing-mix decisions, database

marketing to measure customer acquisition, and customer relationship

management.

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Figure 2.9 Customer Information System

In a customer-centric environment, firms have to make and act on three key

decisions:

1. Strategically select what markets to pursue (marketing research)

Internet marketing research has the potential to become one of the

most powerful tools for gathering marketing information.

Marketing research is a study of the requirements of distinct

markets, the acceptability of products and services, and the

methods of developing new markets. It is a systematic and

objective process used to collect, organize, maintain, analyze, and

present information about a specific market in order to identify and

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define marketing opportunities and problems. Marketing research

connects marketers with their customers, consumers, and the

public.

Figure 2.10 Marketing Research

2. Learn more about customers and devise strategies to acquire target

customers (Database marketing)

Relatively recent advances in computer and Internet technology

have enabled marketers to more easily obtain and utilize

meaningful individual level consumer information, and to

reconnect with customers, as part of the marketing process.

Database marketing has the potential to augment the mass-

produced approach with increased attentiveness, customization,

and efficient spending, which would increase utility for

consumers-and profits for organizations-when carried out

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effectively. In database marketing, four general types of objectives

exist:

1 Identifying prospects

Identifying prospective customers, or leads, is important to

B2B and B2C marketers. Sales leads may be identified through

available lists or through interactive phenomena such as

website or e-mail newsletter registration.

2 Qualifying prospects

Prospects become qualified leads when they indicate an

authentic intention to buy, through processes such as visiting a

retailer’s website, requesting more information in response to

an e-mail newsletter and etc. When a qualified lead is available

through an interactive channel, the opportunity exists to

increase communication, learn more about a prospective

customer, and develop a pre-purchase relationship.

3 Acquiring a customer through the sale of good or service

Selling is a frequent objective of database marketing. For

example, company may review several daily-personalized

promotional offers for products that are available at specially

discounted prices.

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4 Managing a relationship with a customer

3. Assess the long-term profitability of customers and retain key

customers (Customer Relationship Management)

Traditionally, marketers have focused more of their actions and

expenditures on acquiring customers than on retaining them.

Experts report, however, that placing increased emphasis on

customer retention can significantly impact marketing efficiency

and profitability. The Customer Relationship Management is

concerned with three primary directives. First, organizations need

to learn about their customers at the individual level, and respect

their differences. This will enable firms to recognize the customers

with whom it is likely to have a profitable relationship and provide

indicators for best serving each one. Second, organizations need to

formulate strategies for sustaining relationships with profitable or

potentially profitable customers. Third, tactics for advancing

relationship with customer by creating more value for them need to

be devised and put into action.

Ultimately, Customer Relationship Management is about

generating loyalty among customers who are, or will become,

profitable. It is also about abandoning relationship with customers

When a customer makes an initial purchase and establishes a

relationship as a customer, database marketing may be used

effectively to manage this relationship.

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who are not, or are unlikely to become, profitable. Firms can use

technology to obtain, organize, analyze, and utilize customer-

relevant information, which can reduce the uncertainty associated

with each of the three major types of decisions.

2.4.7 Stage Seven: Evaluating the Marketing Program

Metrics drive organizational behavior in a number of ways, including helping

to clarify strategic objectives, communicating the strategy, tracking

performance, tracking performance, increasing accountability, and aligning

objectives. Good metrics are relatively easy to measure in a timely fashion.

They are unambiguous, easy to interpret, and robust. A change in the metric

reflects a change in the outcome it is supposed to measure. In addition,

metrics need to be generally accepted by business stakeholders and linked to

the desired business outcomes.

The financial metrics, customer metrics, and branding and implementation

metrics best capture a firm’s marketing performance. Taken together, they

enable managers to understand the drivers of a firm’s performance in the

marketplace. Financial metrics measure bottom-line results and are at the

most aggregate level. Customer-based metrics capture marketing’s

performance in building customer-based assets that translate into financial

results. Marketing implementation metrics in Figure 2.11 assess how well

each element of the marketing program performs in terms of building

customer assets.

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Figure 2.11 Marketing Metrics Framework

2.5 Critical success Factors for Internet Marketing:

1. Customer advocacy and insight

Internet enables a much greater degree of interaction with customers,

designing and promoting this interaction around customer’s needs and

progressively gaining deeper insights are critical components of creating

positive customer experience. Marketing professionals will need to

strategically collect information from many disparate sources, create

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insightful customer mosaics, and effectively translate them into marketing

strategies and tactics.

2. Integration

The Internet represents both a new channel and a new communications

medium. The networked-economy marketing professional needs to have an

integrated or holistic view of the customer and the enterprise in order to

create a uniquely advantaged strategic plan. Beyond strategy, a marketing

manager must fundamentally understand how to integrate these new tools into

the overall marketing mix.

3. Balanced thinking

An Internet marketing professional needs to be highly analytical and very

creative. It requires understanding the dynamic tension between one to one

marketing and mass marketing and being able to strike a strategic balance

between them. It is also requires determining the appropriate customer data

requirements. Understanding the strategic and tactical implications of the

Internet, leveraging the rapid learning environment and accelerated decision-

making process it creates, and then creatively applying the insights gleaned

from analysis are critical success factors for all Internet marketing

professionals.

4. Passion and entrepreneurial spirit

Although very hard to objectively assess, passion, is what will differentiate

leaders from followers in the networked economy. Passion can be used to fuel

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the entrepreneurial instincts and vision, crating tools as they lead their teams

to success.

5. Willingness to accept risk and ambiguity

The Internet has enabled customers to have much more information and many

more choices than ever before, thus shifting the balance of power toward the

customer and creating the need for a whole new set of marketing tools.

Having the courage to try new things is the key to developing breakthrough

Internet marketing. The risk and ambiguity of managing in such uncharted

territory is tremendous, and the most successful Internet marketers will be

willing to pay at the edges.

2.6 SWOT Analysis

A SWOT analysis is an instrumental framework in Value Based Management

and Strategy Formulation to identify the Strengths, Weaknesses,

Opportunities and Threats for a particular company. SWOT stands for

Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is used

to identify ways to minimize the affect of weaknesses in our business while

maximizing our strengths.

SWOT confines strengths and weaknesses to company's internal workings

while opportunities and threats refer only to the external environment.

Strengths and Weaknesses are internal value creating or destroying factors

such as assets, skills or resources a company has at its disposal relatively to its

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competitors. They can be measured using internal assessments or external

benchmarking

Opportunities and Threats are external value creating or destroying factors a

company cannot control, but emerge from either the competitive dynamics of

the industry or market or from demographic, economic, political, technical,

social, legal or cultural factors.

Strength:

A firm’s strengths are its resources and capabilities that can be used as a basis

for developing a competitive advantage. A strength could be:

• specialist marketing expertise.

• a new, innovative product or service (good reputation among

customers)

• location of business, favorable access to distribution networks

• quality processes and procedures

• any other aspect of business that adds value to product or service.

• Strong brand name

Weakness:

The absence of certain strength may be viewed as weakness. In some cases a

weakness may be the flip side of strength. For example a firm with large

amount of manufacturing capacity and this capacity may be considered a

strength that competitors do not share but it can also may be considered a

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weakness if the large investment in manufacturing capacity if the large

investment in manufacturing capacity prevents the firm from reacting quickly

to changes in strategic environment. A weakness could be:

• lack of marketing expertise

• undifferentiated products and service (i.e. in relation to competitors)

• location of business, lack of access to distribution channels or best

natural resources

• poor quality goods or services

• damaged reputation (a weak brand name)

Opportunities:

The external environmental analysis may reveal certain new opportunities for

profit and growth. An opportunity could be:

• a developing market such as the Internet.

• mergers, joint ventures or strategic alliances

• moving into new market segments that offer improved profits,

• a new international market, removal of international trade barriers.

• a market vacated by an ineffective competitor (an unfilled customer

need)

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Threats:

Changes in the external environmental also may present threats to the firm. A

threat could be:

• a new competitor in home market

• price wars with competitors

• a competitor has a new, innovative product or service, emergence of

substitute products

• competitors have superior access to channels of distribution

• taxation is introduced on product or service

• new regulations, increased trade barriers

A firm should not necessarily pursue the more lucrative opportunities. Rather,

it may have a better chance at developing a competitive advantage by

identifying a fit between the firm’s strengths and upcoming opportunities. In

some cases, the firm can overcome a weakness in order to pursue a

compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of

these factors can be constructed. The SWOT Matrix which also known as

TOWS Matrix is shown as below:

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SWOT / TOWS MATRIX

Table 2.1 SWOT Matrix

Strengths Weaknesses

Opportunities S-O

strategies

W-O

Strategies

Threats S-T

strategies

W-T

Strategies

1 S-O strategies pursue opportunities that are a good fit to the company’s

strengths.

2 W-O strategies overcome weaknesses to pursue opportunities

3 S-T strategies identify ways that the firm can use its strengths to reduce its

vulnerability to external threats

4 W-T strategies establish a defensive plan to prevent the firm’s weaknesses

from making it highly susceptible to external threats.