internet marketing proposal

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CHAPTER ONE

INTRODUCTION

1.1 Background

Technological change has been a major hallmark of economic development in recent years. An

interesting and vital part of the technological change process has been the rapid evolution of

information and communication technology (ICT). It is notable that the world is experiencing an

IT revolution that has drastically changed many aspects of the human life from education,

industry, economy, political to entertainment (Ajayi, 2002). In addition, unprecedented

capabilities of IT have dramatically changed the ways in which the public and private sectors

operate all over the world. ICT has become a major factor in the socio-economic development of

every nation (Kelly, 1998).

Ajayi (2002) further adds that with the world becoming a single market place without borders,

developing countries with their liberalized economies have been forced to develop or adopt

different means of enabling them participate effectively in global trade. The evolution of ICT

especially the Internet has made significant changes in the trade environment in the world.

With continued globalization of the world economies, for most enterprises, trade opportunities

seem to be endless. The powers of the information age and technology together with the

globalization of markets have resulted in traders and consumers being more informed and as a

result have become more inquisitive and demanding. The market place has and still is changing

radically as a result of the global changes. Customers have also changed in that they expect

higher quality and greater customization (Lovelock et al, 1996). This in turn, has caused

heightened competition and serious challenges to the survival and stability of firms.

Consequently, to achieve better performance, the firms are departing from the traditional

commercial strategies and tactics and are looking for ways to compete more effectively on thelocal, regional and global levels (Chaffey, 2001). The information superhighway is what many

business leaders say will make these visions a reality.

According to Kotler (2003), the digital revolution has place new set of capabilities in the hands

of consumers and businesses, which has led to new forms of marketing and business. He further


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adds that competitive pressures have forced organizations to adopt the marketing orientations,

which calls for constant change as market conditions evolves, as a strategy for dealing with

market turbulence. The search for competitive advantage has led to organizations to reconfigure

their operations and by extension their organizations. Firms around the world are now embracing

e-commerce in attempt to gain its enormous advantages.

In Kenya, the banking sector operates in a relatively deregulated environment. The banking

sector in Kenya comprises of 46 institutions, 42 of which are commercial banks, 3 mortgage

finance companies, one non-bank financial institutions and one building society as at December

2006, according to CBK annual reports. Out of the 46 institutions, 34 are locally owned. The

foreign banks comprised of 6 locally incorporated and 5 branches of foreign incorporate

institutions (Nyangosi, 2006).

The Kenyan banking industry has been expanding branch networking amid the introduction of

branchless banking system, which include the use of EFTs, ATM cards, SMS banking etc. The

annual reports of CBK clearly indicate that, branch network has been slowly expanding since

2002. By the end of December 2006, Kenya had a total branch network of 575, as compared to

486 branches in the period ended December 2002. The slow growth of branches can be attributed

to the rapid rise of alternatives, which include electronic financial product through mobile

phones and Personal computers.

Kenyan banks have exponentially embraced the use of information and communication

technology in their service provision. They have invested huge amounts of money in

implementing the self and virtual banking services with the objective of improving the quality of

customer service. Some of the ICT-based products and services include the introduction of SMS

banking, ATMs, Core banking solution, Electronic clearing systems and direct debit among

others. In mid 2005, Kenyas banking Industry moved a milestone by introducing Real Time

Gross and Settlement system (RTGS) which was renamed Kenya Electronic Payment and

Settlement System (KEPSS). This will facilitate the inter-bank financial data transfer. The

development of e-banking services is expected to decongest banking halls and reduce the

incidences of long queues in banking halls. Digital based financial services have made a

significant contribution in covering the cost of offering financial services.


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The banking industry has also over years continued to introduce a wide range of new products,

prompted by increased competition, embracing ICT and enhanced customer needs. As a

marketing strategy, the new products offered in this segment of market, continue to assume local

development brand names to suit the domestic environment and targeting the larger segment of

local customer base. All the above clearly indicate that, Kenyas banking Industry has great

developments like any other banking market in the world

1.2 Statement of the Problem

As the banking fraternity continues to make forays into the retail segment of the market, it is

becoming more paramount that customers be given value for their hard-earned deposits. The new

banking environment is about differentiating banking products, increased choices, security and

accessibility. The ability of financial institution to deliver products and services in the most

efficient and effective manner, will therefore be the key to performance and relevance.

In Kenya, majority of banks have introduced internet banking, mobile banking and other e-

banking facilities, to enhance delivery channels to their customers. It is however, important that

the introduction of these products be accompanied with programs to broaden consumer horizon

by enhancing their knowledge in the new and more innovative way of conducting banking

business.

From a review of related literature, it is evident that organizations that have invested in internet

marketing stand to benefit more as compared to those who dont. Internet marketing creates

borderless markets allowing companies to market their products globally. As indicated by Spar

and Bussgang (1996), internet marketing reduces the marketing costs of companies by enabling

the buyers and sellers complete transactions cheaply, instantaneously, and anonymously. Retie

(2002) asserts that companies that adopt internet marketing have increased sales as a result of

expansion in markets, reduced costs in marketing communication tools, better management of

marketing information and improved feedback mechanism from customers.

However, while internet banking is fast and convenient mode of conducting banking

transactions, this is yet to gain acceptance among banking consumers, due to fears of

apprehension in this mode of banking. Like many other developing countries, e-banking in


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Kenya is at its formative stages. Not many banks have embraced e-banking but majority have at

least one or two technology based delivery channels. The non adoption of e-banking by banks

has been attributed to impaired non-availability of infrastructure and legislation to support e-

banking. Other stumbling blocks include; Internet costs, security of banking transactions,

complexity of use, among others. Consequently, the currently study seeks to establish the extent

these challenges have affected usage of Internet banking in Kenya.

Furthermore, this research envisages internet banking as the future of the banking industry in

Kenya in the wake of globalization of world economies. The study considers the fundamental

role of bank marketing within the dynamics of e-commerce. Despite the increasing importance of

internet marketing, the adoption or rather extent of adoption of internet marketing is not known.

1.3 Research Questions

Therefore, the proposed study seeks answers to the following questions;

i. What is the extent of internet banking by firms in the banking industry in Kenya?

ii. What are the benefits gained from the use of internet banking?

iii. What are the challenges faced in adopting internet marketing by firms in the banking

industry in Kenya?

1.4 Objectives of the Study

The objectives of this study are;

To determine the extent to which Kenyan banks are using internet banking

To establish the accrued benefits from the use of internet banking

To establish the challenges faced in the use of internet banking


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1.5 Justification of the Study

The results of this study will be important to the following;

Banks in Kenya as they may be able to adopt internet marketing in order to compete in

the global arena.

The Government of Kenya, specifically; the Ministries of Planning, Information and

Trade, as they may be used to develop an internet policy document that will support

initiatives for revamping the economy.

Promotional companies as these may be used in developing internet strategies and

internet marketing programs.

1.6 Scope of the Study

The current study covers the specific internet tools used by commercial banks to carry out their

marketing activities. Due to resource constraints, the study will be limited to a survey of

commercial banks with a presence in Mombasa district.

1.7 Meaning of Operational Terms

Internet marketing; internet marketing is a sponsored website that describes the products and

services offered by sellers and allow buyers to search for information, identify what they need

and place orders using credit cards.


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Navigation; refers to a process through which shoppers collect information about products.

E-commerce; means that the company or site offers to transact or facilitate the selling of products

and services online.

E-business; describes the use of electronic means and platforms to conduct a companys

business.

Product; refers to anything of value offered in the marketplace for attention, use, or

consumption, to satisfy a need.

Price; can be defined as a measure of the value of exchange, i.e. the value of benefits received

by customers and the value of compensation given to sellers for their product.

Place; refers to the distribution channels that the company uses the move its products from the

point of origin to the point of consumption.

Promotion; are the means by which firms attempt to inform, persuade, and remind consumers

directly or indirectly- about the products and the brands they sell.

People; This includes all human actors who play a part in service delivery and this influences

buyers perceptions. They are the firms employees, customers, and other customers in the

service environment.


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Processes; These involve actual procedures, mechanisms, and flow of activities by which

services are delivered.

Physical Evidence; refers to the environment where the service is offered, i.e. where firms and

customers interact.

1.8 Conceptual Framework of Internet Banking

Product

Price


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(Source; Author, 2012)

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

Internet marketing

by banks

Place

Promotion

People

Physical evidence


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This section reviews literature that is relevant to the study. The literature distinguishes Internet

marketing from traditional marketing as marketing strategies that support modern marketing

concept. The section further outlines the processes involved in internet marketing, using the

framework of the 7 Ps. Theoretical and empirical literature reviews have both been adequately

addressed in the chapter.

2.2 Theoretical Review

2.2.1 Internet Marketing

Marketing has two distinct meanings in terms of modern management practice: It is understood

as the range of specialist marketing functions carried out within many organizations such as

marketing research, brand/product management, public relations and customer service. It is also

seen as an approach or guiding philosophy for all functions and activities of an organization.

Such philosophy encompasses all aspects of business. Business strategy is guided by an

organizations market and competitor focus and everyone in an organization should be required

to have a customer focus in their job (Chaffey et al, 2000).

Marketing encompasses activities traditional seen as the sole domains of accountants,

production, human resource management and information technology. Increasingly such

functions are being reoriented, evidenced by the importance of initiatives such as Total Quality

Management (TQM), business process Re-engineering (BPR), Just-In-Time (JIT) inventory

systems and supply chain management (Chaffey, 2000). The Internet can be applied by

companies as an integral part of the modern marketing concept.

According to Chaffey et al (2000), internet marketing can be defined as the use of the internet

and related digital technologies to achieve marketing objectives and support the modern

marketing concept. These technologies include the Internet media and other digital media such as

cable and satellite together with the hardware and software which enable its operations and use.

The term electronic commerce or e-commerce is often used in a similar context to internet

marketing and has become a similar term recognized for business transactions conducted on the

internet. It encompasses a range of business activities such as selling online, online bill


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payments, home shopping/banking and improving market efficiency dealings with suppliers and

clients (Hoffman and Novak, 1997). Zwass (1998) extends the meaning of e-commerce to

incorporate sharing business information and maintaining business relationships over the

internet.

According to Kotler (2001), internet marketing is a sponsored website that describes the products

and services offered by sellers and allow buyers to search for information, identify what they

need and place orders using credit cards. Kotlers definition is no different from many others

except in asserting that payment is by credit card. Although credit cards are the main mode of

payment it is important to note that not all internet transactions are completed online. For

example, business enterprises may order goods from their suppliers online and make payments at

a later date either by cheque, bank transfers etc

The internet revolution has been represented by many authors as the sole ingredient of the new

economy. However, a heavy reliance on connecting networks can be risky when

communications is only a means for achieving larger objectives not the end itself. On the other

hand there are revolutionary features of todays business environment that truly distinguish the

new economy of the technological age.

Thus internet marketing of goods entails the incorporation of all the 4 Ps (Product, Price, Place

and Promotion) of marketing and in the case of services the 7 Ps (Product, Price, Place and

Promotion, People, Physical evidence and Process) in the firms marketing efforts. In essence it

is the application of all the fundamental principles of marketing via the web. Unlike mainstream

marketing, internet marketing is entirely web-based as opposed to the traditional media.

2.2.2 Benefits of Internet Banking

The use of internet marketing in the business world presents an array of benefits to be enjoyed by

the producers or marketers of products. Retie (2002) outlines that these benefits can be seen infour perspectives namely; market penetration, market development, product development and

diversification.


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In terms of market penetration, internet marketing can be used to sell more existing products into

existing markets. This is achieved through online advertising to increase awareness of products

and the profile of a company amongst potential customers in an existing market. On market

development, the internet can be used to sell to new markets, taking advantage of the low cost of

advertising internationally without the necessity for a supporting sales infrastructure in the

customers country. However, this requires an individual company overcoming the barriers to

becoming an exporter or operating in a greater number of countries. Product development is

concerned with the development of new products and services that are delivered via the net.

These are typically information products such as market reports which can be purchased using

electronic commerce. The diversification aspect of internet marketing focuses on the

development of new products that are sold in new markets (Rettie, 2002).

According to Rettie (2002) the tangible benefits to the producer include cost reduction, increased

sales from expansion into new markets, reduced time in customer service, reduced printing and

distribution costs of marketing communication tools. Increased sales are achieved through

increased awareness of brands and products in addition to the measure that support online

purchasing. Internet marketing also reduces the cost of conducting market research as search

engines, online questionnaires amongst other internet tools ease the process of finding a range of

market information. The intangible benefits to the producer can be observed in the enhanced

brand, improved and rapid responsive marketing communications, improved customer service,

identifying new partners while supporting the existing ones, better management of marketing

information and improved feedback systems from customers about products.

The marketing literature suggests that exemplary online shopping experiences can lead to greater

customer loyalty and hence, secure future revenues (Fornell, 1992). Better online customer

experiences could potentially reduce the cost of future customer transactions and new customer

acquisition, decrease price elasticity of demand, and minimize the likelihood that customers will

defect if quality falters (Anderson, 1994). This therefore creates a sustainable long-term

advantage, stemming from reputation created by building trust and relationships with customers.


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Rettie (2002) concludes that the benefits of internet marketing can be summarized using the 6

Cs. These are; Cost reduction that is achieved through reducing the need for sales and marketing

enquiries to be handled by telephone operators and the reduced need for printing and distribution

of communication material, which is instead published on the website. Capability in which the

internet provides new opportunities for new products and services and for exploiting new

markets. Competitive advantage as a company is able to introduce new capabilities before its

competitors and thus achieve competitive advantage until its competitors have the same

capability. Communications improvement with customers, staff, suppliers, and distributors.

Control as the Internet provides better market research through tracking of customer behaviour

and the way that staff deliver services. Customer service improvement that is provided by

interactive queries of databases containing, for example, stock availability or customer service

questions.

2.2.3 Challenges of Internet Marketing

The international presence of the Net creates several new challenges or obstacles because the

Internet has expanded the firms business reach to several potential markets worldwide, where

cultural, legal, economic, and social systems differ from country to country. The main problems

can be categorized as either economic or social challenges.

Economic challenges

The economic systems of countries differ greatly with developed countries have efficient

economies as opposed to Third World countries. Rabe (2001) and Singh et al (2001) indicate that

economic barriers present the largest challenge to Internet marketing in developing countries.

Physical infrastructure especially the availability and accessibility of telecommunication systems

impede the ability of firms in developing economies to participate in e-commerce. Many rural

areas do not have telephone lines or electricity to be able to use this technology. This limits the

reach of internet marketing to a few segments in the market.


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In addition, the cost of using the Internet together with the cost of required equipments further

aggravates this issue in developing economies. Therefore companies in these economies will

have to wait for further infrastructural development to bring prices down before they can take

full advantage of e-commerce.

Most of the consumers in developing economies still pay by cash rather than credit cards. The

lack of ability or interest to execute credit transactions is an enormous barrier to e-commerce.

Credit cards are the most useful tool as a way of payment by Internet. Since the use of credit

cards as a means of payment is not universally available globally, companies should develop

other means to receive payments. Third World countries are also faced with low penetration of

credit card companies that further hinders e-commerce.

One of the most common worries with creating efficient and trustworthy online commerce

concerns the security of financial transactions which occur over the network. Credit cards

provide the most obvious answer. Yet an unencrypted message containing the credit card number

could be viewed by an unscrupulous system operator as it passes by an encapsulated package.

Thus there is relative risk involved in these type of purchases (Notess, 1995). Nevertheless, as

experience shows, the probability of this is low because of the vast amounts of information

flowing over the network and the general lack of time available to system administrators. But as

long as consumers doubt the safety of the transfer, there is a problem selling online.

Social challenges

Although among cultures culture has different meanings and importance, one must be aware

that in the internet community there is a general agreement that it should not be used for such

marketing purposes as direct advertising and mailing (Gattiker et al, 1996). Privacy is a growing


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concern in most developed and developing economies, with some countries enacting laws

regulating internet marketing practices, such as unsolicited mail.

Culture and sensitivity to cultural differences plays a critical role in successful international

business, and so much so international e-commerce. Understanding how the Web fits into a

countrys culture is necessary in forming successful customer relations. Sites targeting foreign

consumers, business or even governments should appear friendly to them, which usually requires

translating the site into the local languages (Shannon, 2000). Different languages and cultural

platforms compound the complexity of doing e-business overseas, but a bigger barrier may well

be the attitude and culture of business and government entities, which must learn what to expect

from e-business.

Other barriers to trade such as a limited skill base, weakness of regulatory regimes, as well as

inadequate transportation and distribution networks, further limit the capacity of firms in

developing economies to benefit from the implementation of e-commerce (Nielson and Morris,

2001). Consequently, the establishment of a public Internet based e-commerce environment that

succeeds in helping firms in developing countries gain access to electronic markets requires the

provision of complementary services that reduce the transaction costs associated with negotiating

and fulfilling contracts and with ensuring contract terms between trading parties are met.

Moreover, these e-commerce services must be readily accessible at prices that are affordable to

users.

2.3 Empirical Literature

Extant literature is replete with studies on electronic commerce and marketing. In an article titled

Managing in Marketspace, Rayport and Sviokla, (1994) argue that technology has allowed the

information about a product or service to be separated from the product or service itself. The

authors add that this new market space has three elements: Content is what is being sold (i.e.

what you take delivery of), this can be information, a service or a physical product; Context is


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how the content is presented for sale. Key to consumer loyalty, once the consumer is loyal to a

particular context, there is a large potential for related transactions; and infrastructure describes

how the buyer and seller are brought together.

Traditionally all three elements would be managed by a single player to develop a brand. Now

the three elements will be segmented and can be managed separately to create brand value. Also,

physical products have been replaced with information-based services, whilst near-zero marginal

costs of additional customers invalidates old concepts of pricing. Consequently, companies must

look to exploit the breadth of the electronic channel and develop context loyalty first, thereafter

exploit it with various contents (Rayport and Sviokla, 1994).

Klein and Quelch (1996) looked at e-commerce from an international context. They argue that

e-commerce will develop along two paths: information to transaction (established companies) or

transaction to information (start-ups). Web sites must be built to reduce costs for customers (e.g.

customers' service, transactions) or to generate revenue from them (e.g. product information,

promotions, market research, transactions) E-commerce should enable buyers and sellers to

come together where they previously could not. This is a critical area of growth for international

companies. Technology (connection to the network) will become more important than size for

companies marketing on the Internet. Other scenarios foreseen by the authors are; standard

pricing, the changing role for intermediaries, and companies dominating markets.

Gosh (1998) described four business opportunities that are provided by the Internet: (1) linking

companies directly to customers, suppliers, and other interested parties, (2) allowing companies

to skip other players in the value chain, (3) using the Internet as a tool for developing new

products and services for customers, (4) allowing companies to dominate the electronic channel

of an entire industry or segment, control access to customers, and set business rules.

Evans and Wurster, (1999) dwell on the aspect of navigation, which they aver is now a separate

business with three aspects: reach, affiliation, and richness. Reach refers to the number of

different categories and products a consumer interface (e.g. store, catalog, and Web site) can


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cover. Reach also refers to the number of customers a business can interact with. Affiliation

refers to whose interests are most important to the merchant: the customer's, the retailer's or the

supplier's? Richness is how much information can be exchanged between a producer and

consumer. Richness has two aspects: customer information and product information. They

further add that, brands, as a source of rich information (particularly those based on fact based

beliefs), will lose much of their value The value chain will break down in most industries.

Navigators will be able to capture most of the value in an industry as the other elements of the

supply chain (e.g. physical retailers, distributors, and manufacturers) become commoditized.

2.4 Conceptual Framework of Internet Banking

Zwass (1996) suggests that the established way to analyze and develop complex systems (such as

e-commerce) is to organize them in a meaningful structure. Consequently, the literature is

presented as they apply to the marketing mix model of product, place, price, promotion, people,

process, and physical evidence.

2.4.1 Product

A product is anything that can be offered to a market for attention, acquisition, use, or

consumption that might satisfy a want or need (Kotler, 1991). In an e-commerce marketing

strategy it is important to remember that information is now its own viable product. Many of the

literature reviewed address this area. Rayport and Sviokla (1994) discuss transactions where the

actual product has been replaced by information about the product and Evans and Wurster (1999)

discuss navigation as its own business. This change has resulted from technology that has

brought down the cost of collecting and disseminating information about consumers and

products.

Evans and Wurster (1999) describe navigation as the process through which shoppers collect

information about products. In the physical world, a shopper who wants to buy something has to


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manually sift through the millions of choices. This usually requires a shopper to travel to a store

and inspect the products. Unless they want to travel to various stores, they are limited to the

information at one particular store. A complete search of all offerings would be extremely

expensive, time-consuming and practically impossible. Instead consumers rely on product

suppliers and retailers to aid them in the search. This allows the suppliers and providers to use

the consumers' cost-of search as a competitive advantage. However, on the Internet, consumers

can search much more comprehensively and at virtually no cost. Suppliers and retailers must

realize that product information can be delivered to consumers by a third party. Indeed, pure

navigators such as Yahoo have already become major players in this business (Evans and

Wurster, 1999).

2.4.2 Place

For most companies the place aspects of the marketing mix involve marketing channels.

Marketing channels can be defined as interdependent organizations involved in the process of

making a product or service available for use or consumption (Kotler, 1991). Due to the size of

its marketplace, the Internet will have the most profound effect on place in the marketing mix. E-

commerce puts the purchase decision anywhere connection to the Internet exists. Klein and

Quelch (1996) discuss the global reach of the Internet in creating a larger marketplace and the

strong growth of a network's utility. Evans and Wurster (1999) discuss reach, the number of

eyeballs that view a Web site. They claim that reach is the most visible difference between e-

commerce and the physical world.

The Internet will allow organizations to skip over parts of the value chain. Gosh (1998) discussed

how the Internet could be used to bypass the value chain. Examples most often involve

marketing the product on the Internet in order to bypass the retailer. US based computer

manufacturers such as Dell and Gateway 2000 do this. United Parcel Services (UPS) has a

program to set up e-commerce sites for businesses that ship with them (Gosh, 1998). According

to Evans and Wurster (1999), the navigational Web sites will allow small niche producers easier

access to the markets. They will be able to skip over parts of the value chain that traditional


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suppliers have historically relied on for competitive advantage. Traditional suppliers could

respond to this by keeping their product out of navigational Web sites to block their

development. However, this strategy would be technically difficult and would only be successful

if other large producers acted similarly. Furthermore, it would be a tremendous advantage for a

single producer to defect from the group and offer its product and the only defense available to

other producers would be follow to suit.

A more successful strategy would be to enter into joint ventures or expand a supplier's Web site

to offer competitors' products (Evans and Wurster, 1999). It is critical to quickly develop a large

customer base in e-commerce. Rayport and Sviokla (1994) describe the place of e-commerce in

terms of two aspects: context in which the transaction occurs (e.g. an electronic on-screen

auction replaces a face-to- face auction) and the infrastructure that enables the transactions to

occur (e.g. computers and communication lines replace car lots). Rayport and Sviokla (1994)

claim that customer loyalty must be first gained in the context dimension. The first mover

advantage is very important because Internet standards could make the competitive advantages

of a particular context difficult to sustain. By their very nature, standards will allow

organizations to duplicate the design and features of competitors' Web sites. However, the courts

may provide some protection for e-commerce store designs (Reuters, 1999).

Organizations that are first to offer a large breadth of products to consumers will have an

advantage. The marketplace on the Internet could consolidate quickly as many e-retailers will

attempt to become category killers, places where consumers can go for all their shopping needs.

The success of category killers can be seen in the bricks and mortar world (e.g. Wal-Mart).

Category killers on the Internet would have the following advantages: physical space is less of a

constraint, expansion would be easier on the Internet, and stores can customize offerings to

consumers. Instead of navigating hundreds of sites to find what they need, consumers will stay

with the sites they find convenient. Magnet stores or category killers can be expected to form

around a number of dimensions such as product, service, customer segment, and industry (Gosh,

1998).

2.4.3 Price


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Price is the only element of the marketing mix to generate revenues. As Kotler (1991) suggests,

all other elements of a business operation represent costs. Internet pricing decisions will be just

as important as they traditionally have been. The Internet will lead to increased price competition

and the standardization of prices.

Klein and Quelch (1996) point out two counteracting effects of the Internet on price. First, a

supplier can use the technology to discriminate pricing between consumers, for example, in

different countries. However, if they do not take precautions the consumers may be able to

quickly find out about the price discrimination and object to it. Klein and Quelch (1996) suggest

that taken together these factors would lead to increased standardization of prices across borders.

Also, the ability to compare prices across all suppliers using the Internet and online shopping

services will lead to increased price competition. Finally, the price of providing Internet-based

services often contains little or no marginal costs. Economic theory predicts that the price of a

product or service will approach its marginal cost as competition intensifies.

Organizations will have to employ new pricing models when selling over the Internet. Rayport

and Sviokla (1994) point out that the ability of technology to offer services at a cheaper cost

would make it difficult to determine the appropriate price for a consumer. Voicemail, for

example, is solely an information-based service, which provides the consumers with a

replacement for the traditional answering machine. However, consumers are willing to pay even

more for the service than they would for an answering machine due to the convenience and

added features (Rayport and Sviokla, 1994).

2.4.4 Promotion

Promotion encompasses all the various ways an organization undertakes to communicate its

products' merits and to persuade target customers to buy from them (Kotler, 1991). Incumbent

retailers and manufacturers have certain advantages when promoting products and services on

the Internet. Evans and Wurster (1999) discuss these advantages in relation to the richness of

information they can provide consumers. The Internet provides a low cost way for the

manufacturer to build a direct link with the consumer.


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Incumbents can use their traditional sources of consumer information (e.g. product testing, focus

groups) in addition to the information that is easily collected from e-commerce sites (e.g. sales

information, customer demographics). Using data mining they can build customer profiles that

allow them to offer distinct promotions that are tailored to their customers. This advantage is at

its greatest when the consumer is interested in detailed product information or the product is

marketed as state-of-the-art. Such rich product information is most useful when the consumer is

evangelistic, enthusiastic and the product has a strong connotative context (Evans and Wurster,

1999).

Branding will continue to play an important role in Internet marketing. As Klein and Quelch

(1996) point out, new users tend to explore sites with familiar brands first. Recent surveys have

shown that 46 per cent of new online shoppers prefer to buy from merchants they had previously

bought from off-line. Even 34 per cent of repeat online shoppers preferred the familiar off-line

store sites (Kane, 1999).

Brands that equate their products with an experience (e.g. feelings, associations, and memories)

will likely be more effective than brands based on facts about a product. Belief-based brands

associate themselves with attributes such as high quality or reliability. These attributes can be

easily proven by an impartial display of the facts on a navigator's Web site. Even if the facts

confirm the brand, it may only be rendering the brand redundant. Brands that are associated with

a mixture of beliefs and experiences should play up the experiential side of the brand (Evans and

Wurster, 1999).

There are important limitations to promoting on the Internet. Privacy concerns may make

consumers unwilling to give up information. Technologies such as privacy programs allow

consumers to prevent data from being collected. In addition, consumers may realize the value of

this information and demand a premium for it (Evans and Wurster, 1999). However, Web

marketers can use consumer information to create substantial value for the consumer. As

consumers recognize this value they will be more likely to share their information. In addition,

when detachment, objectivity, and comprehensiveness characterize the purchase decision, the

richness of product information provided does not provide as strong an advantage. Other


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problems for manufacturers presenting rich product information include the reach of their Web

sites and the lack of credibility in a single product Web site versus an independent site that

compares multiple products (Evans and Wurster, 1999).

2.4.5 People

The people element of the marketing mix refers to how an organizations staff, interact with

customers and other stakeholders during pre and post sales. Smith and Chaffey (2001) suggest

that online, part of the consideration for the people element of the mix is the consideration of the

tactics by which people can be replaced or automated. Some of the options include; auto

responders that automatically generate a response when customer emails an organization, or

submits an online form. Email notification that is automatically generated by a companys

systems to update customers on the status of the order, for example, order received, items

currently in stock, order dispatched. There are also callback facilities in which customers fill in

their telephone number on a form and specify a convenient time to be contacted. Dialing from a

representative in the call center occurs automatically at the appointed time and the company pays

which is popular. Frequently Asked Questions (FAQ), for these, the art is compiling and

categorizing the questions so customers can easily find the question and a helpful answer. On-

site search engines that assists customers find what they are looking for quickly are popular

when available. Site maps are a related feature.

2.4.6 Physical Evidence

Smith & Chaffey (2001) indicate that in an online context, physical evidence refers to the

customers experience with the company through the website and associated support. Consumers

online look at certain aspects of the web page, and just like a physical shop, may or may not visit

it again. Some of these aspects include; the ease of ordering, product selections, product

information, price, the website performance (ease of navigation, appearance, etc), on-time

delivery, product presentation, customer support and privacy.


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2.4.7 Process

The process element of the marketing mix refers to the methods and procedures companies use

to achieve all marketing functions such as research, product development, promotion, sales, and

customer service. The restructuring of the organization and channel structures described for the

product, price, place and promotion all require new processes (Smith & Chaffey, 2001).

A graphical representation of the conceptual framework is seen below. In the model, the 7 Ps, i.e.

product, price, place, promotion, people, physical evidence, and process are the independent

variables, and intent marketing practices the dependent variable.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter provides a description of the procedures and methods that the researcher will adopt

in conducting the research. The study will be guided by the research study objectives in

developing the research methodology. The chapter discusses the research methodology applied

in respect to the research design, study population, sampling design, sampling method and

techniques, data collection and analysis methods, techniques and procedures.

3.2 Research Design

This is a descriptive study aimed at determining whether firms in the banking industry in Kenya

have adopted Internet marketing and to what extent. According to Emory (1996), a descriptive


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study is concerned with who, what, where and how of a phenomenon, which is the objective of

the current study.

3.3 Sampling

The current study is targeting selected commercial banks in Mombasa. According to a list

provided by the Central Bank of Kenya, there are 55 branches of commercial banks in Mombasa.

The sample will be drawn 10 per cent of the total population, (i.e. 6 branches). Each branch will

be expected to provide at least 5 respondents to bring to sample size to thirty (30).

3.4. Data Collection

The study will use both primary and secondary data to achieve its objectives. Primary data study

will be collected by way of structured questionnaires. The fact that questionnaires are mainly

used for descriptive or explanatory research because they work best with standardised questions

that are interpreted the same way by all respondents informed the researchers choice for this

instrument.

Specifically, a Likert-style rating scale will be used to collect opinion data as is the most frequent

used variation of the summated rating scale. Likert- rating scale refers to summated scales

consisting of statements that express either a favourable or unfavourable attitude towards the

object of interest. Respondents will be asked to respond to statements related to the usage of

Internet marketing techniques. The scale will be as follows; 5 very large extent, 4 large

extent, 3 moderate extent, 2- small extent, 1 no extent at all. Thereafter the scores will be

totaled to measure the respondents attitude.

3.5. Data Analysis and Presentation

Descriptive statistical measures such as percentages and frequencies will be used to analyze

closed ended questions, with the aid of SPSS computer software application. These techniques

are usually used in descriptive surveys as they employ factual information about a situation toprovide an understanding of performance levels. The results will then be presented in tables,

frequency bar charts and pie charts.


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References

Allen, E. and Fjermestad, J., (2001). E-commerce marketing strategies: a framework and case

analysis. Logistics Information Management Journal, Volume 14.

Ajayi G. O. (2002). African Response to Communication Technology Revolution; Case Study of

the ICT Development in Nigeria, African Technology policy Studies network, Special Paper No.

8, Nigeria.

Bussgang, J. (1996). The Internet is revolutionizing business, but who is setting the rules?

Harvard Business Review,


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Chaffey, E and Smith, J., (2000). E-Marketing Excellence: The Heart of E-Business, Oxford,

Butterworth Heinemann.

Evans & Wurster, (1999), Getting real about virtual commerce, Harvard Business Review,

November issue.

Gosh, S., (1998),Making Business Sense of the Internet, Harvard Business Review, March

issue.

Kahn, R. E, (1999), Evolution of the Internet, World Communication and Information Report,

1999 2000, UNESCO.

Klein, L, and Quelch, J, (1996). The Internet and International Marketing, Sloan Management

Review, Vol 37, No. 3, pp 60 -75.

Kotler, P, (2001), Marketing Management, Millennium Edition, Prentice Hall Inc.

Rayport, J. and Svioka, J. (1994). Managing in the marketspace. Harvard Business Review,

November issue

Rettie, R. (2002). How will the Internet change marketing? Kingston University, Surrey,

United Kingdom.

Zwass, V. (1998), Foundations of Information Systems, Irwin/McGraw-Hill, New York.


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APPENDIX I QUESTIONNAIRE

The questionnaire seeks to collect data on the extent of use of Internet banking by selected

commercial banks in Kenya. While the objective is academic, the results of the survey will be

critical to determine in determining the best Internet banking practices, challenges and

benefits/opportunities of Internet banking. Your support in completing the questionnaire is

greatly appreciated.

SECTION A GENERAL INFORMATION

(This section requires you to give information regarding the firm. Please tick or fill-in where

applicable)

1. Name of the bank _________________________________

2. Branch _________________________________


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3. Title of the respondent _________________________________

SECTION B EXTENT OF USE OF INTERNET BANKING

Indicate the extent to which your bank undertakes the following activities ONLINE. On a scale

of 1 to 5 where;

1 Very large extent;

2 Large extent;

3 Moderate extent;

4 Small extent; and

5 No extent at all.

(i) Product

New product development & launching [1] [2] [3] [4] [5]

Product sampling [1] [2] [3] [4] [5]

Information on product features [1] [2] [3] [4] [5]

Explaining product benefits [1] [2] [3] [4] [5]

Offer product warranties [1] [2] [3] [4] [5]

After-sales services [1] [2] [3] [4] [5]

(ii) Price

Publishing price lists [1] [2] [3] [4] [5]

Offering discounts online [1] [2] [3] [4] [5]

Publishing online price comparisons [1] [2] [3] [4] [5]

Online invoicing [1] [2] [3] [4] [5]

Online payments [1] [2] [3] [4] [5]

(iii) Place

Online distribution channels [1] [2] [3] [4] [5]

Soliciting orders [1] [2] [3] [4] [5]

Processing orders [1] [2] [3] [4] [5]

Delivery of services online [1] [2] [3] [4] [5]


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(iv) Promotion

Placing advertisements on the Internet [1] [2] [3] [4] [5]

Running product offers online [1] [2] [3] [4] [5]

Holding contests online [1] [2] [3] [4] [5]

Tracking sales online [1] [2] [3] [4] [5]

Prospecting for customers online [1] [2] [3] [4] [5]

Online sales presentations [1] [2] [3] [4] [5]

Negotiating online [1] [2] [3] [4] [5]

Handling client objections online [1] [2] [3] [4] [5]

Online press releases [1] [2] [3] [4] [5]

Online announcements on price changes [1] [2] [3] [4] [5]

Sending catalogues & brochures online [1] [2] [3] [4] [5]

(v) People

Automated customer call centers [1] [2] [3] [4] [5]

Automated email responders [1] [2] [3] [4] [5]

(vi) Processes

Online market research [1] [2] [3] [4] [5]

Online product development [1] [2] [3] [4] [5]

(vii) Physical Evidence

Company Website [1] [2] [3] [4] [5]

Product selections [1] [2] [3] [4] [5]

Reassurance of consumer privacy [1] [2] [3] [4] [5]

SECTION C BENEFITS OF INTERNET BANKING

What benefits has the bank experienced as a result of Internet banking?

Increased sales volumes


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Increased market share

Increased profits

Increased awareness

Reduced costs

Improved customer service

Improved market research

Better management of marketing information

Other (please specify)

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

__

SECTION D CHALLENGES EXPERIENCED IN INTERNET BANKING

On a scale of 1 11, please rank the following challenges that the organization faces while using

Internet banking. The value 1 represents the greatest challenge while the value 10 represents the

least challenge faced.

High accessibility cost

Lack of confidentiality

Insecurity

Poor internet connection

Low interest from customers

Complexity of use


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Lack of skilled knowledge

Use of outdated software & hardware

Lack of government support

Other, (please specify)

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

____

D.2) What methods does the bank use to address the above identified challenges? (Please list)

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

___

internet marketing proposal

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