Digital Marketing MRKT309 Chapter 3: Remix of the Ps PDF

Digital Marketing MRKT309 Chapter 3: Remix of the Ps Dr. Sarah Al-Shamali Chapter 3 Remix The digital world affects every aspect of business, every aspect of marketing and every aspect of the marketing mix. Some argue that physical distribution, selling an...

Digital Marketing MRKT309 Chapter 3: Remix of the Ps Dr. Sarah Al-Shamali Chapter 3 Remix The digital world affects every aspect of business, every aspect of marketing and every aspect of the marketing mix. Some argue that physical distribution, selling and pricing absorb the biggest impact. In fact, all the elements of the marketing mix are affected by this new world. This chapter shows you exactly how to evaluate the options for varying your organization’s marketing mix. 2 2.1 Introduction to remix The digital marketing mix and its elements is changing: Products become services Customers create communities that extend the brand into new online experiences Figure 2.1 The 7Ps of the classic marketing mix 3  2.1 Introduction to remix Your brand is your most valuable asset online. A company such as Facebook heavily relies upon its brand equity. 2.1 Introduction to remix Customers don’t care about an organizations internal process, they just want the right product/service available at the right time, in the right place and the right price. Some of you would have learned in the past that the marketing mix consists of 4Ps (Product, Price, Place and Promotion). However, the 4Ps help the marketing of products, the extra three ‘Ps’ are required to help market services, which is becoming a growing trend today as many products are becoming services.  What is the marketing mix? Figure 2.1: Elements of the marketing mix and how it has changed in the digital environments. + partnerships: colaborations with organizations to benefit from their experience/resources/image 2.2 What is the marketing mix? 1- Product 8Ps 2- Price 3- Place 4- Promotion + 5- People – Create and deliver service 6- Processes – Process of production 7- Physical evidence – Cues such as uniforms, badges and buildings 8- Partnerships – With other organizations Principles of the Mix: stick close to customers; listen to them using social media or formalized marketing research; learn what they need; supply it better than the competition by using the right mix. 7 2.3 Beyond the mix Before choosing a marketing mix, a marketing strategy first determines target markets and required brand positioning. Marketing Strategy involves… the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets. Marketing Opportunity Analysis (MOA) involves… the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments. 8 2.3 Beyond the mix Position Is the place a product, brand, or group of products occupies in consumers’ minds relative to competing products. Positioning Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact 2.4 The mix is morphing Social Media has changed everything, it has deepend the impact of digital media. Generating conversations on social media platforms… Enhances the product experience – Product Promotes the brand – Promotions Spreads the accessibility of a brand – Place Brand dependent on well-trained teams – People Crystal-clear systems and processes – Processes 2.4 The mix is morphing Widgets Widgets are like mini-apps that can be added to things such as your computer or phone home screen as a quick way to access certain information from apps without having to open the app itself. These can include widgets for the weather, news, games ect. Widgets enable individuals to personalize their home page with content from brands they like. M Improve the customer experience – Product E Deliver the experience wherever you are – Place R Promote the product simultaneously – Promotion G E 11 Widget Widget App App  Yahoo Microsoft Finance Outlook Netflix Shazam Spotify 2.5 Let’s start with mixing: Product The product offering, the heart of an organization’s marketing program, is usually the starting point in creating a marketing mix. Price, distribution, promotion strategies, and other elements of the marketing mix can not be determined until the firm has a product to sell. Things such as well-conceived price, distribution, and promotion strategies have little value without a strong product offering. Companies should also consider how the Internet can be used to change the range or combination of products offered. Some companies, such as fashion retailers, may only offer a subset of products online, whereas furniture retailers may use their website to expand their ranges and customer choice.  2.5 Options for digital products Some of the markets transformed most by the Internet are those where products can be transformed into digital services, such as music, books, and films. Digital technology also introduces options for mass customisation of products, particularly digital products or products that can be specified online. Mass customisation: Using economies of scale enabled by technology to offer tailored versions of products to individual customers or groups of customers. The Internet has provided a channel through which manufacturers can not only sell the personalised products but also use the Internet as a source of information for developing highly targeted products e.g. ASOS. 15 2.5 Product Digital channels offer a host of new opportunities and promote these product- related questions: What benefits do your products currently give your customers? Can these benefits be delivered online? What other benefits might your customers like? Can these additional benefits be delivered online? 2.5 Product When developing new products or adding digital value to customers, Ghosh (1998) urges companies to ask: 1. Can I afford additional information or transaction services for my existing customer base? 2. Can I address the needs of new customer segments by repacking my current information assets or by creating new business propositions using the Internet? 3. Can I use my ability to attract customers to generate new sources of revenue such as advertising or sales of complementary products? 4. Will my current business be significantly harmed by other companies providing some of the value I currently offer? 17 Example of question 2: Hala motor: Even less complex but high- involvement consumer purchases such as cars, motorcyles and boats can be aided online. Remember to keep asking, ‘How can I help my customers?’, ‘What information do my ideal target customers seek?’, ‘How can I save customers’ time?’ How can I add value to their online experience when they visit my site?’, and ’How can I excel at giving them this online?’ Quick Read (QR) codes can add another layer to an existing product and service by connecting a customer with online information, benefits and experiences. Once scanned, QR codes take vistors to a video clip, photo, article or a website. QR codes can also enhance two of the ‘Ps’: Promotion and Place. These codes let smartphone users scan a type of barcode to get digital information (website, video clip, article, photo or a shop). They add these layers of information and use them in many creative ways to enhance a product experience. Restaurants in Kuwait now use QR codes to help customers browse menues. Business cards and even advertising campaigns also use QR codes. 2.5 Product Enhancing product value on a website Evidence of Quality and Credibility for Products Online Endorsements Money-back offers Awards Staff photographs Testimonies Social proof such as a number of Customer lists and numbers subscribers, circlers, fans or Customer comments followers on social networks Warranties Guarantees 22 Extended Product e.g. coca cola line or Extended Brand e.g. virgin are examples of extending your brands product value to other items/industries because people are already aware of your brand. 2.5 Product Online Value Proposition (OVP) Online Value Proposition (OVP) is “a positioning statement that explains what benefit you provide and how you do it uniquely well.” The online proposition can offer some online advantages such as immediacy, interactivity and additional information, maybe even virtual experiences or virtual testing. The OVP should not only encompass the complete experience of selecting, buying and using the product or service, it must also reinforce core brand values and clearly summarize what a customer can get from you they cannot get elsewhere. This requires careful consideration customer needs, competitive sites and offerings, company strengths and resources available. 24  Examples of OVP A clearly created sentence appearing on a web site can summarize the offerings: a) Deliveroo – Food, we get it. b) Drops – You shop, we drop. c) CrazyEgg – Like a pair x-ray glasses. Figuring out precisely how people are using your website is a major challenge for many businesses. You might think you have a good idea about your users’ behavior, but without hard, actionable data, you can’t know for certain. That’s where CrazyEgg comes in. We’re a website behavior tracking system at an unbeatable price.  Customer Experience (CX): a totality of cognitive, affective, sensory, and behavioral consumer responses during all stages of the consumption process including pre-purchase, consumption, and post- purchase stages. If you are going to offer a consistent CX, then the online value proposition (OVP) should be the same as the offline proposition. 2.6 Price Prices have been affected by intense online competition and new creative approaches. Pricing models Describe the form of payment, such as auction, rental, volume purchases and credit terms. Companies that offer digital products such as written content, music, or videos have more flexibility offering a range of purchase options at different price points, such as: a) Subscription – This is a traditional publisher revenue model, which can be offered for different periods at different price points. b) Pay Per View – A fee for a single download or viewing session at a higher relative price than a subscription service. c) Bundling – Different channels or content can be grouped at a reduced price compared than a subscription service. 27 Netflix Subscription UFC Pay Per View Nintendo Switch Bundling  2.6 Price In price-sensitive marketplaces, not knowing that your competitors have increases their prices could cost you in lost revenue. Equally, not knowing that your competitors have cut their prices can push a brand outside of a price sensitive market. The internet is changing pricing forever. Prices are under pressure. Pricing structures and options are becoming more complex. It is crucial to get the pricing right in the short, medium and long term. Review new price structures in your markets, driven by customers looking for lower prices available through a range of online tools including reverse auctions, customer forums, intermediaries and shopping bots.  2.6 Price New buying processes require new pricing approaches Under pressure because of… (previous slide) - Customer knowledge/resources - Competition - Price transparency Research suggests two approaches commonly adopted for pricing online: 1. Start-up companies have tended to use low prices to gain a customer base 2. Existing companies just transferred their existing prices to the web Other methods to make pricing attractive: Discounts Add-ons and extra products & services Guarantees and warranties Refund & return policies Order cancellation terms 31  Pricing and demand Price elasticity of demand: Measure of consumer behaviour that indicates the change in demand for a product or service in response to changes in price. Price elasticity of demand is used to assess the extent to which a change in price will influence demand for a product. Price elasticity of demand is determined by the price of the product, availability of alternative goods from alternative suppliers and consumer income. A product is said to be ‘elastic’ if a small change in price increases or reduces the demand substantially. A product is ‘inelastic’ if a large change in price is accompanied by a small amount of change in demand. Market-orientated pricing: The response to price changes by customers making up the market are considered. This is known as ‘the elasticity of demand’. 32  The Cheap(er) Internet The competition caused by price transparency and increased number of competitors is the main reason for downward pressure on price. Pricing level: The price set for a specific product or range of products. The Internet also tends to drive down prices, since Internet-only retailers that do not have a physical presence do not have the overheads of operating stores and a retailer distribution network. This means that, in theory, online companies can operate at lower pricing levels than offline rivals. There are two approaches to pricing on and offline: 1- Premium pricing (or skimming the market) involves setting a higher price than the competition to reflect the positioning of the product as a high-quality item with customers who are price- insensitive. 2- Penetration pricing is when a price is set below the competitors’ prices to either stimulate demand or increase penetration. The difficulty with this approach is that if customers are price-sensitive then the low price must be sustained, otherwise customers may change to a rival supplier.  Price testing and dynamic pricing Dynamic pricing Prices can be updated in real time according to the type of customer or current market conditions. The Internet introduces new opportunities for dynamic pricing – for example, new customers could automatically be given discounted purchases for the first three items. Care must be taken with differential pricing since established customers will be unhappy if significant discounts are given to new customers. 35  The setting of shipping fees can have a dramatic effect on both conversion rates and profitability according to research. Shipping fees They note the popularity of free shipping offers when the basket size is above a certain amount, but also note that it can potentially cause profitability to fall if it is not set at the right level. They also suggest that different shipping fees could potentially be offered to different segments. Shipping fees can also be varied according to the time it takes for items to be delivered. One further approach is to offer a loyalty programme in return for free express shipping, e.g. Amazon Prime programme. 36  2.7 Payment mechanisms Due to scams etc. paying online is a sensitive topic which organizations need to be aware of. Traditionally, online purchase will occur at the retailer through a partnership with an online secure payment provider e.g. Knet. Effectively, the purchase transaction occurs on a different domain, but it is important that customers are reassured that the payment process is secure and seamless. Retailers often offer payment mechanisms where the purchaser has already set up payment with another payment provider, such as PayPal. This approach can assist with reassurance about privacy and security and increase purchase convenience. 37 2.7 Place Today customer have direct access to supplier, Place Promotion hence the place and promotion can merge into one. Before/offline Figure 2.16 Alternative representation locations for online purchases 38  2.7 Place Distribution or place, is crucial, increase your representation and make it widely and readily available to target customers. You can also use multi-channels for distribution to ensure they make their product easily available to new customers as well. Place and promotion overlap when organizations that extend their presence online with links from other sites in relevant places as the brand gets wider promotion. Place means the place of purchase, distribution and, in some cases, consumption. Some products exploit all three aspects of place online; for example digitizable products such as software, media and entertainment.  2.7 Place Place variable: The element of the marketing mix that involves distributing products to customers in line with demand and minimising cost of inventory, transport and storage. Typically, for offline channels, the aim of Place is to maximise the reach of distribution to achieve widespread availability of products while minimising the costs of inventory, trans-port and storage. In an online context, thanks to ease of navigating from one site to another, the scope of Place is less clear since Place also relates to Promotion and Partnerships. Successful retailers are those that maximise their representation or visibility on third-party sites that are used by their target audiences. These third-party sites will include search engines, online portals reviewing mobile phones and product comparison sites. 40 Amazon Dash physically lets customers put a one-click wirless re-order ‘button’ device (the size of a usb drive) on household devices like fridges and cupboard shelves.  2.7 Place: Localization Localisation Tailoring of website information for individual countries or regions. Localisation can include simple translation, but also cultural adaptation. A site may need to support customers from a range of countries with: different product needs language differences cultural adaptation 43 2.8 Promotion Communications/promotional mixes online 44  2.8 Promotion Promotional issues a) Promotional mix – Marketers need to mix the promotional mix. They need to choose which tools are most cost-effecive techniques for acquiring and retaining target customers. b) Resourcing – While online communications opportunities are infinite, resources need to maintain content marketing, service interactions and the database are not infinite. CRM systems can prove to be an extremely cost effective and customer satisfying they can use automated responses or issues that emerge online. c) Integration – All communications (online and offline) must be integrated, supporting the overall positioning and OVP which the the digital marketing strategy derives. d) Globalization – There are added complications of a global audience. Caution is required when entering international markets. 45 An example of issues faced with d) Globalization We have finished the traditional 4 P’s which have been customized for digital marketing (product, price, place, promotion). Now we start discussing the new 4 P’s in accordance with digital marketing: People Physical evidence Process Partnership  The People, Process, Physical evidence and Partnership elements of the mix are closely related and often grouped as ‘the service elements’. They are significant because they impact a customer’s loyalty and the probability of their recommending the service. Some of the key issues in improving the delivery of service online to assess the combination of technology and human assistance that is used to deliver service: 1. Substitution: Deploying technology instead of people (or the opposite) 2. Complementarity: Deploying technology in combination with people 3. Displacement: Outsourcing or ‘off-shoring’ technology or labour 2.9 People Your people (employees) are important since everyone in your organization is an abassador. Excellent service – before, during and after a sale – is required for repeated business. Contact strategies should be developed that give customers a choice of contact, but minimize costly interactions with staff. Automated services help, but people are also required. Customer service is a delicate balancing act, but bare them both in mind when integrating online and offline marketing activities. Recruitment, training, motivation and communication are required constantly. Happy Staff = Happy Customers = Happy Shareholders 2.9 People Auto-responders – Automatically generated to response to customer emails. Email/text alert – Automatically generated to update a customer on order status. Call-back facility – Customer give phone number and specify a time to be contacted. Realtime live chat – Customer support operator. FAQ – Page that customers can easily find answers to frequently asked questions. 50 2.9 People The challenges of managing websites & online services include: People vs Automation: Automation enables customers to get informtion independently whilst reducing costs for the business. However, some customers want personal assistance either via a phonecall or visit from a sales person. Therefore, a mix of both automations and people should be clearly available. Training and resourcing: Ofcourse, staff need to be trained and motivated whether they manage the website, telephone, field sales or the reception. What happens if a web transaction fails and the customer calls the centre? Can call-center staff access the database to complete the transaction, or do they have to collect all the details again? Moreover, a seemless integrated database is also required.  2.9 People To manage service and quality, organisations must devise plans to accommodate the five stages: Stage 1: Customer defines support query Best practice is clearly to find email support options. Often, finding contact and support information on a website is difficult. Standardised terminology on site is ‘Contact Us’, ‘Support’ or ‘Ask a Question’ is recommended. Providing FAQs or automated diagnostic tools should be considered at this stage to reduce the number of inbound enquiries. Avatars are increasingly being used to reduce the need for enquiries. Stage 2: Receipt of email and acknowledgement Best practice is that automatic message acknowledgement occurs. 54  2.9 People Stage 3: Routing of email Best practice involves automated routeing or workflow. Routing the email to the right person is made easier if the type of query has been identified through the techniques described for Stage 1. Stage 4: Compose response Best practice is to use a library of pre-prepared templates for different types of queries. These can then be tailored and personalised by contact centre employees, Stage 5: Follow-up Best practice is that if the employee does not successfully answer the first response, then the email should suggest call back from an employee or a live chat. Finally, the email follow-up may provide the opportunity for outbound contact and marketing, perhaps advising about complementary products or offers. 55 2.10 Physical evidence a) Customers look for online cues and clues for reassurance whether on a website, an app, a virtual experience or even an email. Design, layout and professional content offer credability. b) Offline activities can are also important such as professional-looking buildings, delivery vans and uniforms. c) Evidence, whether physical or digital, need to be managed constantly. Guarantees Ratings and reviews Refund policies Independent reviews Security icons News clippings Trade and professional body memberships Ethnical policies Awards Full address and contact details Customer endorsements Error-free Third party/institutional endorsements Reliable response systems International Standards (ISO) 56 2.10 Physical evidence  2.11 Process Optimizing internal/external processes: transactions & communications that are required to run a business. Processes can have a huge impact on your organization. Good processes and systems can create competitive advantage. There are lots of poor processes that kill sales and damage the brand. Typical operational objectives that should drive the strategies and measure effective- ness are: 1. minimise average response time per email and the range of response time from slowest to fastest 2. minimise resolution time 3. maximise customer satisfaction ratings with response 4. minimise average staff time and cost per email response. 2.11 Process To understand the important of process, consider a simple online enquiry and subseqyent online sale of a book. How should the system work? Think about which events/actions need to occur for the order to be fulfilled. a) Customer wants to check availability: Does the website show the number of product in stock and when next available if out of stock? b) Product specification or price is changed: Is the change seemlessly reflected in the site and price list or catalogues? c) Customer places order: Does site update the change in number of stock? Is customer notified by email that order is being processed? Is the finance system updated in include new order within the month’s revenue? d) Customer makes email enquiry: Can system cope with a wave of calls or emails and respond promptly? e) Product dispached: Is customer notified of this event by email? Can they track their order? 2.11 Process Organizations should also be aware of the disconnect of how they want to contact customers, and how customers want to be communicated to: Customer-preferred channel: The company uses a customer-led approach where customers use their preferred channel for enquiry. There is little attempt made to influence the customer. While this approach may give good customer satisfaction ratings, it is not usually the most cost-effective approach. Company-preferred channel: Here the company will seek to influence the customer on the medium used for contact. Customer choice is still available, but the company uses the website to influence the choice of channel. 2.12 An extra ‘P’ - Partnerships We can’t do everything ourselves. Companies, particularly those that want to succeed on a global scale find it difficult to succeed without partners. Partnerships can help enormously, but require skilled management. Strategic partnerships open doors to vast new markets via shared resources and experience. 61  2.12 Partnerships MUTV partnered with Sky and Century Radio in an attempt to develop its expansion so it could create additional outlets to Man Utd fans around the world, which quickly attrackted 379,000 unqiue users in 98 countries. 2.12 Partnerships GoPro & Red Bull: Stratos To make the partnership work, GoPro equips athletes and adventurers from around the world with the tools and funding to capture things like races, stunts, and action sport events on video — from the athlete’s perspective. At the same time, Red Bull uses its experience and reputation to run and sponsor these events.  2.12 Partnerships Nike & Apple: Nike+ Athletic brand Nike and technology giant Apple have been working together since the early 2000s, when the first line of iPods was released. The partnership started as a way to bring music from Apple to Nike customers’ workouts using the power of technology: Nike+iPod created fitness trackers and sneakers and clothing that tracked activity while connecting people to their tunes. Chapter summary Re-examine marketing mix for the digital world: Product– can be extended online through new information-based services and interaction with the brand. Price – reduction in market prices and changes in purchase, distribution and usage of products affect price Place/Promotion – online options are plenty but also expensive. New P’s: People – service quality is a key differentiator online and offline. Physical evidence – a well-designed site, physical cues. Process – internal and external systems Partnerships – can help expand a business. 65