E-Marketing and Service Marketing Exam PDF

E- Marketing and service marketing Module SERVICE AND E- MARKETING EXIT EXAM SUPPORTING MODULE Exit Exam Supporting Documents Department of Marketing Management 1 Compiled by Department of Marketing Management  E- Marketing and servi...

E- Marketing and service marketing Module SERVICE AND E- MARKETING EXIT EXAM SUPPORTING MODULE Exit Exam Supporting Documents Department of Marketing Management 1 Compiled by Department of Marketing Management  E- Marketing and service marketing Module INTRODUCTION TO E-MARKETING There is no doubt about it-the Internet has changed the world we live in. Never before has it been so easy to access information, communicate with people all over the globe and share articles, videos, photos and all manner of media. The Internet has led to an increasingly connected environment, and the growth of Internet usage has resulted in declining distribution of traditional media: television, radio, newspapers and magazines. Marketing in this connected environment and using that connectivity to market is E-Marketing. Internet has become an important medium for doing global business based on the state of the art technology. What is e-business, e-marketing and e-commerce E-business: overall automation or digitalizing of business functions. It focuses is not only on customers but also on suppliers, employees and other business partners. E-Business is defined as the continuous optimization of a firm‘s business through digital technology. E-Marketing or electronic marketing: refers to the application of marketing principles and techniques via electronic media and more specifically through internet. E-Marketing is also a part of e-Business that involves electronic medium to achieve marketing objectives. E marketing does not necessarily have sales as the primary goal. E-commerce: an emerging concept that describes the process of buying and selling or exchanging of products, services, and information via computer networks including the internet. Some people view the term commerce as describing transactions conducted between business partners. Ecommerce is simply the buying and selling of goods and services online. Electronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the internet. Electronic commerce describes the buying and selling of products, services, and information via communication networks including the Internet.There are different perspectives defining E- Commerce, a) Communication perspective: E-Commerce is the delivery of goods, services, information, or payments over computer networks or by any other electronic means. b) Business process perspective: E-Commerce is the application of technology towards the automation of business transactions and work flow. c) Service perspective: 2 Compiled by Department of Marketing Management  E- Marketing and service marketing Module E-Commerce is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery. d) Online perspective: E-Commerce provides the capability of buying and selling products and information on the internet and other online services. 1.2. The difference between E-Commerce and E-Business E-Commerce characteristically relates to the process of buying and selling products, services and information through the use of the Internet and/or computer networks. E-business is overall automation or digitalizing of business functions. It focuses not only on customers but also on suppliers, employees and other business partners. E-Commerce principally focuses on the organization customers (on their transactional relationship with the seller) while E-Business expands the connectivity of the organization to include not only its customers but also the organization suppliers, employees and business partners. There is a debate among consultants and academics about the meaning and limitations of both e-commerce and e-business. Some argue that e-commerce encompasses the entire world of electronically based organizational activities that support a firm's market exchanges-including a firm's entire information system's infrastructure. Others argue, on the other hand, that e-business encompasses the entire world of internal and external electronically based activities, including e-commerce.  Unique features of E-Commerce i) Ubiquity: internet/web technology is available everywhere at work, at home, and elsewhere via mobile devices any time. From a consumer point of view, ubiquity reduces transaction costs—the costs of participating in a market. ii) Global reach: permits commercial transactions to cross cultural and national boundaries.As a result, the potential market size for e-commerce merchants is roughly equal to the size of the world‘s online population iii) Universal standards: technical standards of conducting E-Commerce are shared by all nations around the world.The universal technical standards of the Internet and e-commerce greatly lower market entry costs—the cost merchants must pay just to bring their goods to market. At the same time, for consumers, universal standards reduce search costs—the effort required to find suitable products. iv) Richness: the complexity and content of a message. The Internet has the potential for offering considerably more information richness than traditional media such as printing presses, radio, and television because it is interactive and can adjust the message to individual users. 3 Compiled by Department of Marketing Management  E- Marketing and service marketing Module v) Interactivity: e-commerce is a technology that allows two-way communication between merchant and consumer. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience. VI) Information Density: the total amount and quality of information available to all market participants, consumers, and merchants alike.E-commerce technologies reduce information collection, storage, processing, and communication costs. vii) Personalization/Customization: Personalization: merchants can target their marketing messages to specific individuals by adjusting the message to a person's name, interest, and past purchases. Customization: changing the delivered product or service based on a user's preference or prior behavior.  Types of E-Commerce E-commerce is the use of Internet and the web to transact business but when we focus on digitally enabled commercial transactions between and among organizations and individuals involving information systems under the control of the firm it takes the form of e-business. Nowadays, 'e' is gaining momentum and most of the things if not everything is getting digitally enabled. Thus, it becomes very important to clearly draw the line between different types of commerce or business integrated with the 'e' factor. There are mainly five types of e-commerce models: 1. Business to Consumer (B2C) - As the name suggests, it is the model involving businesses and consumers. This is the most common e-commerce segment. In this model, online businesses sell to individual consumers via internet. When B2C started, it had a small share in the market but after 1995 its growth was exponential. The basic concept behind this type is that the online retailers and marketers can sell their products to the online consumer by using crystal clear data which is made available via various online marketing tools. E.g. an online pharmacy giving free medical consultation and selling medicines to patients is following B2C model. 2. Business to Business (B2B) - It is the largest form of e-commerce involving business of trillions of dollars. In this form, the buyers and sellers are both business entities and do not involve an individual consumer. It is like the manufacturer supplying goods to the retailer or wholesaler. E.g. Dell sells computers and other related accessories online but it is does not manufacture all those products. So, in order to sell those products, it first purchases them from different businesses i.e. the manufacturers of those products. 3. Consumer to Consumer (C2C) - It facilitates the online transaction of goods or services between two people. Though there is no visible intermediary involved but the parties cannot carry out the transactions without the platform which is provided by the online market maker such as eBay. 4 Compiled by Department of Marketing Management  E- Marketing and service marketing Module 4. Peer to Peer (P2P) - Though it is an e-commerce model but it is more than that. It is a technology in itself which helps people to directly share computer files and computer resources without having to go through a central web server. To use this, both sides need to install the required software so that they can communicate on the common platform. This type of e-commerce has quite low revenue generation as from the beginning it has been inclined to the free usage due to which it sometimes got entangled in cyber laws. 5. M-Commerce - It refers to the use of mobile devices for conducting the transactions. The mobile device holders can contact each other and can conduct the business. Even the web design and development companies optimize the websites to be viewed correctly on mobile devices. There are other types of e-commerce business models too like Business to Employee (B2E), Government to Business (G2B) and Government to Citizen (G2C) but in essence they are similar to the above mentioned types. Moreover, it is not necessary that these models are dedicatedly followed in all the online business types. It may be the case that a business is using all the models or only one of them or some of them as per its needs.  Types of commerce A.Traditional commerce: all dimensions are physical E.g. Bricks-and-mortar firms—those traditional companies that are not yet involved in the WWW. B. pure EC: All dimensions are digital E.g. Clicks-only firms—those that conduct business only via the Internet and are considered to be innovators in the field. C. Partial EC: All other possibilities include a mix of digital and physical dimensions E.g. Bricks-and-clicks firms—operate both in traditional and Internet setting  Benefit of e-Commerce A. To Organizations Expands a company‘s marketplace to national and international markets. Decrease the cost of creating, processing, distributing, storing, and retrieving paper-based information. It also lowers telecommunications costs. Electronic commerce allows for high degree specialization that is not economically feasible in the physical world. www.dogtoys.com. It reduces the time between the outlay of capital and the receipt of products and services. Electronic commerce enables companies to interact more closely with customers, even if through intermediaries. Enables companies to procure material and services from other companies, rapidly and at less cost. 5 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Shortens or even eliminates marketing distribution channels, making products cheaper and vendors‘ profits higher. Decreases (by as much as 90 percent) the cost of creating, processing, distributing, storing and retrieving information by digitizing the process for business operation improvement. Reduce warehouse costs (maintaining a store, rent, insurance and utilities) Allows lower inventories by facilitating pull-type supply chain management. This allows product customization and reduces inventory costs. Helps small businesses compete against large companies and Reduce delivery delay. B. To customers 24/7/365 service of transaction and Provides more choices. Electronic commerce frequently provides less expensive products with quick comparison. Gives consumers more choices than they could easily locate otherwise. Delivers relevant and detailed information in seconds. Enables consumers to get customized products, from PCs to cars, at competitive prices. Makes it possible for people to work and study at home. Makes possible electronic auctions. Reduce the problem of trafficking, and finding parking space and trek through stores to shop. Allows consumers to interact in electronic communities and to exchange ideas and compare experiences. Buying is private, interactive and immediate Buyers are free from pressurize selling Saves time i.e. no need to visit the store personally and contact the sales person C. To society Enables individuals to work at home and to do less traveling, resulting in less road traffic and lower air pollution. Allows some merchandise to be sold at lower prices, thereby increasing people‘s standard of living. Enables people in developing countries and rural areas to enjoy products and services that are otherwise not available. This includes opportunities to learn professions and earn college degrees, or to receive better medical care. Public services can be delivered at lower cost. Such as increasing the quality of social services, police work, health care, and education.  Limitations of E-commerce 6 Compiled by Department of Marketing Management  E- Marketing and service marketing Module I. Technical Limitations Lack of universally accepted standards for quality, security, and reliability (are still evolving). Insufficient telecommunications bandwidth. Still-evolving software development tools. Some EC software might not fit with some hardware or it may be incompatible with certain operating systems or components. II. Non-technical limitations  The cost of developing Electronic commerce in-house can be very high and mistakes made due to lack of experience may result in delays.  Security and privacy issues.  Customers do not trust an unknown, faceless seller, paperless transactions, and electronic money.  Some customers like to touch items such as cloths, so they know exactly what they are buying.  Perception that EC is expensive and unsecured.  Slow internet connectivity  Cost increases as per the attractiveness of website increases  Credit/debit cards may be tracked INTERNET MARKETING ENVIRONMENT AND E-BUSINESS MODEL Environment consists of the actors and forces outside marketing that affect the marketing management‘s ability to develop and maintain successful transactions with its target customers. The marketing environment offers both threats and opportunities‘. All organizations operate within an environment that influences the way in which they conduct business. Organizations that monitor, understand and respond appropriately to changes in the environment have the greatest opportunities to compete effectively in the competitive marketplace. The marketing environment consists of Microenvironment and macro environment.  Microenvironment Consists of forces close to the company that affect its ability to serve its customers.these are: the company, suppliers, marketing channel firms, customer markets and competitors. Let us see one by one.  The Company: Constitutes the internal environment, Marketing plans are influenced by top management, finance, research and development (R & D), purchasing, manufacturing and accounting and others. these functions must ‗think customer‘ and they should work together to provide superior 7 Compiled by Department of Marketing Management  E- Marketing and service marketing Module customer value and satisfaction. On online context the organization must be adaptable to new technology changes.  Customers: The company must study its customer markets closely i.e. Customers access level to internet, interest to use and buy products or services online and online consumer behavior. 2.1.3. Supplier: Are an important link in the company's overall customer 'value delivery system. they provide the resources or raw materials needed by the company to produce its goods and services. Suppliers have effect on product price, availability and features. In the Internet contexts supplier Access level to internet, interest to use and sell raw materials or resources online and integration with existing system. 2.1.4. Marketing Intermediaries: Marketing intermediaries are firms that help the company to promote, distribute and sell its goods to final buyers. They include resellers, physical distribution firms, marketing services agencies and financial intermediaries. The best known online intermediaries are the most popular sites such as Google, MSN and Yahoo! Online intermediary sites provide information about destination sites and provide a means of connecting Internet users with product information. Consumer intermediaries such as kelkoo (www.kelkoo.com ) and Bizrate (www.bizrate.com ) provide price comparison for products. These are types of intermediaries online: Search engines (Google, Yahoo! Search). Malls (now replaced by comparison sites such as Kelkoo and Price runner). Virtual resellers (own inventory and sells direct, e.g. Amazon, CDWOW). Financial intermediaries: offers digital cash and payment services such as PayPal which is now part of eBay). 2.1.5. Competitors: A firm‘s competitive environment refers to the other companies selling similar products and operating in the same market space.To be successful, a company must provide greater customer value and satisfaction than its competitors do. To do so marketers must do more than simply adapt to the needs of target consumers gain strategic advantage by positioning their offerings strongly against competitors' offerings in the minds of consumers. Unlike the case of traditional marketing, since it is difficult to easily know online competitors, companies need to always review: Well-known local competitors; well-known international competitors; and new internet companies local and worldwide (within sector and out of sector). 2.2. Macro environment 8 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Macro environment consists of the larger societal forces that affect the whole microenvironment; these are social, economic, and natural, technological, political, legal and cultural forces. 2.2.1. Social Factors (Socio-cultural): these include the influence of consumer perceptions in determining usage of the Internet for different activities. 2.2.2. Legal and Ethical Factors – determine the method by which products can be promoted and sold online. Governments, on behalf of society, seek to safeguard individuals‘ rights to privacy. 2.2.3. Economic Factors – variations in the economic performance in different countries and regions affect spending patterns and international trade (it is not about internal, which is micro level) 2.2.4. Political: national governments and transnational organizations have an important role in determining the future adoption and control of the Internet and the rules by which it is governed. 2.2.5. Technological Factor: changes in technology offer new opportunities to the way products can be marketed. 2.3. E-commerce Business Models and Concepts A business model describes the architecture for product, service, and information delivery and a description of sources of revenues (revenue streams). A business model identifies the value chain elements of the business such as inbound logistics, operations (or production), outbound logistics, marketing, service; and support activities. A business model doesn‘t exist in a vacuum. A firm might select one or more business models as strategies to accomplish enterprise goals. For instance, if the firm‘s goal is to position itself as a high-tech, innovative company, it might decide to use the internet to connect and communicate with its suppliers and customers. The authors of internet business models and strategies suggest the following components as critical to appraising the fit of a business model for the company and its environment.  Customer value: - Does the model create value through its product offering that is differentiated in some way from that of competitors?  Scope: - Which markets does the firm serve, and are they growing? Are these markets currently served by the firm, or will they be higher-risk new markets?  Price:-Are the firm‘s products priced to appeal to markets and also achieve company share and profit objective?  Revenue source:-Where is the money coming from? Is it plentiful enough to sustain growth and profit objectives over time? Many dot.com failures overlooked this element. 9 Compiled by Department of Marketing Management  E- Marketing and service marketing Module  Connected activities:-What activities will the firm need to perform to create the value described in the model? Does the firm have these capabilities? For example, if 24/7 customer service is part of the value, the firm must be prepared to deliver it.  Implementation: - The Company must have the ability to actually make it happen, which involves the firm‘s systems, people, and culture and so on.  Capabilities:-Does the firm have the resource (financial, core competencies, etc) to make the selected model functional?  Sustainability:-The e-business model is particularly appropriate if it will create a competitive advantage over time. Will it be difficult to imitate and will the environment be attractive for maintaining the model over time?  Eight Key Elements of a Business Model If you hope to develop a successful business model in any arena, not just e-commerce, you must make sure that the model effectively addresses the eight elements of business models. These elements are value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team. Many writers focus on a firm‘s value proposition and revenue model. While these may be the most important and most easily identifiable aspects of a company‘s business model, the other elements are equally important when evaluating business models and plans, or when attempting to understand why a particular company has succeeded or failed. In the following sections, we describe each of the key business model elements more fully. 2.4.1. Value Proposition A company‘s value proposition is at the very heart of its business model. A value proposition defines how a company‘s product or service fulfills the needs of customers. To develop and/or analyze a firm‘s value proposition, you need to understand why customers will choose to do business with the firm instead of another company and what the firm provides that other firms do not and cannot. From the consumer point of view, successful e-commerce value propositions include personalization and customization of product offerings, reduction of product search costs, reduction of price discovery costs, and facilitation of transactions by managing product delivery. For instance, before Amazon existed, most customers personally traveled to book retailers to place an order. In some cases, the desired book might not be available, and the customer would have to wait several days or weeks, and then return to the bookstore to pick it up. Amazon makes it possible for book lovers to shop for virtually any book in print from the comfort of their home or office, 24 hours a day, and to know immediately 10 Compiled by Department of Marketing Management  E- Marketing and service marketing Module whether a book is in stock. Amazon‘s Kindle takes this one step further by making e-books instantly available with no shipping wait. Amazon‘s primary value propositions are unparalleled selection and convenience. 2.4.2. Revenue Model A firm‘s revenue model describes how the firm will earn revenue, generate profits, and produce a superior return on invested capital. We use the terms revenue model and financial model interchangeably. The function of business organizations is both to generate profits and to produce returns on invested capital that exceed alternative investments. Profits alone are not sufficient to make a company ―successful‖. In order to be considered successful, a firm must produce returns greater than alternative investments. Firms that fail this test go out of existence. Although there are many different e-commerce revenue models that have been developed, most companies rely on one, or some combination, of the following major revenue models: the advertising model, the subscription model, the transaction fee model, the sales model, and the affiliate model. 1. Advertising revenue model: a company that offers content, services, and/ or products also provides a forum for advertisements and receives fees from advertisers.Yahoo, for instance, derives a significant amount of revenue from display and video advertising. 2. Subscription revenue model: a company that offers content or services charges a subscription fee for access to some or all of its offerings. 3. Transaction fee revenue model: a company receives a fee for enabling or executing a transaction. For example, eBay provides an auction marketplace and receives a small transaction fee from a seller if the seller is successful in selling the item. 4. The sales revenue model: companies derive revenue by selling goods, content, or services to customers. Companies such as Amazon (which sells books, music, and other products), LLBean.com, and Gap.com all have sales revenue models. 5. The affiliate revenue model: companies that steer business to an ―affiliate‖ receive a referral fee or percentage of the revenue from any resulting sales. For example, MyPoints makes money by connecting companies with potential customers by offering special deals to its members. 2.4.3. Market Opportunity The term market opportunity refers to the company‘s intended market space (i.e., an area of actual or potential commercial value) and the overall potential financial opportunities available to the firm in that market space.The market opportunity is usually divided into smaller market niches. The realistic market opportunity is defined by the revenue potential in each of the market niches where you hope to compete. 11 Compiled by Department of Marketing Management  E- Marketing and service marketing Module 2.4.4. Competitive Environment A firm‘s competitive environment refers to the other companies selling similar products and operating in the same market space. It also refers to the presence of substitute products and potential new entrants to the market, as well as the power of customers and suppliers over your business. The competitive environment for a company is influenced by several factors: how many competitors are active, how large their operations are, what the market share of each competitor is, how profitable these firms are, and how they price their products. Firms typically have both direct and indirect competitors. Direct competitors are companies that sell products and services that are very similar and into the same market segment.For example, Priceline and Travelocity, both of whom sell discount airline tickets online, are direct competitors because both companies sell identical products—cheap tickets. Indirect competitors are companies that may be in different industries but still compete indirectly because their products can substitute for one another.For instance, automobile manufacturers and airline companies operate in different industries, but they still compete indirectly because they offer consumers alternative means of transportation.  Competitive Advantage Firms achieve a competitive advantage when they can produce a superior product and/or bring the product to market at a lower price than most, or all, of their competitors. Firms also compete on scope. Some firms can develop global markets, while other firms can develop only a national or regional market. Firms that can provide superior products at the lowest cost on a global basis are truly advantaged. There are four types competitive advantages: 1. Asymmetry: exists whenever one company in a market has more resources than other companies. Theresources may be financial backing, knowledge, information, and/or power than other companies. 2. first-mover advantage: a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service. If first movers develop a loyal following or a unique interface that is difficult to imitate, they can sustain their first-mover advantage for long periods. 3. Complementary resources: resources and assets not directly involved in the production of the product but required for success, such as marketing, management, financial assets, and reputation. 4. Unfair competitive advantage: occurs when one firm develops an advantage based on a factor that other firms cannot purchase. For instance Brands are built upon loyalty, trust, reliability, and quality. Once obtained, they are difficult to copy or imitate, and they permit firms to charge premium prices for their products.  Market Strategy 12 Compiled by Department of Marketing Management  E- Marketing and service marketing Module No matter how tremendous a firm‘s qualities, its marketing strategy and execution are often just as important. The best business concept, or idea, will fail if it is not properly marketed to potential customers. Market strategy is the plan you put together that details exactly how you intend to enter a new market and attract new customers. For instance, Twitter, YouTube, and Pinterest have a social network marketing strategy that encourages users to post their content on the sites for free, build personal profile pages, contact their friends, and build a community. In these cases, the customer becomes part of the marketing staff.  Organizational development Organizational Development is plan describes how the company will organize the work that needs to be accomplished. Typically, work is divided into functional departments, such as production, shipping, marketing, customer support, and finance. Jobs within these functional areas are defined, and then recruitment begins for specific job titles and responsibilities. For instance, eBay founder Pierre Omidyar started an online auction site, according to some sources, to help his girlfriend trade Pez dispensers with other collectors, but within a few months the volume of business had far exceeded what he alone could handle. So he began hiring people with more business experience to help out. Soon the company had many employees, departments, and managers who were responsible for overseeing the various aspects of the organization.  Management Team Management team is describes as employees of the company responsible for making the business model work. A strong management team gives a model instant credibility to outside investors, immediate market-specific knowledge, and experience in implementing business plans. Eventually, most companies get to the point of having several senior executives or managers. How skilled managers are, however, can be a source of competitive advantage or disadvantage. The challenge is to find people who have both the experience and the ability to apply that experience to new situations.  Summary of the eight key elements of a business model Value proposition: Why should the customer buy from you? Revenue model: How will you earn money? Market opportunity: What market space do you intend to serve, and what is its size? Competitive environment: Who else occupies your intended market space? Competitive advantage: What special advantages does your firm bring to the market space? Market strategy: How do you plan to promote your products or services to attract your target audience? 13 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Organizational development: What types of organizational structures within the firm are necessary to carry out the business plan? Management team: What kinds of experiences and background are important for the company‘s leaders to have?  Categorizing E-commerce Business Models Our approach is to categorize business models according to the different major e-commerce sectors—B2C and B2B—in which they are utilized. You will note, however, that fundamentally similar business models may appear in more than one sector. For example, the business models of online retailers (often called e-tailers) and e-distributors are quite similar. However, they are distinguished by the market focus of the sector in which they are used. In the case of e-tailers in the B2C sector, the business model focuses on sales to the individual consumer, while in the case of the e-distributor, the business model focuses on sales to another business. Many companies use a variety of different business models as they attempt to extend into as many areas of e- commerce as possible. We look at B2C business models and B2B business models.  Major business-to-consumer (B2c) e-commerce business models 1. E-tailer: Online retail stores, often called e-tailers come in all sizes, from giant Amazon to tiny local stores that have Web sites. Online version of retail store where customers can shop at any hour of the day or night without leaving their home or office.Eg.Amazon, iTunes and Bluefly. 2. Community Provider: Sites where individuals with particular interests, hobbies, common experiences, or social networks can come together and ―meet‖ online.eg. Social Medias (Facebook, Twitter, viber). 3. Content Provider: these are Information and entertainment providers such as newspapers, sports sites, and other online sources that offer customers up-to date news and special interest how-to guidance and tips and/or information sales.eg. WSJ.com, CBSSports.com, CNN.com, ESPN.com 4. Portal: offers users powerful search tools as well as an integrated package of content and services all in one place: news, e-mail, chat, music downloads, video streaming, calendars, etc. Seeks to be a user‘s home base.Eg. Yahoo, AOL, MSN and Facebook 5. Transaction Broker: Processors of online sales transactions, such as stockbrokers and travel agents that increase customers‘ productivity by helping them get things done faster and more cheaply. Eg.E*Trade, Expedia, Monster, Travelocity, Hotels.com and Orbitz. 6. Market Creator: Businesses that use Internet technology to create markets that bring buyers and sellers together and display products, search for products, and establish a price for products.eg. EBay, Etsy, Amazon and Priceline. 14 Compiled by Department of Marketing Management  E- Marketing and service marketing Module 7. Service Provider: Companies that make money by selling service to users online, rather than a product. Eg. VisaNow.com, Carbonite and Rocket Lawyer.  Major business-to-business (B2B) e-commerce business models 1. E-distributor: Companies that supply products and services directly to individual businesses. These are Single-firm online version of retail and wholesale store; supply maintenance, repair, operation goods; indirect inputs. Eg. Grainger.com, Partstore.com 2. E-procurement: e-procurement firms create and sell access to digital electronic markets. Firms such as Ariba, for instance, have created software that helps large firms organize their procurement process by creating mini-digital markets for a single firm. E.g. Ariba and Perfect Commerce. 3. Exchange: an independent digital electronic marketplace where suppliers and commercial purchasers can conduct transactions. Exchanges are owned by independent, usually entrepreneurial start-up firms whose business is making a market, and they generate revenue by charging a commission or fee based on the size of the transactions conducted among trading parties. 4. Industry Consortia: Industry consortia are industry-owned vertical marketplaces that serve specific industries, such as the automobile, aerospace, chemical, floral, or logging industries.In contrast, horizontal marketplaces sell specific products and services to a wide range of companies. 2.8. Value and Revenue in E- commerce As part of its e-business model, an organization describes the ways in which it creates value for customers and partners. This description is in line with the marketing concept, which suggests that the social and economic justification for an organizational existence is the satisfaction of customer wants and needs while meeting organizational objectives. Business partners might include supply chain members such as suppliers, wholesalers and retailers or firms with which the company joins forces to create new brands. Firms deliver stakeholder value through e-business models by using digital products and processes. Whether online or offline, the value proposition involves knowing what is important to the customer or partner and delivering it better than other firms. Value: It encompasses the customer‘s perceptions of the product‘s benefits, specifically its attributes, brand name, and support services. Subtracted from benefits are the costs involved in acquiring the product, such as monetary, time, energy, and psychic costs. Like customers, partners evaluate value by determining whether the partnership provides more benefits than costs. This concept is shown as follows: Value= benefit-cost 15 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Information technology usually but not always increase benefits and lowers costs to stakeholders. E-marketing strategies capitalize on the internet‘s properties to add many general benefits, thus increasing stakeholder value. Conversely, they can decrease value when websites are complex, information is hard to locate, and technical difficulties interrupt data access or shopping transactions.  Business process level in E-business models These are the business processes levels to increase the firm‘s effectiveness. A. Customer relationship management (CRM): This involves retaining and growing business and individual customers through strategies that ensure their satisfaction with the firm and its products. CRM seeks to keep customers for the long term and to increase the number and frequency of their transactions with the firm. In the context of e-business, CRM uses digital processes and integrates customer information collected at every customer ―touch point.‖ Customers interact with firms in person at retail stores or company offices, by mail, via telephone, or over the internet. The results of the interactions at all these touch points are integrated to build a complete picture of customer characteristics, behavior, and preferences. B. knowledge management (KM): Is a combination of a firm‘s database contents, the technology used to create the system, and the transformation of data into useful information and knowledge. KM systems create a storehouse of reports, customer account information, product sales, and other valuable information managers can use to make decisions. C. Supply chainmanagement (SCM): Involves coordination of the distribution channel to deliver products more effectively to customers. For example, a user orders from certain web sites, FedEx‘s computers receive the instruction to pick up product from a warehouse and delivery it quickly to the customer. Similarly, when consumers buy a product at the grocery store, the bar code scanner at the checkout tells the store‘s computer to reduce the inventory count by one and then automatically orders more cases of the product from warehouses or suppliers if inventory in the back room is low. D. Community building: With community building, firms build websites to draw groups of special interest users. In this model, firms invite users to chat and post e-mail on their websites with the purpose of attracting potential customers to the site. Firms often gather e-mail lists of like-minded users from these communities for future e-mail marketing campaigns. Through community building, marketers can create social bonds that enhance customer relationships. E. Affiliate programs: Occur when firms put a link to someone else‘s retail website and earn a commission on all purchases by referred customers. Amazon.com pioneered this e-business model. When viewed from an Amazon affiliate‘s perspective, it is operating as a selling agent for Amazon‘s products. 16 Compiled by Department of Marketing Management  E- Marketing and service marketing Module F. Database marketing: Involves collecting, analyzing, and disseminating electronic information about customers, prospects, and products to increase profits. It is one of the fastest growing strategies for e- marketers. Database marketing systems can be a part of the firm‘s overall knowledge management system. G. Enterprise resource planning (ERP): Refers to a back-office system for order entry, purchasing, invoicing, and inventory control. ERP systems allow organizations to optimize business processes while lowering costs. ERP does not fall under the marketing function, but it is so important that it must be included in this list. H. Mass customization: Refers to the internet‘s unique ability to customize marketing mixes electronically and automatically to the individual level. Firms use this practice when they collect information from customers and prospects, and use it to customize products and communication on an individual basis for a large number of people. Electronic-marketing planning Introduction to e-Marketing plan E-Marketing plan is a strategic document developed through analysis and research and is aimed at achieving marketing objectives via electronic medium. E-Marketing plan represents a sub-set of organization‘s overall marketing plan which supports the general business strategy. Every good e-Marketing plan must be developed in line with the organization‘s overall marketing plan. The e-marketing plan serves as a road map to guide the direction of the firms, allocate resources and make tough decisions at critical junctures. In a broad sense, e-Marketers generally start by analyzing the current micro- and macro-economic situation of the organization. E-Marketers must observe both internal and external factors when developing an e-Marketing plan as trends in both micro and macro environment affect the organization‘s ability to perform business. Examples of micro environment elements are: pricing, suppliers, customers. Macro environment also consist socioeconomic, political, demographic and legal factors. In order to produce a viable e-Marketing solution, e- Marketers must first understand the current situation of the company and its environment, profile, segment the target in to the right market and then strategically position the products as to achieve optimal response with the target market. This is generally achieved through SWOT analysis. By assessing organization‘s strengths and weaknesses and looking at current opportunities and threats one can devise an e-Marketing strategy that can improve the organization‘s bottom line. How can information technologies assist marketers in building revenues and market share or lowering costs? How many firms identify a sustainable competitive advantage with the internet when the landscape is 17 Compiled by Department of Marketing Management  E- Marketing and service marketing Module constantly changing? The answer lies in determining how to apply digital data and information technologies both effectively and efficiently. The best firms have clear visions that they translate, through the marketing process, from e-business objectives and strategies into e-marketing goals and well executed strategies and tactics for achieving those goals. This marketing process entails three steps: marketing plan creation, plan implementation, and plan evaluation/corrective action. This chapter examines the first of these steps i.e. the e-marketing plan. Creating an E-marketing plan The e-marketing plan is a blueprint for e-marketing strategy formulation and implementation. It is a guiding, dynamic document that links the firm‘s e-business strategy (e-business model) with technology driven marketing strategies and lays out details for plan implementation through marketing management. The intent of the marketing plan is to guide delivery of the desired results measured by a performance metrics according to the specifications of the e-business model imbedded in the firm‘s e-business strategy. It presents a generic plan that includes a menu of tasks from which marketers can select activities relevant to their firm, industry, brands, and internal processes. It assumes that a higher level corporate plan is already in place, outlining the firm‘s goals, e-business strategies and selected enterprise level e-business models. If such plan has not already been formulated, marketers must go through the environmental scan and SWOT analyses prior to creating the plan. A Seven step E-marketing plan Step 1- Situational analysis This is the first step in which the marketers will conduct the situation analysis by reviewing environmental and SWOT analysis. The marketing environment is ever changing, providing plenty of opportunities to develop new products, new markets, and new media to communicate with customers, plus new channels to reach business partners. At the same time, the environment poses competitive, economic, and other threats. Three key environmental factors that affect e-marketing and are part of any situation analysis include legal, technological, and market related factors. The SWOT analysis (strength, weaknesses, opportunities, and threats) flows from a situation analysis that examines the company‘s internal strengths and weaknesses with respect to the environment and the competition, and looks at external opportunities and threats. Opportunities may help to define a target market or identify new product opportunities, while threats are areas of exposure. Step 2- E-marketing strategic planning 18 Compiled by Department of Marketing Management  E- Marketing and service marketing Module After reviewing the situation analysis and currently used marketing plans, marketers engage in strategic planning. The strategic planning process involves determining the fit between the organization‘s objectives, skills, and resources and its changing opportunities. We present tasks as tier 1 strategies, including segmentation, targeting, differentiation, and positioning. During this phase, marketers uncover opportunities that help to formulate the e-marketing objectives. Marketers conduct a market opportunity analysis (MOA), including both demand and supply analysis, for segmenting and targeting. The demand analysis portion includes market segmentation analysis to describe and evaluate the potential profitability, sustainability, accessibility, and size of various potential segments. Segment analysis in the B2C market uses descriptor such as demographic characteristics, geographic location, selected psychographic characteristics (such as attitude towards technology and wireless communication device ownership), and past behavior towards the product (such as purchasing patterns online and offline). B2B descriptor includes firm location, size, industry, type of need, and more. These descriptors help firms to identify potentially attractive markets. Firms must also understand segment trends- are they growing or declining in absolute size and product use? Firms use traditional segmentation analysis when they enter new markets through the online channel; however, if the firm plans to serve current markets online, it will explore more deeply into these customers‘ needs to answer the questions like; which of the firm‘s customers will want to use the internet? & how do the needs of customers using the firm‘s web site differ from those of other customers? For example, most internet users expect e-mail to be answered within 24 hours but will be satisfied if a postal letter is answered within weeks. In addition, firms often discover new markets as these customers find their way to the web site. Marketers can use database analysis and other techniques to discover how best to serve these new markets. Another tier 1 step in e-marketing strategic planning includes identifying brand differentiation variables and positioning strategies. Based on an understanding of both the competition and the target(s), marketers must decide how to differentiate their products from competitors‘ products in a way that provides benefits perceived as important by the target. Following from the differentiation is the positioning statement: the desired image for the brand relative to the competition. If this positioning strategy was already decided upon in the traditional marketing plan, e-marketing must decide whether it will be effective online as well. Step 3 - Objectives In general, an objective in an e-marketing plan takes a form that includes the following aspects:  Task (what is to be accomplished) 19 Compiled by Department of Marketing Management  E- Marketing and service marketing Module  Measurable quantity (how much )  Time frame (by when) Assume that Amazon wants to increase the number of associates in its affiliate program from 800,000 to 900,000 in one year. This type of objective is easy to evaluate and a critical part of the e-marketing plan. The plan will often include the rationale for setting each objective –why each is desirable and achievable given the situation analysis findings, e-marketing, and e-business strategy. Even though e-commerce transactions are an exciting dimension of an e-business presence, other objectives are also worthwhile, especially when the firm is using technology only to create internal efficiencies such as target market communication. In fact, most e-marketing plans aim to accomplish multiple objectives such as the following:  increase market share  increase sales revenue (measured in dollar or units)  reduce cost ( such as distribution and promotion costs)  achieve branding goals ( such as increasing brand awareness)  improve databases  achieve customer relationship management goals ( such as increasing customer satisfaction, frequency of purchases, or customer retention rates)  improve supply chain management ( such as by enhancing member coordination, adding partners, or optimizing inventory levels) Step 4 - Marketing strategies Next, marketers craft strategies regarding the 4 Ps and relationship management to achieve plan objectives regarding the offer (product), value (pricing), distribution (placing), and communication (promotion). Further, marketers design customer and partner relationship strategies (CRM/PRM). For clarification we call these tier 2 strategies. In practice, tier 1 and tier 2 strategies are interrelated; for example, marketers select the best target market and identify a competitive product position, which dictates the ideal type of advertising, pricing, and so forth. Steps 2, 3, and 4 are an iterative process because it is difficult to know what the brand position should be without understanding the offer that comprises the brand promise (i.e. the benefits the firm promises to customers). Let us see the details of tier 2 strategies one by one. I. The offer: Product strategies 20 Compiled by Department of Marketing Management  E- Marketing and service marketing Module The organization can sell merchandise, services, or advertising on the web site. It can adopt one of the e- business models discussed so far such as online auctions, to generate a revenue stream. The firm can create new brands for the online market or simply sell selected current or enhanced products in that channel. Obviously, the previous analysis will reveal many options. If the firm offers current brands online, it will need to solve many different problems, such as the way colors appear differently on a computer screen than in print. The brightest firms take advantage of information technology capabilities to alter their online offerings. For example, Dell computer allows product customization in an instant: customers configure the computer they want to buy using an online form, and the database returns a page that includes current information about the computer and its price. II. The value: Pricing strategies A firm must decide how online product prices will compared with offline equivalents. To make these decisions, firms consider the differing costs of sorting and delivering products to individuals through the online channel as well as competitive and market concerns. Two particularly important online pricing trends include the following:  Dynamic pricing. The strategy applies different price levels for different customers or situations. For example, a first time buyer or someone who hasn‘t purchased for many months may receive lower prices than a heavy user, or prices may drop during low demand periods. The internet allows firms to price items automatically and ―on the fly‖ while users view pages.  Online bidding. This approach presents a way to optimize inventory management. For instance, a few Seattle hotels allow guests to bid for hotel rooms on slow days, instructing its reservation agents to accept various minimum bid levels depending on occupancy rates for any given day. Priceline.com, eBay.com, and many B2B exchanges operate exclusively using this strategy. III. Distribution strategies Many firms use the internet to distribute products or create efficiencies among supply chain members in the distribution channel. Consider these examples:  Direct marketing. Many firms sell directly to customers, bypassing intermediaries in the traditional channel for some sales. In B2B markets, many firms realize tremendous cost reductions by using the internet to facilitate sales.  Agent e-business models. Firms such as eBay and E*TRADE bring buyers and sellers together and earn a fee for the transaction. IV. Marketing communication strategies 21 Compiled by Department of Marketing Management  E- Marketing and service marketing Module The internet generates a multitude of new marketing communication strategies, both to draw customers to a web site and to interact with brick- and- mortar customers. Firms use web page and e-mail to communicate with their target markets and business partners. Companies build brand images, create awareness of new products, and position products using the web and e-mail. Database marketing is a key to maintaining records about the needs, preferences, and behavior of individual customers so companies can send relevant and personalized information and persuasive communication at strategic times. V. Relationship management strategies Many e-marketing communication strategies also help build relationships with a firm‘s partners, supply chain members, or customers. However, some firms aware the gamble by using customer relationship management (CRM) or partnership management (PRM) software to integrate customer communication and purchase behavior into a comprehensive database. They use CRM software to retain customers and increase average order values and lifetime value. Other firms build extranets- two or more proprietary networks linked for better communication and more efficient transactions among firms as in PRM. One simple way to present the firm‘s goals and accompanying e-marketing strategies is through an objective- strategy matrix. This graphical device helps marketers to better understand their implementation requirements. Step 5 Implementation plan This is the stage at which decision has to be made concerning how to accomplish the objectives through creative and effective tactics. Marketers select the marketing mix (4Ps), relationship management tactics, and other tactics to achieve the plan‘s objectives and then devise detailed plans for implementation (the action plans). Marketers also check to make sure that, the right marketing organization is in place for implementation (i.e. staff, department structure, application service providers, and other outside firms). The right combination of tactics will help the firm meet its objectives effectively and efficiently. E-marketers pay special attention to information gathering tactics because information technologies are especially practiced at automating these processes. Web site forms, e-mail feedback, and online surveys are just some of the tactics firms use to collect information about customers, prospects, and other stakeholders. Other important tactics include the following:  Web site log analysis software helps firms review under behavior at the site and make changes to better meet the needs of users. 22 Compiled by Department of Marketing Management  E- Marketing and service marketing Module  Business intelligence uses the internet for secondary research, assisting firms in understanding competitors and other market forces. Step 6- Budget A key part of any strategic plan is to identify the expected returns from an investment. These returns can then be matched against costs to develop a cost/benefit analysis, ROI calculation, or internal rate of return (IRR), which management uses to determine whether the effort is worthwhile. Marketers today are especially concerned with adequate return on marketing investment (ROMI). During plan implementation, marketers will closely monitor actual revenues and costs to see that results are on track for accomplishing the objectives. The following sections describe some of the revenues and costs associated with e-marketing initiatives. I. Revenue forecast In this budget section, the firm uses an established sales forecasting method for estimating the sales revenues in the short, intermediate, and long term. The firm‘s historical data, industry report, and competitive actions are all inputs to this process. An important part of forecasting is to estimate the level of web site traffic over time, because this number affects the amount of revenue a firm can expect to generate from its site. Revenue streams that produce internet profits come mainly from web site direct sales, advertising sales, subscription fees, affiliate referrals, sales at partner sites, commissions, and other fees. Companies usually summarize this analysis in a spreadsheet showing expected revenues over time and accompanying rationale. II. Intangible Benefits The intangible benefits of e-marketing strategies are much more difficult to establish, as are intangible benefits in the brick-and-mortar world. For example, can we easily respond the question how much brand equity is created? It is something difficult to measure. An American Airlines provides its customers periodic e-mail message about their frequent-flyer account balances. So, what is the value of increased brand awareness from a web site? Putting a financial figure on such benefits is challenging but essential for e-marketers. III. Cost savings Money saved through internet efficiencies is considered soft revenue for a firm. For example, if the distribution channel linking a producer with its customers contains a wholesaler, distributor, and retailer, each intermediary will take a profit. A typical markup scheme is 10 percent from manufacturer to the wholesaler, 100 percent from wholesaler to the retailer, and 50 percent to the consumer. Thus, if a producer sells the product to a wholesaler for $50; the consumer ultimately pays $ 165. If the producer cuts out the intermediaries 23 Compiled by Department of Marketing Management  E- Marketing and service marketing Module (disintermediation) and sells its product online directly to the consumer, it can price the product at $85 and increase revenue by $30. Whether this approach translates into profits depends on the cost of getting the product to the consumer. Other examples include the $5,000 a marketer might save in printing and postage for a direct mail piece costing $1.00 per piece to 5000 consumers, or the $270 million Cisco actually saved in one year on handling costs for its online computer system sales. IV. E-marketing costs E-marketing entails many costs, including costs for employees, hardware, software, programming, and more. In addition, some traditional marketing costs may creep into the e-marketing budget- for example, the cost of offline advertising to draw traffic to the web site. For simplicity, this section will discuss technology-related cost items only. See the ―Let‘s Get Technical‖ box for the steps required to build a web site. Consider that the cost of web site (except the most basic) can range from $5,000 to $50 million. Following are just a few of the costs site developers incur:  Technology cost. These costs include software, hardware, internet access or hosting services, educational materials and training, and other site operation and maintenance costs.  Site design. Web sites need graphic designers to create appealing page layouts, graphics, and photos.  Salaries. All personnel who work on web site development and maintenance are budget items.  Other site development expenses. If not included in the technology or salary categories, any other expenses will be here-things such as registering multiple domain names and hiring consultants to write content or perform other development and design activities.  Marketing communication. All advertising, public relations, and promotions activities, both online and offline that directly relate to drawing site traffic and enticing them to return and purchase are begged here. Other costs include search engine registration, online directory costs, e-mail list rental, prizes for contests, and more  Miscellaneous. Other typical project costs might fall here –expenses such as travel, telephone, stationery printing to add the new URL, and more. Step 7- Evaluation of plan Once the e-marketing plan is implemented, its success depends on continuous evaluation. This type of evaluation means e-marketers must have tracking systems in place before the electronic doors open. What should be measured? The answer depends on plan objectives. Review the balanced scorecard (BSC) for e- business to see how various metrics relate to specific plan goals. 24 Compiled by Department of Marketing Management  E- Marketing and service marketing Module In general, today‘s firms are quite ROI driven. As a result, e-marketers must show how their intangible goals, such as brand building or CRM, will lead to higher revenue down the road. Also, they must present accurate and timely metrics to justify their initial and ongoing e-marketing expenditures throughout the period covered by the plan. To sum up, situation assessment is often the analysis of the current e-Business tools and activities within the organization. One of them is a website audit aimed at analyzing and detecting any inefficiencies and setting the direction for strategic improvement. Once the organization‘s environment is well understood, e-marketers then have an opportunity to present realistic objectives and provide a path for implementation and evaluation of the implementation process. A good e-Marketing plan will have a clear executive summary and unambiguous set of recommendations which can be understood by management and further implemented by technical staff. For this reason, it is essential that e-Marketers are familiar with basic principles of the technology and tools that drive e-Marketing activities. As we move into the future the age of technology is only surpassed by the quest for knowledge. Whether you have a large corporation or you operate a small business out of your home, an internet presence will be the key to continued success. When it comes to websites, only those that are search engine optimized will rank well enough to achieve the momentum needed to compete. Search engine optimization consulting can provide the secrets to gaining and keeping that momentum – the momentum that will not only allow a company to compete within a niche, but it will allow it to conquer and control a niche. This will insure search engine rankings that will translate into profits. It is vital for businesses to have a web presence that allows prospective customers to find their website easily in order to purchase their products and services. Think Big Sites is an online search engine optimization (SEO) business that specializes in organic search engine optimization. Organic search engine optimization is an approach to business marketing that carefully selects strategies and tactics for a target site in order to obtain business objectives. Think Big Sites deploys many different strategies, such as increasing a site‘s ability to be searched and indexed by search engines, which help online businesses to reach their business goals. INTERNET MARKETING STRATEGIES An overview of marketing strategies No matter how tremendous a firm‘s qualities are high, its marketing strategy and execution are often just as important. The best business concept, or idea, will fail if it is not properly marketed to potential customers. 25 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Market strategy is the plan you put together that details exactly how you intend to enter a new market and attract new customers or Market strategy is How the firm plan to promote about firms products or services to attract its target audience. For instance, Twitter, YouTube, and Pinterest have a social network marketing strategy that encourages users to post their content on the sites for free, build personal profile pages, contact their friends, and build a community. In these cases, the customer becomes part of the marketing staff. Product strategies over the internet A product is a bundle of benefit that satisfies the needs of organizations or consumers and for which they are willing to exchange money or other items of values. The term product includes; tangible goods, services, ideas, people and places. The success of Google demonstrates how a new and purely online product can use the internet‘s properties to build a successful brand. All these can be marketed on the internet, as the Google.com example shows. Products may also be classified by the purpose for which they are purchased. Consumer products are those purchased by an individual for personal consumption. Businesses sell products to consumers in the business-to-consumer (B2C) market, and Consumers sell products to another consumer in the consumer- to-consumer (C2C) market. Industrial products are used in the operation of an organization, as components for manufacture into final product, or for sale (B2B market), that is businesses sell products to businesses. Some new products such as search engines are unique to the internet while other products such as books simply use the internet as a new distribution channel, often adding unique technology –enabled services. With the internet‘s unique properties, customer control, and other e-marketing trends, product developers face many challenges and enjoy a plethora of new opportunities while trying to create customers value using electronic marketing tools. Creating customer value online To succeed, firms must employ strategies that result in customer value. Value = Benefit - costs. But what is exactly is value? First, it is the entire product experience. It starts with a customer‘s awareness of a product, continues at all customer touch point (including the web site experience and e-mail from a firm) and ends with actual product usage and post purchase customer service. Second, value is defined by the customer (by the mental beliefs and attitude held by customers). Regardless of how favorably the firm views its own products, it is the customers‘ perceptions that count. Third, value involves customer expectation; if the actual product experience falls short of their expectation, customers will be disappointed. 26 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Fourth, value is applied at all price levels. The internet can increase benefits and lowers costs, but it can also work in reverse. Product Benefits The benefits customers seek online are: Effective online navigation Quick download speed Clear site organization Attractive and useful site design Secure transaction Privacy Free information or service & User-friendly web browsing and e-mail reading To capitalize on these opportunities, marketers must make five general product decisions that comprise its bundle of benefits to meet customer needs: These are 1. Attributes Product attributes include overall quality and specific features. With quality, most customers know ―you get what you pay for‖. Higher and consistent quality means higher prices, thus, maintaining the value proposition. Product features include; color, taste, style, size and speed of service. For example, Yahoo! provides list of website categories (attribute), which helps users to find things quickly online (benefit). Product benefits are key components in the value proposition. The internet increases customer benefits in many remarkable ways that have revolutionized marketing practice. The most basic is the move from atoms to bits, one of the internet‘s key properties. This capability opened the door for media, music, software, and other digital products to be presented on the web. Perhaps the most important benefit is mass customization. Tangible products such as laptop computers can be sold alone at rock-bottom price online or bundled with many additional hardware, software items or services to provide additional benefits at a higher price. 2. Branding A brand includes a name, a symbol, or other identifying information. When a firm registers that information it becomes a trademark. A trade mark is a word, phrase, symbol or design, or combination of these, that identifies and distinguishes the source of the goods or services of one party from those of others. A brand is much more than its graphic and verbal representation in marketing materials, however. It is an individual‘s perception of an integrated bundle of information and experiences that distinguishes a company and/or its product offerings from the competition. Brand Decision for web products 27 Compiled by Department of Marketing Management  E- Marketing and service marketing Module A) Using existing brand name on the web Firms can use exiting brand names for their new products. An existing brand name can be used for any new product and it makes sense when the brand is well known and has strong brand equity. For example, Amazon added music CDs, videos, software, electronics, and more to its product mix. It is beneficial for Amazon to use its well established web brand name for these additional offerings rather than launch a new electronic storefront with another name. B) Creating new brand names for the internet marketing If an organization wants to create a new internet brand, a good name is important. Good brand names should suggest something about the product (e.g. webpromote.com and Google.com), should differentiate the product from the competitors (e.g. gurl.com), and should be capable of legal protection. On the internet, a brand name should be short, memorable, easy to spell, and capable of translating well into other language. For example, Dell computer at www.dell.com is much easier than HammacherSchlemmer (www.hammacher.com), the gift retailer. As another example, consider the appropriateness of these search tool names: Yahoo!, Excite, Lycos, Alta Vista, InfoSeek, HotBot, WebCrawler, GoTo, Google, and LookSmart. Which ones fit the preceding criteria? C) Co-Branding It occurs when two different companies put their brand names on the same product. This practice is quite common on the internet and is a good way for firms to build synergy through expertise and brand recognition, as long as their target markets are similar. For example, sports illustrated now co-brands with CNN as CNNSI. Even the website address displays the co-brand: sportsillustrated.ccn.com. Yahoo! is a good place to look for co-branded services. D) Internet Domain Names Organizations spend a lot of time and money developing powerful, unique brand names for strong brand equity. Using the company trademark or one of its brand names in the web address helps consumers quickly find the site. For example, coca-cola.com adds power to Coca-cola brands. This parallel usage is not always possible, however. Many factors must be considered when it comes to domain names. 3. Support Service Customer support during and after purchase-is a critical component in the value proposition. Customer service representatives should be knowledgeable and concerned about customer experiences. Site that care about developing relationships with their customers, such as Amazon.com; place some of their best people in 28 Compiled by Department of Marketing Management  E- Marketing and service marketing Module customer support. Some products need extra customer support, for example when user purchases software such as Survey Solutions to design online questionnaires, technical support becomes important. Customer service representatives help customers with installation, maintenance problems, product guarantees, and service warranties, and in general work to increase customer satisfaction with the firm‘s product. Customer service as a product benefit is an important part of customer relationship management; however, it has now become more of a necessity than competitive edge. 4. Packaging Packaging decisions are the fourth set of decisions that must be made about individual products. Packaging is the activity of designing and producing the container or wrapper for a product. Protection of the product and promotion are the two major purposes of packaging. The package may include:  The primary package (what the product is in it – a tube full of toothpaste);  The secondary package (the box the tube came in);  the shipping package (a card box case) 5. Labeling Product labels identify brand name, sponsoring firms, product ingredients, and often provides instructions for use and promotional materials. Labels on tangible products create product recognition and influence decision behavior at the point to purchase. Labeling has digital equivalents in the online world. For online services, terms of product usage, product features, and other information comprise online labeling at web sites. For example, when user downloads RealAudio software for listening to online broadcasts, they can first read the ‗label‘ to discover how to install and use the software. Pricing Strategy as Part of Internet Marketing Plan In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values (such as money, time, energy and psychic cost) that buyers exchange for the benefits of having or using a good or service. Throughout most of history, prices were set by negotiation between buyers and sellers, and that remains the dominant model in many emerging economies. One of the first questions you need to answer is what your site visitors like? Are they bargain hunters? Or do they look for excellence in customer service? Or shop for products based on their prestige value? Another important question is what does it cost you to purchase (or produce) and market this product or service? Your price will have to be above your costs-most of the time. Fixed price policies Refers to setting one price for all buyers- is a relatively modern idea that arose with the development of large-scale retailing and mass production at the end of the 19th century. Now, one hundred 29 Compiled by Department of Marketing Management  E- Marketing and service marketing Module years later, the internet is taking us back to an era of dynamic pricing-varying prices for individual customer or different price for different customers. Buyer and seller perspectives of price The meaning of price depends on the viewpoint of the buyer and the seller. Each party brings different needs and objectives that help to describe a fair price. I. Buyer view Buyers define value as benefits minus costs. Internet creates many benefits important to consumers and business buyers alike. Here we explore the cost side of the formula: money, time, energy, and psychic costs. II. Seller view Sellers view price as the amount of money they receive from buyers. Both internal and external factors affect pricing levels. Internal factors are the firm‘s strength and weaknesses from its SWOT analysis, its overall pricing objectives, its marketing mix strategy, and the cost involved in producing and marketing the product. External factors that affect online pricing in a particular include the market structure and the buyer‘s perspective, as discussed earlier. Here are the various pricing objectives you‘ll want to consider. To maximize short-term profits Here you try to squeeze as much money out of sales of the product as possible, even though fewer customers may make a purchase. Your strategy may be to charge premium prices for website design services. You end up with fewer customers, but then dealing with a lot of customers multiplies your problems. And you can make more profit off each customer. Or you may need to maximize profits in order to satisfy an impatient boss or investor. To gain market share The other main strategy is to price your service lower to gain market share. You may want to maximize the number of subscribers to your online Internet access business, even though you don‘t make as much on each customer. But you know that later you‘ll be able to sell these subscribers other services such as web hosting, e- commerce, website design, DSL, and a host of others once they get comfortable with you. You don‘t make as much early, but you plan to make money later with ―back end‖ sales. To survive Survival is a worthy goal. Sometimes companies lower prices so they can generate enough revenue to survive short term. But this isn‘t a very good long-term strategy. There‘s an old joke about the businessman who said he was losing money on every sale, but he expected to make it up in volume. 30 Compiled by Department of Marketing Management  E- Marketing and service marketing Module To help society You might keep the price lower than ―what the market will bear‖ in order to make essential products available to the consumers who would otherwise be priced out of the market. Altruism has its place. You don‘t have to make as much money as possible, unless making money is your only goal. For example, I really want to keep my consulting services priced within reach of small businesses. I long to see small businesses thrive; that‘s part of what makes me tick. But I also want to charge better-funded companies a more appropriate fee for the more extensive services I render them. The way I do this is to offer a standard product or service, and an economy service at a lower price, but with clear limitations. Pricing Approaches Of course, pricing isn‘t just scientific. It has a lot to do with your particular niche on the Internet, and how you‘ve determined you can best succeed. Here are some demand-oriented approaches to pricing: Skimming pricing: When you are offering a new or innovative product you can initially charge a high price, since the ―early adopters‖ aren‘t very price sensitive. Then you lower prices to ―skim‖ off the next layer of buyers, etc. Eventually, the price will drop as the product matures and competitors offer lower prices. Penetration pricing: You set a low initial price in order to penetrate quickly into the mass market. A low initial price discourages competitors from entering the market, and is the best approach when many segments of the market are price sensitive. Amazon.com, for example, offers a discount price and may lose money on the first sale, but this way they gain more customers who will purchase products later at a lower marketing cost (since it costs much less to attract them back for the second or third sale if they are happy with their first purchase experience). Prestige pricing. Cheap products are not taken seriously by some buyers unless they are priced at a particular level. For example, you can sometimes find clothing of the same quality brand at Nordstrom as you do at the Men‘s Warehouse. But because it is priced higher, Nordstrom‘s clientele believes it to be of higher quality. Odd-even pricing takes advantage of human psychology that feels like $499.95 is less than $500. Studies of price points by direct marketers have found that products sell best at certain price points, such as $197, $297, $397, compared to other prices slightly higher or lower. Strange, we humans! Demand-backward pricing is sometimes used by manufacturers. First, they determine the price consumers are willing to pay for a product. Then they work backward through the standard markups taken by retailers and wholesalers to come up with the price they can charge wholesalers for the product. Bundle pricing is offering two or more products together in a single package price. This can offer savings to both the buyer and to the seller, who saves the cost of marketing both products separately. And the customer is 31 Compiled by Department of Marketing Management  E- Marketing and service marketing Module willing to pay more because he perceives that he is getting a lot more, even though the cost to the seller may not really be that much more. Here are some cost-oriented approaches to pricing that I‘m sure you are familiar with: Standard mark-up pricing: Typically a manufacturer marks his price up 15% over his costs, a wholesaler 20% over his costs, and a retailer 40% over his costs. The retailer gets a larger markup based on the idea that, since he is closest to the end user, he is required to spend more services and individual attention meeting the buyer‘s needs. Then there are competition-oriented approaches to pricing that you‘ll recognize: Customary pricing is where the product ―traditionally‖ sells for a certain price. Candy bars of a certain weight all cost a predictable amount—unless you purchase them in an airport shop. Loss-leader pricing works on the basis of losing money on certain very low priced advertised products to get customers in the door who will buy other products at the same time. Flexible-price policies offer the same product to customers at different negotiated prices. Cars, for example, are typically sold at negotiated prices. Many B2B sales depend on negotiated contracts. Once you have determined list or quoted price you can make some special adjustments still. Quantity discounts encourage customers to buy larger quantities, and thus cut marketing costs. Seasonal discounts encourage buyers to stock inventory earlier than their normal demand would require. This enables the manufacturer to smooth out manufacturing peaks and troughs for more efficient production. Rebates, such as $40 off Microsoft FrontPage 2000, are usually offered by the manufacturer, but sometimes a retail store will offer its own rebate. Rebates make marketing sense, since they strongly motivate sales, but often less than 50% of the buyers will remember to collect the receipt, proof-of-purchase, and rebate form, fill it out, and mail it prior to the expiration date. And, of course, the rebate is often subtracted from the list price of the item, which still has considerable profit built in. Rebate marketing is less than half as expensive to the marketer as the price cut would seem to indicate. Trade discounts are offered by manufacturers to distributors or resellers in their distribution chain. For example, a manufacturer may quote list price of $1000 less 30/10/5, meaning 30% off the list price to the retailer, an additional 10% off the $1000 to the wholesaler, and an additional 5% off the $1000 to the jobber. This pricing will be expected if you have an online B2B store. Cash discounts are sometimes offered for the costs saved from not having to extend credit and bill the buyer on an open account. This mainly affects B2B sales rather than retail. 32 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Allowances may be permitted for trade-ins (not too many trade-in cars shipped by modem though) or by a manufacturer for promotional advertising that a retailer undertakes. Online Distribution Strategies Marketing intermediaries are firms which help the company to promote, sell, and distribute its goods to final buyers. They include: resellers, physical distribution firms, marketing service agencies, and financial intermediaries. Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers, who buy and resell merchandise. Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets. Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Most firms and customers depend on financial intermediaries to finance their transactions. New types of intermediaries New technologies have led thousands of enterprises to launch internet companies. The amazing success of early internet only companies such as amazon.com, Expedia, Priceline, eBay and dozens of others struck terror in the hearts of many established manufacturers and retailers. Established store-based retailers of all kinds- fear being cutout by these new types of intermediaries. The new intermediaries and new forms of channel relationships caused existing firms to re-examine how they served their markets. Brick & mortar, click and mortar and click only marketers a. Brick and mortar marketers A ―brick and mortar business‖ is a term used mainly on the Internet to differentiate between companies that are based solely online, and those that have a real-world counterpart. Such a business has a commercial address ―made of brick and mortar‖ where customers can transact face-to-face. When e-commerce was new, however, some consumers were wary of doing business with companies that did not have a commercial address. This brings us to one of the main advantages of a brick and mortar business: customer security. b. Click only companies The click-only dot.comsoperate only online without any brick and mortar market presence. They directly sell products and services to final consumers via the internet. Familiar e-tailers include amazon.com, Expedia and wine.com. The click only group also includes search engines and portals such as such as Google, Yahoo and 33 Compiled by Department of Marketing Management  E- Marketing and service marketing Module Excite, which started as search engines and later added services such as news, weather, stock reports, entertainment, etc. Internet service providers such as AOL and Earth link are click only companies that provide internet and email connections for a fee. Transaction sites such as auction site eBay, take commissions for transactions conducted on their site. Various content sites, such as New York Times on the web (www.nytimes.com), ESPN.com and Encyclopedia Britannica Online, provide financial, research and other information. Finally enabler sites provide the hardware and the software that enable internet communication and commerce. C. click and mortar companies Click and mortar companies are traditional brick and mortar companies that have added e-marketing to their operations. However most resisted adding ecommerce to their sites they worried that this would produce channel conflict- that selling their products or services online would be competing with their offline retailers and agents. For example Hewlett-Packard feared that its retailers would drop HP‘S computers if the company sold its computers directly online. Merrill lynch hesitated to introduce online stock trading fearing that its own brokers would rebel. Even store based bookseller Barnes & Noble delayed opening its online site to challenge Amazon.com. These companies struggled with the question of how to conduct online sales without cannibalizing the sales of their own stores, resellers or agents. However, they soon realized that the risks of losing business to online competitors were even greater than the risks of angering channel partners. If they don‘t cannibalize these sales, online competitors soon would. Online Promotion strategies Simply put, online promotion is promoting or communicating the product or service to customers digitally. Online advertising encompasses adverts on search engine results pages, adverts placed in emails and other ways in which advertisers use the Internet. One of the greatest benefits of online display advertising is that the messages are not restricted by geography or time and are more interactive than offline advertising. Internet ads can be updated any time at minimal cost, and therefore can always be timely. They can reach a very large number of potential buyers all over the world. Online ads are sometimes cheaper in comparison to print (newspaper and magazine), radio, or television ads. Ads in these other media are expensive because they are determined by space occupied by how many days (times) they are run, and by the number of local and national stations and print media that run them. Internet ads can be interactive and targeted to specific interest groups and/or to individuals. Finally, the use of the Internet itself is growing very rapidly, and it makes sense 34 Compiled by Department of Marketing Management  E- Marketing and service marketing Module to move advertising to the Internet, where the number of viewers is growing. Nevertheless, the Internet as an advertising medium does have some shortcomings, most of which relate to measurement of effectiveness. Types of display advertising There are different ways to display messages online, some of which are mentioned below. 1. Interstitial banners These are banners that are shown between pages on a web site. As you click from one page to another, you are shown this advert before the next page is shown. Sometimes, you are able to close the advert. 2. Pop-ups and pop-under As the name suggests, these are adverts that pop up or under the web page being viewed. They open in a new, smaller window. 3. Map advert This is advertising placed within the online mapping solutions available, such as Google Maps. Pricing is a function of coverage area, content and design requirements, final size. 4. Floating advert This advert appears in a layer over the content, but is not in a separate window. Usually, the user can close this advert. It looks very much similar to pop ups ads, but definitely more infuriating. It "fly" anywhere around the page for 5-30 seconds, obscure view of the page you are trying to read, and often block mouse input. Often, the animation ends by disappearing into a banner ad on the page. 5. Wallpaper advert This advert changes the background of the web page being viewed. Usually, it is not possible to click through this advert. 6. Banner advert A graphic image or animation displayed on a web site for advertising purposes. They may be static banners rich media such as Flash, video, JavaScript and other interactive technologies. Banners are not limited to the space that they occupy; some banners expand on mouse over or when clicked on. There are two types of banners: Keyword banners appear when a predetermined word is queried from the search engine. It is effective for companies who want to narrow their target to consumers interested in particular topics. Random banners appear randomly and might be used to introduce new products to the widest possible audience, or to keep a well-known brand, such as Amazon.com or IBM, in the public eye. 35 Compiled by Department of Marketing Management  E- Marketing and service marketing Module A major advantage of using banners is the ability to customize them to the target audience. Keyword banners can be customized to a market segment or even to an individual. If the computer system knows who you are, or what your profile is, you may be sent a banner that is supposed to match your interests. However, one of the major drawbacks of using banners is that limited information is allowed. Hence advertisers need to think of creative but short messages to attract viewers. Web site development and design A website is a connected group of pages on the World Wide Web regarded as a single entity, usually maintained by one person or organization and devoted to a single topic or several closely related topics/subjects. Web development and design are at the heart of successful e-Marketing. Developing a web site involves more than choosing colors and header images. While it is tempting to focus on the design aesthetics of web sites, and eye-catching web sites can be converting web sites, it is important to remember that a web site is a marketing tool which should be increasing revenue for the company. Types of websites Marketers beyond simply creating a website must design an attractive site and find ways to get consumers to visit the site, stay around and come back often. Websites vary greatly in purpose and content. The most basic type is 1. Corporate website: These sites are designed to build customer goodwill and to supplement other sales channels, rather than to sell the company‘s products directly. For example, you can‘t buy ice cream at benjerrys.com, but you can learn all about Ben & Jerry‘s company philosophy, mission, current events, financial performance, company personnel, employment opportunities, products and locations. Corporate websites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships and generate excitement about the company. Most corporate websites also provide entertainment features to attract and hold visitors. Finally, the site might also provide opportunities for customers to ask questions or make comments through e-mail before leaving the site. 2. Marketing website: A website that engages consumers in interactions that will move them closer to a direct purchase or other marketing outcomes. Such sites might include catalog, shopping tips and promotional features such as coupons, sales events or contests. For example, visitors to Sonystyle.com can search through dozens of categories of Sony products, review detailed features and specifications lists for specific items, read 36 Compiled by Department of Marketing Management  E- Marketing and service marketing Module expert product reviews. They can place an order for the desired Sony products online and pay by credit card, all with a few mouse clicks. Companies aggressively promote their marketing websites in offline print and broadcast advertising and through banner-to-site advertisements that pop up on others‘ websites. Toyota operates a marketing website at www.toyota.com. Once a potential customer clicks in, the carmaker wastes no time trying to turn the inquiry into a sale. The site offers plenty of information and a garage full of interactive selling features, such as detailed descriptions of current Toyota models information on dealer locations and services, complete with maps and dealer web links. How to create an effective website? Creating a website is one thing; getting people to visit the site is another. The key is to create enough value and excitement. Today‘s website users are quick to abandon any website that doesn‘t measure up. ―Whether people are online for work reasons or for personal reasons‖, says a website design expert, ―if a website doesn‘t meet their expectations, two/thirds say they don‘t return-now or ever. We call it the internet death penalty. This means that companies must constantly update their sites to keep them current, fresh and useful. Doing so involves time and expense, but the expense is necessary if the e-marketer wishes to cut through the increasing online clutter. For some types of products, attracting visitors is easy. Consumers buying new cars, computers, or financial services will be open to information and marketing initiatives from sellers. Marketers of low involvement products, however, may face a difficult challenge in attracting website visitors. For low interest products the company can create a corporate website to answer customer questions, build goodwill and excitement, supplement selling efforts through other channels and collect customer feedback. The early text based websites have largely been replaced in recent years by graphically sophisticated websites that provide text, sound, and animation to attract first view and to encourage repeat visits. To attract new visitors and to encourage revisits, suggests one expert, e-marketers should pay close attention to the seven Cs. Context: The site‘s la