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IIE Module Manual DIGK6122 2 Digital Marketing Within the Marketing Mix 2.1 What is Marketing? Marketing can be defined as a process whereby an organisation, in its drive to meet its organisational goals, focuses on meeting cu...

IIE Module Manual DIGK6122 2 Digital Marketing Within the Marketing Mix 2.1 What is Marketing? Marketing can be defined as a process whereby an organisation, in its drive to meet its organisational goals, focuses on meeting customer needs and wants by offering the right product at the right price, in the right place and by using the right marketing communication channels. Through this process, organisations also strive to establish relationships with stakeholders in an ever-changing environment (Cant and van Heerden, 2017). 2.2 The Traditional Marketing Mix Cant and Van Heerden (2013) explain the concept of the Marketing Mix as being the mix of elements required to effectively communicate the product/service offering of a company to prospective customers and the public at large. In digital marketing, we call this the traditional marketing mix – the basic elements any organisation would use, whether they are an offline or online organisation. Cant and van Heerden (2013) go on to explain the four major elements of the marketing mix. These are: 1. Product. In this element of the traditional mix, decisions regarding the product itself are made. These decisions could include any number of things, depending on the level of input the marketing department has into what the organisation produces. Some examples of product related decisions could be packaging design, product features, serving size (if the product is a food item) or available accessories. These decisions are made to produce a product/service offering that will be as attractive to targeted customers as possible (more on this in later, and in your Marketing module). 2. Price. In this element of the mix, decisions regarding pricing strategies are made. Examples include sales, bundle offerings, and other pricing strategies. Different pricing strategies are used at different stages of the Product Life Cycle (PLC), which you will learn about in Marketing 1A and 1B. © The Independent Institute of Education (Pty) Ltd 2024 Page 20 of 85 IIE Module Manual DIGK6122 3. Place. In this element of the mix, decisions regarding distribution of the product will be made. Examples include how and where customers will be able to purchase the product (e.g., buying online, purchasing in a retail outlet such as Pick n Pay), and how to get your product offering placed in the outlets you choose efficiently. Customers buying patterns should determine where the product is made available. 4. Promotion. In this element of the mix, marketers must decide how best to communicate the decisions made regarding the other three elements of the mix to potential customers. A variety of marketing communication mechanisms exist, such as advertising (TV, radio, billboards etc) or sponsorships. Digital communication channels such as websites and social media would also fall under this element of the marketing mix. 2.3 The Extended Marketing Mix In response to the changing profiles of customers, new ways of communication and interaction, increased competition and other societal shifts has placed higher levels of attention on the service sector. This has led to the extended marketing mix which adds three new Ps to the traditional mix of Product, Price, Place and Promotion. The three additions are: 1. People – having the right people in the right places in the organisation to provide superb service and delight customers. Customers make judgements and deliver perceptions of the service based on the employees they interact with. Staff should be equipped with the necessary interpersonal skills, the right attitude and appearance, and service knowledge to deliver a positive experience to customers. 2. Processes – This entails having procedures in place to ensure that the service each customer receives meets the required standards and quality. For instance, think about what happens behind the scenes when you enter a KFC drive- through, place an order for a Burger meal and receive it a few minutes later. What was the process that allowed you to obtain this efficient service delivery? 3. Physical Evidence – As the third element of the extended marketing mix, it is responsible for ensuring that customers are satisfied that they have something to show for the interaction with the company. The physical evidence of a service includes any tangible representations of the organisation. It includes the building where the service was offered, signs and equipment, letterheads, and business cards. These three Ps are most useful when organisations are considering the marketing of services, rather than products (although, recall that both products and services are often referred to as the product offering). Companies should consider the entire extended marketing mix when designing a digital marketing strategy. © The Independent Institute of Education (Pty) Ltd 2024 Page 21 of 85 IIE Module Manual DIGK6122 2.4 The Role of Digital Marketing If we consider the elements of the marketing mix discussed above, it makes sense that digital marketing techniques will, for most companies, fall under the Promotion element of the marketing mix. Social media, for example, will allow companies to communicate effectively with their customers in new and unusual ways. Chaffey and Smith (2013) tell us that in modern industries where competition is intense and customers are more selective, it is not enough for a company to consider digital technologies as communication mechanisms that are tagged on to a traditional marketing mix. Rather, they recommend that companies consider their digital strategy as a standalone component of their overall marketing strategy. Many devices other than computers and smart phones are currently connected to the Internet – and where there is an Internet connection, there is the potential to deliver messages to consumers in many new and unique ways. For example, Smart TVs, cars, and home appliances all have the potential to be online (the so-called Internet of Things). This means that to be a competent digital marketer, one must consider more than just a company website! 2.4.1 Definitions From the above, it is very easy to understand that digital marketing is going to mean very different things to many different organisations. Chaffey and Smith (2013) encourage an organisation to choose an interpretation that suits their marketing strategy, but consider the following as a general definition: The marketing of products or services online, whether via websites, online adverts, mobile apps, or other emerging platforms – i.e., using digital channels to reach customers. Note the use of the word “reach” rather than communicate. This leaves room for digital approaches to form part of the rest of the traditional marketing mix, and not just Promotion. Another definition of digital marketing, also proposed by Chaffey and Smith (2013), is using digital technologies to get closer to customers and understand them better, add value to products, widen distribution channels, and boost sales. Put another way, we could define digital marketing as identifying, anticipating, and satisfying customer needs profitably. © The Independent Institute of Education (Pty) Ltd 2024 Page 22 of 85 IIE Module Manual DIGK6122 This introduces a very important characteristic of digital communication with customers. It is two-way. Companies communicate with customers, and customers communicate with companies. This is very important to us as marketers, because the more we can get our customers to talk to us, the more we can learn about them. This is important when we consider the concept of Targeting – i.e., identifying the traits and characteristics of our most valuable customers. One important aspect of digital marketing is e-commerce – the process of customers transacting electronically with the company. We may communicate digitally with customers, who then come into a physical (brick and mortar) store to make a purchase. Or a customer may see a traditional (above-the-line) advertising message and visit our website to make a purchase via e-commerce. Still other customers may see an online marketing message, e.g., via social media, and click on the ad to be taken straight to the company website to make a purchase. 2.4.2 Online Presence One of the most important things a company must do if it wants to make use of digital marketing techniques is establish a credible and clear digital presence. This is the collection of online elements a company chooses to use to represent itself electronically (Chaffey & Smith, 2013). Elements which contribute towards a company’s online presence could include: 1. An e-commerce site designed for customers to purchase from. 2. Relationship-building elements such as comment and feedback forms. 3. Brand-building elements like an informational website (for example, every time a big budget movie is released, a website featuring relevant content is created to support the marketing efforts). 4. Listings in portals and directories (Yahoo, TripAdvisor, Yelp). 5. Social network pages, like a company Facebook page These elements of online presence can allow digital interactions to take place in four different ways: 1. B2C – Business to Consumer 2. B2B – Business to Business 3. C2C – Customer to Customer 4. C2B – Customer to Business Question: Can you think of examples of digital interactions in these four different ways? List a few examples of each (Hint: Remember that not every interaction is a communication, it could involve a purchase, an indication of agreement on social media such as a “Like” on Facebook, or any other way Customers and Businesses could interact with one another digitally). © The Independent Institute of Education (Pty) Ltd 2024 Page 23 of 85 IIE Module Manual DIGK6122 2.4.3 The Purpose of Digital Marketing Based on the various definitions of digital marketing we have explored above, see if you can come up with examples of how digital marketing can help an organisation: 1. Identify customer needs. ………………………………………………………………………………………… ………………………………………………………………………………………… ………… 2. Anticipate customer needs. ………………………………………………………………………………………… ………………………………………………………………………………………… …………. 3. Satisfy customer needs. ………………………………………………………………………………………… ………………………………………………………………………………………… …………. 4. Be more efficient. ………………………………………………………………………………………… ………………………………………………………………………………………… ………… 2.4.4 Customer Engagement When customers in your online audience are paying attention to what you say, and reacting to your marketing messages, we say that the customers are engaged. Pohpal (2014) defines customer engagement as being connected with your audience and interacting in meaningful ways. In previous decades, these interactions would have been in person or, perhaps via phone calls, or even a letter. Today, a large number of connections/interactions with customers happen through a variety of online mechanisms. Can you list three examples of ways that a company could interact with its customers online? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ……………………………………………………………….. Remember, when connections/interactions with customers are meaningful, and customers pay attention to those interactions and respond to them, we say that those customers are engaged. © The Independent Institute of Education (Pty) Ltd 2024 Page 24 of 85 IIE Module Manual DIGK6122 According to Chaffey and Smith (2013), there are three categories of digital media that companies can use to interact with and engage their customers. They are: 1. Paid for media such as online advertising. 2. Earned media such as word of mouth via social media. 3. Owned media such as company websites, Twitter accounts and social media pages. These media are either outbound or inbound. Outbound marketing consists of media messages that originate from the company. Inbound marketing is communication with customers that originates from the customer. Companies know that inbound marketing is efficient, as customers choose to make contact with the company themselves rather than in response to expensive advertisements. 2.4.5 Reasons for Companies to use Digital Marketing Every company will have its own reasons for choosing to use digital marketing as part of its overall marketing strategies. Some of the most popular reasons include: 1. Cost Saving – advertising electronically can often be far more cost effective than advertising via traditional media such as newspaper and TV. 2. Improved Targeting – technology allows companies to ensure their advertisements are displayed to those most likely to be engaged by them. 3. Measurability – the technology behind digital marketing is able to accurately report on who interacts with marketing efforts, and how and when they do so. Companies can use this information to further improve their marketing efforts. 4. Easy to change and update – digital advertising can be altered or updated with no delay and very little additional cost. 5. Market where your customers are – the vast majority of customers are already online in some capacity, and digital marketing will allow your company to connect with them effectively. 2.4.6 Generating revenue online There are a variety of ways that companies can generate income online. The most obvious is that they can sell whatever they produce via their website. But not every company sells a product. Let us use the example of News24 – South Africa’s largest news website. They do not sell anything, and browsers do not pay to read the news on the site, so how do they make money? Some companies, such as News24, sell advertising space to companies on their pages. Companies are willing to pay to use the space on News24’s site, as they know it is a popular site that many people visit, and therefore many people will see their advert. © The Independent Institute of Education (Pty) Ltd 2024 Page 25 of 85 IIE Module Manual DIGK6122 So, aside from selling products online, companies can generate revenue in a variety of different ways (Chaffey & Smith, 2013). These include: 1. Subscription access – News24 could charge customers to read the content on their site. They do not do this, but many news outlets like, Forbes and the Cape Argus newspaper, do. 2. CPM (Cost per Mile) Advertising – News24 could charge a company for every 1000 times their advert is displayed. 3. CPC (Cost per Click – also known as Pay per Click or PPC) – News24 could charge a company only when a visitor clicks on an advert. CPC rates are typically more expensive than CPM rates, but they occur less frequently because not every customer who looks at an advert will necessarily click on it. 4. Affiliate revenue – News24 could be paid a commission for every sale generated by a customer seeing a product advertised on their site. © The Independent Institute of Education (Pty) Ltd 2024 Page 26 of 85 IIE Module Manual DIGK6122 Learning Unit 2: Digital Marketing Research Learning Objectives: My notes Define digital marketing information; Describe the use of a marketing information system as an information management tool; Discuss the specific decision support systems within digital marketing; Define marketing research; Theme 2 Apply the digital marketing research process to a given scenario; Discuss the use of the Internet as a tool for digital marketing research; Explain the importance of market measurement and demand forecasting. Material used for this learning unit: Module Manual. How to prepare for this learning unit: Before class, be sure that you read this learning unit. As you read these sections, see if you can find the answers to the revision questions at the end of this learning unit. © The Independent Institute of Education (Pty) Ltd 2024 Page 29 of 85 IIE Module Manual DIGK6122 1 Introduction This learning unit is designed to investigate the increasingly important role that information plays in the operations of a 21st century organisation. The various methods which companies can use to gather information on their customers and the measurements which can be used to identify performance will be covered. 2 Digital Marketing Information Companies are constantly collecting data regarding their businesses through their day- to-day operations. Perhaps they have a record of all purchases made on each customer’s particular account or lists of how much of each item in their inventory is sold each day. This is called raw data (Laudon & Laudon, 2017). It is made up of numbers, facts, and figures, but on its own, it does not tell an organisation anything they can use to improve their operations. In order for the data an organisation collects to become useful, it needs to be sorted, organised, and collated. Once data has been processed into a form that is useful to a company, it is called information. For example, knowing that 1000 tins of cooldrink were sold is data – it does not help us in any way. Knowing that 45% of those were tins of Coca-Cola, 30% Fanta, and 25% Sprite, is information. Without the relevant digital marketing information, marketing decision making is nothing more than intuitive guessing, and although it would be less costly for the organisation, it can result in serious mistakes and potentially the demise of the company. Digital marketing information therefore refers to processed digital marketing data (which includes raw facts, unrecorded numbers, figures, and statistics) that digital marketers use in order to make well-informed decisions. The final step in the process of using data to help an organisation operate efficiently is to turn that information into knowledge. Knowledge is making use of information to track trends and patterns over time, so that we can predict what to do in future to continue satisfying our customers. To continue our example, we would use the information regarding how many tins of each cooldrink are sold every day to help us predict how many tins of cooldrink to have in stock in future, to make sure we never run out, and can continue to satisfy our customers. Can you come up with an example of how information can be used to provide knowledge to an organisation in the following circumstances? 1. A restaurant that wants to ensure it does not run out of ingredients on a busy Saturday night. 2. A business trying to determine how much paper to order for its office use. 3. News24 that needs to calculate what load their servers must be able to handle from users reading the News. © The Independent Institute of Education (Pty) Ltd 2024 Page 30 of 85 IIE Module Manual DIGK6122 Each of these companies would make use of their knowledge in order to operate efficiently and effectively. 2.1 Using Knowledge for Digital Marketing The better an organisation gets to know their customers, the more they will be able to put together a marketing mix that appeals to them. This, in turn, will lead to an increase in sales and income for the business. 2.1.1 Knowledge generated by the company itself Organisations are presented with a unique opportunity in terms of digital marketing. This is because the various technologies that are used to make contact with customers via digital means make it very easy for companies to collect data on what those customers are doing. As a simple example, let us consider the case of Zando, a South African online clothing retailer. Every customer who shops on Zando registers an account. This means that Zando can track which products customers look at or purchase (data). They can, furthermore, compare the behaviours of different customers, and see, for example, that most customers who buy Converse All Stars also buy Adidas hoodies (information). Understanding this behaviour could lead Zando to suggest Adidas hoodies to a customer who clicks onto Converse All Stars on their site, or perhaps put the two products on sale together as a bundle (knowledge). 2.1.2 Knowledge sourced from other locations With the rise of social media, organisations also look to outside sources to gain more information about their customers. Social media platforms such as Twitter, Facebook, Instagram, and Snapchat (along with many others) collect data on things their users like, follow, comment on, and post, and sell that data to marketing firms that use it to target their advertising to their desired customers. Facebook, for example, releases information regarding what combinations of products, pages, and items users click “Like” on, and has even identified sensitive algorithms to calculate the likelihood of a person being depressed, single, or in a relationship (even if you do not tell Facebook that information). There is even information on how your political views are likely to change your consumer behaviours, and more. Google uses cookies (small files stored on your PC) to track things you have searched for, and through their AdSense network, deliver targeted advertising on websites you visit for products and services you have searched for. © The Independent Institute of Education (Pty) Ltd 2024 Page 31 of 85 IIE Module Manual DIGK6122 2.1.3 Privacy concerns Many consumers are concerned about the level of detail that large digital companies such as Google and Facebook store about their users. A further concern is where and by whom that information will be used. While most companies that collect data on their users have a policy that requires them to anonymise what they collect such that no individual users can be identified and linked to that data, privacy advocates caution that as time goes by and digital providers become more advanced, we are more at risk of our private data being exposed either accidentally or intentionally. Question: What do you think about the online privacy debate? Should customers accept that companies will use their information as they see fit, or do they have a reasonable right to have their actions kept private? 2.2 Marketing Information Systems In order for digital marketing managers to make well-informed decisions, they require access to information that has been refined and analysed. A marketing information system can be defined as a collection of predefined methods that enables information about the organisation’s products, customers, and competition to be gathered, examined, and assessed, allowing for effective information management. A marketing information system is a typical input-output system, with information sources being the input and relevant, timely, and accurate information the output. It essentially is regarded as a system of interactive and interdependent subsystems that function as a whole (Cant and van Heerden, 2017). The type of marketing information system varies from one organisation to another depending on the size of the organisation, the nature of the products offered by the organisation and the level of competition. For example, a small organisation with a homogenous type of product and very few competitors is more likely to use a simple marketing information system. © The Independent Institute of Education (Pty) Ltd 2024 Page 32 of 85 IIE Module Manual DIGK6122 2.2.1 Decision support systems A marketing decision support system will aid a digital marketing manager in the decision-making process, enabling them to confront problems directly by using computerised software and databases. A marketing decision support system (MDSS) can be defined as a computerised system that helps marketing managers and digital marketing managers store, format, and organise data about the business and its environment. A decision support system comprises of the following components: Data system – This is created by using internal and external references to collect and store data. Dialogue system – This forms part of the language system that enables users to search the database. Model system – This is used to complete a specific analysis and procedures need to be followed to configure the data to meet management requirements. 2.2.2 Specific decision support systems for digital marketing managers Marketing information systems also provides feedback on the decisions taken by digital marketing managers. This feedback is often used to address further problems. The following decision support systems (DSS) are available to digital marketing managers: BRANDAID – Brandaid is a model dealing with a number of sub-models where the focus is on dealing with advertising spending levels, price, and salesperson effort. It can be used by a digital marketing manager in determining the marketing mix for a particular brand. ADMOD – Admod is used to supply information to support decisions that need to be made regarding the advertising budget, the advertising copy, and media allocation. CALLPLAN – This model provides management with support in determining the amount of time that salespeople should spend with current and potential customers. DETAILER – This model will assist digital marketing managers with the allocation of a sales force’s selling effort across items in an organisation’s product line. GEOLINE – This model will assist digital marketing managers in establishing geographical boundaries and the effort that will be required to operate and reach those marked areas. POSSE – This can be used by digital marketing managers to make product design decisions. STRATPORT – This assist in the allocation of the firm’s financial resources across its strategic business units. BRANDFRAME – This is a system that supports brand managers with monitoring brands, diagnosing events, and planning appropriate marketing actions. © The Independent Institute of Education (Pty) Ltd 2024 Page 33 of 85 IIE Module Manual DIGK6122 2.3 Marketing Research As outlined earlier, decision making is an important component of the management of any organisation. Digital marketing managers, for example, need to decide on the extent to which they use social media or email marketing in their promotional campaigns. Marketing research can be defined as the systematic and objective collection, analysis, and interpretation of information for decision-making on various marketing problems. Digital marketing managers generally would be seeking answers to questions such as: What product is bought? Where is the product bought? When is it bought? How is it bought? Why is it bought? Marketing research serves two important purposes: It provides the organisation with information about customer demand for products and services. It gives customers the opportunity to express their views and needs and thus influence decision making to ensure that they get the products and services they desire. 2.3.1 The marketing research process The marketing research process consists of a number of predefined steps or stages that are used to collect marketing data and information. Every marketing research problem can be regarded as unique. Digital marketing managers will mainly conduct research when the organisation is faced with a problem. The marketing research process consists of a number of steps, as outlined below: Step 1: Describing the research problem or objectives – The first step in the marketing research process attempts to set the scene and uncover the basic research problem on hand. Organisations may find value in conducting a situational analysis first to fully discover the nature of the problem. The situational analysis will be useful in the formulation of primary and secondary research objectives. Furthermore, forming the research problem and objectives will assist in the selection of the research design. Step 2: Selecting the research design – The research design refers to the plan that the researcher attempts to follow in order to achieve the research objectives and solve the marketing problem. The definition of the research problem and the requirements of the research objectives would therefore, to a large extent, determine the type of research design that is most suitable for the situation. The following research designs may be used: © The Independent Institute of Education (Pty) Ltd 2024 Page 34 of 85 IIE Module Manual DIGK6122 o Exploratory research; o Descriptive research; o Qualitative research; o Quantitative research; o Ad hoc research; o Ex post facto research; o Longitudinal research; o Causal research; o Predictive research. Step 3: Preparing the research design – The first activity in the preparation of the research design is to decide between the two main categories of data sources, namely primary data, and secondary data. Primary data refers to data collected and used exclusively to solve a particular research problem, whereas secondary data refers to data that has been collected previously and used to solve other marketing and digital marketing problems. In some instances, the researcher is able to solve the marketing problem with only secondary data, however there are times when a solution cannot be found, and the collection of primary data is warranted. After the researcher has determined the research design and that primary data will be collected, he or she needs to determine how the required data will be collected. There are three main approaches to collecting data: o The observation approach § Rather than questioning the respondents, the researcher gathers information by simply observing, recognising and taking note of what is happening. o The survey approach § The survey approach uses direct or indirect questioning of selected individuals. It is the most widely used form of data collection in marketing research. Examples include interviews and questionnaires. o Experimentation § The objective of experimentation is to control and manipulate the independent variable to assess the relationship with the dependent variable. In marketing, this approach is not used often. The researcher also needs to devise a suitable sampling plan. Researchers seldom study the whole population, instead they select a sample of the population. For example, if a researcher wants to obtain the opinions of Vega Bordeaux students towards Cadbury © The Independent Institute of Education (Pty) Ltd 2024 Page 35 of 85 IIE Module Manual DIGK6122 chocolates, he or she is unlikely to go to every single student on campus but is likely to select a smaller representative. Step 4: Fieldwork – This refers to the actual collection of data by using either questionnaires or conducting interviews. Step 5: Processing, tabulation, and analysis – After the data has been collected, processing is required. The data collected needs to be edited, verified, and coded to facilitate data capture on a computer. For example, programmes such as Microsoft Excel can be used to help process the data. Step 6: Reporting the research results – This is the final stage in the marketing research and involves reporting the results to the digital marketing decision maker. It is important that the marketing information is communicated in an appropriate format. The researcher needs to ensure that the research report is understandable, relevant, clear, concise, organised, timeous, accurate, and comprehensive. 2.4 The use of the Internet in Marketing research Changes in technology have created an opportunity for digital marketers to use the Internet to enhance their marketing research projects. However, advantages are often confronted with challenges, and it is important that these are overcome. 2.4.1 Advantages of internet research and web surveys The use of internet surveys has increased substantially in the past few years. This is mainly due to the fact that it can be widely distributed within a short period of time. Using the web to conduct research also proves to be more cost effective. If an organisation chooses to conduct face to face interviews, there are substantial interviewer costs that need to be considered. These costs are avoided when surveys are administered via email. The Internet is also able to reach a large number of people, no matter where they are. Barriers that are often experienced with international research studies may no longer pose a problem. Furthermore, web-based surveys have the added benefit of using attractive fonts, graphics, and videos that attract respondents’ attention and could increase response rates. The Internet makes it possible to design and implement creative research-based projects that are not possible with paper-based research. © The Independent Institute of Education (Pty) Ltd 2024 Page 36 of 85 IIE Module Manual DIGK6122 2.4.2 Disadvantages of internet research and web surveys Although there are many positives to conducting web-based surveys, there are also noticeable differences. Internet users often lack representivity. Essentially, internet users belong to the upper LSM (Living Standards Measure) groups. There is a definite bias towards educated people in urban areas. A second problem is that of security. Spamming and the invasion of privacy are still major concerns for internet users. This may have an impact on the response rates of web-based surveys. 2.5 Market Measurement and demand forecasting One of the main reasons for collecting marketing information is to identify any current trends in the marketplace that could lead to an opportunity for the organisation. Before the organisation can start developing strategies to take advantage of such an opportunity, the opportunity must be determined to be worthwhile and sustainable. Market measurement involves determining the size and characteristics of the current market and measurements may be completed on four levels, namely: Consumer level – This provides information on the number of final consumers in different market segments. For example, the consumer level of the market for airtime would provide measurement information on segments such as individuals, companies, and other organisations as users. Product level – This refers to the number of current buyers for each product type. Product types for airtime for example could be divided into the type of users: prepaid or contract users. Geographic level – The total market can be divided into geographical segments, and it is thus possible to express the market measurement in geographical terms. Airtime, for example, could be divided into contract users for each suburb in Cape Town. Time level – This refers to a market measurement that seeks to provide details on the specific time of purchase and provides information on the sales over different time periods, such as monthly sales, seasonal sales, and annual sales. While market measurement refers to the size of the current market, market forecasting is concerned with the size of the future market. Essentially, forecasting is concerned with predicting the future. It is crucial that digital marketing managers are provided with reliable measures of future sales, as these measures will be used in the planning and implementation of future digital marketing strategies. The following link has more information on some of the digital marketing forecasts for 2018. https://demodia.com/discovering-demand/digital-marketing-forecast-2018 [Accessed 20 July 2023]. © The Independent Institute of Education (Pty) Ltd 2024 Page 37 of 85 IIE Module Manual DIGK6122 Learning Unit 3: Digital Marketing Environment Learning Objectives: My notes Define the microenvironment. Explain the components of the microenvironment. Define the market environment. Describe the various market environmental factors. Define the macro environment. Evaluate the components of the macro environment. Discuss the importance of environmental scanning for digital marketing companies. Apply a SWOT analysis to a given scenario. Material used for this learning unit: Module Manual. How to prepare for this learning unit: Before class, be sure that you read this learning unit. As you read these sections, see if you can find the answers to the revision questions at the end of this learning unit. © The Independent Institute of Education (Pty) Ltd 2024 Page 40 of 85 IIE Module Manual DIGK6122 1 Introduction This learning unit focuses on understanding the dynamic digital marketing environment in order to identify factors that can affect or influence the business. These factors may come from the microenvironment (internal to the organisation and therefore controllable) and may be either negative (weaknesses) or positive (strengths). The market and macro environments that are located outside of a firm must also be explored, and any opportunities (positive) identified should be pursued. Conversely, organisations should attempt to minimise and eliminate harmful threats. In order to assess these factors, management will constantly scan the environment and make use of a SWOT analysis to identify and categorise them, 2 The Digital Marketing Environment The digital marketing environment refers to the context in which firms operate, including how they relate to customers and other businesses participating in their markets. Each firm has its own unique space within the marketing environment, which is shaped by how they interact with internal aspects of their own business, competing businesses, and the wider marketing environment. The marketing environment consists of three sub-environments that all impact on each other. These three sub- environments are known as the micro, market, and macro environments. 2.1 Microenvironment The microenvironment refers to internal variables that can be controlled by management, such as the staff to be appointed, the funds to be used, the mission statement, and the digital marketing objectives of the organisation. Digital marketing managers do not own or exercise direct control over all the variables in the internal environment, as this is made up of various functional areas. The digital marketing manager would essentially only have direct control over digital marketing activities within the marketing department. The digital marketing activities and instruments used are directly controlled by the digital marketer. The digital marketing strategy within the microenvironment encompasses all the elements that will determine the strategic direction of the business. These elements include the mission statement, target market selection, and digital marketing objectives. 2.1.1 Mission Statement A business is not defined by its name, statutes, or articles of incorporation – it is defined by its mission statement. In order for an organisation to set clear and realistic business objectives, it needs to be certain about its mission and purpose. The mission statement provides a concise statement of the business’s current market position. It provides guidelines on where the resources of the business should be applied. © The Independent Institute of Education (Pty) Ltd 2024 Page 41 of 85 IIE Module Manual DIGK6122 A mission statement is used to give direction and differentiate the company from its competitors. In order to compile a mission statement, a business needs a clear description of its customers. The following questions should be answered when compiling a mission statement: Who is the customer? What does the customer buy? Where is the customer located? How does the customer buy? How can the customer be reached? What does the customer regard as value for money? 2.1.2 Target market In line with the mission and objectives of the company, a target market must be selected. The target market must be big enough for the company to meet its stated objectives and to ensure the long-term survival and growth of the business. A company may make a conscious effort to focus all its resources on a small segment (niche market). For example, many luxury sports car brands and high-end fashion clothing labels adopt this approach. 2.1.3 Resources, skills, and abilities The resources, skills, and abilities of the organisation are controllable elements of the microenvironment and are used to take advantage of external opportunities and counter threats. As a digital marketing manager, the focus is on trying to utilise the resources as best as possible so that the objectives of the organisation are realised. 2.1.4 Digital marketing objectives It is important that companies set specific numerical objectives for their online channels and resources to deliver these objectives. Digital marketing objectives would be formulated after the organisation has outlined their business objectives. After digital marketing objectives have been formulated, the digital marketing manager needs to seek ways to measure digital marketing performance. Web analytics can be used to measure the contribution of leads, sales, and brand involvement that would be associated with online communications such as search engine marketing, online advertising, and email marketing. Any marketing strategy should be clearly based on the organisation’s corporate objectives, but there is sometimes a tendency for digital marketing to be conducted separately from other business and marketing objectives. Chaffey and Ellis-Chadwick (2016) acknowledge that many dot.com companies fail due to a lack of planning and objectives not being clearly stated. The terms goals and objectives are often used interchangeably, but there are noticeable differences between these two terms. © The Independent Institute of Education (Pty) Ltd 2024 Page 42 of 85 IIE Module Manual DIGK6122 Objectives are specific and cover the SMART criteria, which ensures that a specific target is set for a particular time period and is measured by using sales and analytics systems. Goals refer to broader aims that are informed by a vision. 2.1.5 The company website While elements such as social media are becoming more important, for most organisations, their website remains the core component of their digital marketing strategy. It is also important to note that it is one of the very few elements of a digital strategy that the organisation has complete control over. In current times, customers expect an organisation to have a useful, professional website that provides them with the information they require in an easy-to-use format. 2.1.5.1 Components of a website Obviously, every company is free to decide what should and should not be included on their website. Experience tells us that customers expect to find some or all of the following on the website of a company that they visit: 1. Contact details and physical location, if applicable. 2. Company information and overview. 3. Product list with detailed information. 4. Frequently asked questions. Can you think of other elements that customers may want or expect on a company website? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… In addition to the information available on the site, an organisation must take care to make sure that the appearance of their site is suitable. They will need to consider the colour scheme, fonts, images, any video content they may post, and many other aspects, that will ensure that customers enjoy visiting their website and find it easy to use. By combining content and appearance in a suitable way, companies will ensure customers return to their site often. This is an important concept in digital marketing, known as stickiness. © The Independent Institute of Education (Pty) Ltd 2024 Page 43 of 85 IIE Module Manual DIGK6122 Stickiness is the combination of tools and techniques that companies use to make customers visit their site often and stay on it for a long time. Based on the definition above, www.facebook.com would definitely be defined as a “Sticky” website–people return to it often, sometimes many times a day, and spend a long time on it when they do. 2.1.5.2 Website stickiness Cant and Van Heerden (2013), Chaffey and Smith (2013) and many others provide guidelines as to how a company can make their website more sticky. A handy way of understanding website stickiness is to consider the so-called 4 C’s of website design. They are: 1. Content: Customers will only return to your site if the content available is interesting to them. Typically, that content should be updated frequently so that when a customer returns, there is something new for them to view. Examples of websites that do this very well are MrPrice.co.za, News24.com, and obviously Facebook, although most of the content visible on Facebook is generated by other users and not the company itself. 2. Community: These are the people who interact on your site and provide a social element to a visit. Facebook, again, delivers very well on this aspect of stickiness, but any website that provides a forum or a comments section (again, such as News24) can be considered to have a community aspect. In a highly competitive and dynamic business environment, it has become important for companies to engage with all stakeholders, especially their customers. 3. Communication: This refers to customers having the ability to make contact with your company through your site. Contact options, email enquiry forms, and “live chat” functionalities are all examples of this aspect of stickiness. Telkom.co.za has a live chat facility that customers can use to report faults without needing to call in to their call centre, which is extremely popular among users. Note that communication refers to customers talking to the company, whereas community refers to customers talking to one another. 4. Commerce: This is an aspect of stickiness in which companies make it easy for customers to do business with them. Some companies allow you to order directly with them online, and some will allow for contact to be made with a sales representative if online shopping is not appropriate. Can you think of some other examples of a website you use that meet the criteria for stickiness? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… © The Independent Institute of Education (Pty) Ltd 2024 Page 44 of 85 IIE Module Manual DIGK6122 2.1.6 Setting SMART objectives The acronym SMART is often used to assess the suitability of objectives More detail is provided on the setting of SMART objectives below: Specific – Is the objective sufficiently detailed to measure real-world problems and opportunities? Measurable – Can a quantitative or qualitative attribute be applied to create a metric? For example, when setting a cost objective, an organisation should state that they would like to reduce marketing communications costs by 10% instead of simply stating that they want to reduce costs. Attaching a numerical value to the objective helps in assessing success or failure. Actionable – Can the information be used to improve performance? If the objective does not change the behaviour of staff to help them improve performance, there is very little point in it! Relevant – Can the information be applied to the specific problem faced by the manager? Time-related – Can the information be constrained through time? For example, a digital marketing manager may state that they wish to increase online revenue by 10% within two years. 2.2 The market environment The market environment refers to those elements or variables that the organisation may not necessarily be able to control. These variables influence the business in a profound way and include suppliers, consumers, intermediaries, and competitors. 2.2.1 Customers Understanding the individual nature of customers is fundamental to marketing practice and planning. Digital marketing managers need to analyse the consumer market to see how it functions. Changes in the composition of the market or changes in customer needs may create certain opportunities that, if taken advantage of, may influence the long-term growth and survival of the business. According to Chaffey and Ellis-Chadwick (2016), the types of individuals using the web have changed significantly since 1995. In those early days, online shoppers tended to be young males who were generally better educated and wealthier than their contemporaries. They portrayed confidence and had the desire to experiment with the Internet. Some companies specifically targeted these individuals and developed services to suit their needs. Online customers are changing rapidly. Ten years ago, only the most tech-savvy among us would consider shopping online, with most South African consumers being extremely wary of online transactions. These days, almost all in our society with the means to transact electronically has done so to some extent, with that ratio growing all the time. © The Independent Institute of Education (Pty) Ltd 2024 Page 45 of 85 IIE Module Manual DIGK6122 The term “independence of location” refers to the global reach of organisations and the fact that many organisations now have opportunities to sell their products in international markets, which may not have been previously possible. In the 21st century, a larger percentage of customers are likely to interact electronically in some way. There are many benefits to interacting with customers electronically. 2.2.2 Online customers have many choices Because of the vast size of the World Wide Web, every firm anywhere in the world able to service your customers’ needs in the same way that you would is considered a competitor. Online customers are aware that many alternatives exist and are very likely to evaluate several alternative providers before settling on a particular organisation or brand to meet their needs. 2.2.3 Online customers talk about their experiences With the rise of social media, customers are likely to share their experiences extensively with friends, family, and co-workers. Unfortunately, bad experiences are shared far more often than good ones. Organisations must be aware that online customers hold tremendous power over their reputations, and work hard to maintain a positive reputation in the minds of their customers and potential customers. 2.2.4 Online customers expect and value privacy As customers become more internet-savvy, they become more educated regarding privacy concerns. Customers will respect and appreciate an organisation that has a clear policy regarding the safekeeping of their private information and will look unfavourably on an organisation that does not keep their information safe or shares it with third parties. A variety of providers, such as Sony, DropBox, and others, have had their private client information databases compromised, and the damage done to their reputation has been estimated to run into millions of dollars. Question: Do some research into data compromises that have occurred in the South African online space. What do you think the biggest concerns regarding breaching of private data could be? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………………………………………………………………………………………. © The Independent Institute of Education (Pty) Ltd 2024 Page 46 of 85 IIE Module Manual DIGK6122 According to the Michigan Institute of Technology (MIT), the biggest risk of private data such as ID Numbers and credit card details being breached is identity theft. This is a process whereby an attacker uses information they have uncovered about you to impersonate you, so as to gain some kind of advantage, e.g., taking out a loan in your name. 2.2.5 Customer motivations and expectations One of the big questions we must answer is: why do customers go online? Chaffey and Smith (2013) highlight a variety of reasons as to why customers venture online, and not all of them are commerce related. They include: 1. Socialising – e.g., Facebook, Twitter, Instagram, Snapchat. 2. Catching up on news – e.g., reading a news website like www.iol.co.za. 3. Entertainment – YouTube, streaming services such as Netflix, Showmax, or Hulu. 4. Education/information search – Wikipedia, company websites for specific product information. 5. Shopping/browsing – e-commerce activities. The combination of benefits consumers perceive they will obtain from being online is called the Online Value Proposition (OVP). Chaffey (2004) suggests that it is possible to “nudge” consumers towards purchasing behaviour regardless of their original reason for being online and suggests that companies wishing to convert other online activities into transactions should emphasise the convenience and cost reduction aspects of online transactions to their potential customers. As with all marketing, organisations will need to meet the expectations of their online customers in order to satisfy them. If you consider an online transaction from start to finish (as opposed to a face-to-face transaction), what are some of the things you would expect or that would make you satisfied? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………………………………………………………………………. © The Independent Institute of Education (Pty) Ltd 2024 Page 47 of 85 IIE Module Manual DIGK6122 Some of the most common expectations of online customers when making a purchase include: 1. Easy to find what they are looking for on the site. 2. The relevant information on the product is available (e.g., price, sizing). 3. Information regarding delivery costs and time is available. 4. The payment process is secure and trustworthy. 5. Customers are notified when their order is dispatched for delivery. 6. Their information is kept private and secure. 7. Items are delivered on time and as promised. 8. Any required returns process is easy and straightforward. 2.2.6 Customer concerns Not all motivations and emotions towards online activities are positive. So-called fears and phobias regarding online activities are real, and strong enough to influence consumer behaviour. As marketers, we need to familiarise ourselves with these doubts, and understand how they could deter customers from interacting with us electronically. What do you think are some of the biggest fears/concerns customers might have about going online? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… Visit (https://roobykon.com/blog/posts/113-7-reasons-people-are-afraid-of- ecommerce-and-how-to-deal-with-them) [Accessed 20 July 2023] for some more ideas! 2.2.7 Competitors For any marketer, including a digital marketer, a key consideration is developing an understanding of how to satisfy customers better than competitors. Competition can be defined as those companies that offer similar products and services and who take certain actions to secure the support and loyalty of the same customers by offering the best possible solution to their needs and wants (Cant and van Heerden, 2017). The level of competition can vary considerably from one market to another or from one industry to another. Chaffey and Ellis-Chadwick (2016) have stated that an industry is a group of firms that market products that are close substitutes for each other. Some industries possess more opportunities, and others are regarded as being more volatile in nature. © The Independent Institute of Education (Pty) Ltd 2024 Page 48 of 85 IIE Module Manual DIGK6122 Porter’s five forces model has been widely used to analyse the nature of competition within an industry. Porter proposes that the intensity of competition in a market is dependent on five forces. These are outlined below. Bargaining power of buyers: The increase in customer power and knowledge is perhaps the single biggest threat posed by electronic trading. The bargaining power of a retail shopper is greatly increased when they are using the Internet as they are able to evaluate the characteristics of different products and compare prices. For example, many consumers use search engines to compare prices. Organisations such as Hippo.co.za and Trivago are often used by online consumers due to their efficiency and convenience. Bargaining power of suppliers: The Internet has resulted in the bargaining power of suppliers being reduced, as it allows the consumer to migrate to a different supplier relatively easier. Threat of substitute products and services: The Internet is particularly good as a means of providing information-based services at a lower cost. The greatest threats are likely to occur where digital product and/or service fulfilment can occur over the Internet. Barriers to entry: For traditional companies, new online entrants have been a significant threat for retailers selling products such as books and financial services. Industries with fewer barriers to entry have a greater chance of becoming saturated. For example, there are high barriers to entry in the South African energy industry. Intensity of rivalry: The Internet has encouraged the commoditisation of more products, making it harder to differentiate between product offers. Some sectors are characterised by high levels of growth (there is an increase in the number of consumers and an increase in the number of organisations competing in this market). The nature of the rivalry between the company’s trading online is largely determined by the number of players in the market and their relative sizes, the structure of costs and pricing, the switching costs customers would encounter if they changed, strategic objectives, and exit barriers (Chaffey and Ellis-Chadwick, 2016). For example, in South Africa, new e-tailers looking to enter the market and compete with existing firms may find it difficult to do so against a company like Takealot as their operating costs may be substantially higher. © The Independent Institute of Education (Pty) Ltd 2024 Page 49 of 85 IIE Module Manual DIGK6122 2.2.8 Suppliers Suppliers are known to deliver the goods and services that an organisation requires. According to Cant & van Heerden (2017), a supplier is a party whose business it is to make available certain products or services that enable another business to produce its products or services. In the digital marketplace, the supply chain can take many different forms depending on whether physical or digital products are produced. Digital marketing managers are encouraged to monitor suppliers, ensuring that the quality of the products delivered is of a suitable standard. Suppliers need to deliver products timeously, in the correct quantities and at the correct price. Unreliable suppliers result in the interruption of production and further costs borne by the organisation. 2.2.9 Intermediaries Without the use of online intermediaries, e-tailers would be exclusively responsible for promoting their own products. Most destination sites, also make use of online intermediaries such as Google and Yahoo due to their wide reach and impact. Destination sites are typically owned by merchants, product manufacturers, or retailers providing product information (Chaffey and Ellis-Chadwick 2016). Marketing intermediaries are firms that help a company to promote, sell, and distribute its products or services. Online intermediary sites such as Google and Yahoo provide information about destination sites and are responsible for connecting internet users with product information. Online intermediaries are businesses that support business and consumer audiences, so they can serve both B2B and B2C information exchanges. The Internet results in many different types of online intermediaries. These include: Directories (such as Yahoo! Directory, Open Directory) Search engines (Including Google, Yahoo, and Bing) Virtual resellers (own inventory and sells direct. For example, Amazon) Financial intermediaries (offering digital cash and payment services. e.g., Paypal) Forums, fan clubs and user groups often referred to as virtual communities. Evaluators (this refers to sites that compare prices from a variety of sellers. E.g., Trivago, Trip Advisor, and Hippo.co.za) (Chaffey and Ellis-Chadwick 2016) © The Independent Institute of Education (Pty) Ltd 2024 Page 50 of 85 IIE Module Manual DIGK6122 The Internet has resulted in new channel structures, and although it allows for new intermediaries to be established, it also provides opportunities for consumers to deal directly with the organisation. Disintermediation, which refers to the elimination of the middleman or broker, allows consumers to deal directly with organisation. For example, most air travellers will visit the airline’s website directly when looking for flights. We have also discussed the concept of re-intermediation, where new intermediaries have been created. 2.3 Macro Environment The macroenvironment comprises of elements outside the organisations in which the organisation has little to no control over. The macroenvironment is dynamic in that it changes rapidly, and the impact of such changes can be felt very quickly. In marketing literature, the acronyms PEST, SLEPT, and PESTLE are widely used. Digital marketers need to assess which tasks are most important to carry out and which forces will have the greatest impact. We will examine the technological, economic, political, legal, and social forces and how they would impact an organisation. 2.3.1 Technological forces Marketers need to understand the role that digital marketing plays and have basic knowledge of the terminology that is used. Technology is evolving at an alarming rate and digital marketers need to be aware and adjust their strategies accordingly. For example, 10 years ago, companies were concerned with improving the functionality of their websites on mobile devices. Today, most organisations have moved beyond creating mobile websites to developing Apps. Technology innovation is considered as the process that expands people’s capacity. It starts with research and development and often results in the production of new products and services. Changes in the technological environment often have an impact on other environments. For example, the introduction of cellphones has changed the way people live and communicate with each other. As technology improves, so should the security measures. Security remains a contentious issue in digital marketing. A digital marketing manager needs to ensure that they understand security issues and the risks that they might encounter in order to successfully manage their online operations. What other technological innovations can you think of? How has it impacted business? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………… © The Independent Institute of Education (Pty) Ltd 2024 Page 51 of 85 IIE Module Manual DIGK6122 2.3.2 Economic forces Globally, economic forces affect business operations and can determine an organisation’s level of success. Economic forces affect the supply and demand for a product and are something that digital marketers need to identify and closely monitor. Factors such as economic growth, unemployment, interest rates, exchange rates, business cycles, inflation, and consumer income. South Africa has experienced lower levels of economic growth over the past few years. Evaluate how economic growth would impact on a company’s digital marketing strategy. ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………… 2.3.3 Political forces The political environment is shaped by the interplay of government agencies, public opinions, and consumer pressure groups (Chaffey and Ellis-Chadwick 2016). The government’s influence over the economy has an impact on overall economic performance and business investment. Digital marketers need to be aware and adjust to changes in the political environment. The government has recently decided to increase the VAT (value added tax) rate to 15%. What implications will this have on an online retailer? ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………… 2.3.4 Legal forces Laws are developed to provide a framework of control and aim to ensure that business is practiced in a legal and ethical manner (Chaffey and Ellis-Chadwick 2016). Below are the six most important legal issues for digital marketers: Data protection and privacy law Disability and discrimination law Brand and trademark protection Intellectual property rights Contract law Online advertising law © The Independent Institute of Education (Pty) Ltd 2024 Page 52 of 85 IIE Module Manual DIGK6122 2.3.5 Social forces Social forces are closely linked to culture and have implications for digital marketing. The world population is estimated at approximately 7 billion people, with 26,3% being 14 years or younger, 65,9% between the ages of 15 and 64, and 7,9% over the age of 65. Analysis of social forces will provide digital marketers with added information that can be used when designing products and services. The Internet has a significant social impact and determines how people live and communicate. It has also resulted in social exclusion. For example, as a student, if you have not watched a particular movie and all your friends have, you may feel excluded and be unable to participate in social discussions. Furthermore, the Internet also dictates the level of information that is distributed to individuals. Those with Internet have access to a greater volume and higher quality of information than those who do not. Discuss why marketers may choose to target wealthier, more educated individuals with their products. ………………………………………………………………………………………………… ………………………………………………………………………………………………… ………………… 3 Recommended Additional Reading Chaffey, D. and Smith, P. Digital Marketing Excellence- Planning, Optimizing and Integrating online marketing. 2013. 5th edition. New York: Routledge. Chaffey, D. & Smith, P.R, 2023, Digital Marketing Excellence: Planning, optimizing and integrating online marketing.,6th ed ; Routledge Taylor & Francis Group, London and New York Cant, M.C and Van Heerden, C.H. Marketing Management – A South African perspective (2017) 3rd edition. Cape Town: JUTA https://roobykon.com/blog/posts/113-7-reasons-people-are-afraid-of- ecommerce-and-how-to-deal-with-them [Accessed 20 July 2023]. © The Independent Institute of Education (Pty) Ltd 2024 Page 53 of 85