Digital Marketing Strategy, Implementation, and Practice (Pearson)

DIGITAL MARKETING STRATEGY, IMPLEMENTATION AND PRACTICE Seventh Edition Part 2 Digital marketing strategy development...

DIGITAL MARKETING STRATEGY, IMPLEMENTATION AND PRACTICE Seventh Edition Part 2 Digital marketing strategy development Chapter 5 Digital media and the marketing mix Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Chapter 5 Digital media and the marketing mix Main topics: Product Price Place Promotion People, process and physical evidence Case study: Spotify streaming develops new revenue models Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  What is the marketing mix? Marketing mix The series of seven key variables – Product, Price, Place, Promotion, People, Process and Physical evidence – that are varied by marketers as part of the customer offering. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  What is the marketing mix? Digital marketing affects all aspects of the traditional and service marketing mix, and in this chapter we explore: Product: looking at opportunities for modifying the core or extended product for digital environments. Price: focusing on the implications for setting prices in digital markets; new pricing models and strategies. Place: considering the implications for distribution for digital marketing. Promotion: exploring promotional techniques. People, process and physical evidence: reviewing the principal ideas, where the focus is on how these elements of the mix relate to customer relationship management and managing an organization's digital presence. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product The product variable of the marketing mix refers to characteristics of a product, and has implications for service or branding. Product decisions should be informed by market research where customers’ needs are assessed and the feedback is used to modify existing products or develop new products. There are many alternatives for varying the product in the online context when a company is developing its digital strategy; product decisions can usefully be divided into decisions affecting the core product and the extended product. The core product refers to the main product purchased by the consumer to fulfil their needs, while the extended or augmented product refers to additional services and benefits that are built around the core of the product. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product Implications for digital technology for the product element of the mix 1. Options for varying the core product 2. Options for offering digital products 3. Options for changing the extended product 4. Conducting online research 5. Speed of new product development 6. Speed of new product diffusion Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product 1. Options for varying the core product: For some companies, there may be options for new digital products that will typically be information products that can be delivered over the web. Originally, Ghosh (1998) talked about developing new products or adding ‘digital value’ to customers. The questions he posed still prove useful today: Can I offer additional information or transaction services to my existing customer base? Can I address the needs of new customer segments by repackaging my current information assets or by creating new business propositions using the Internet? can I use my ability to attract customers to generate new sources of revenue such as advertising or sales of complementary products? Will my current business be significantly harmed by other companies providing some of the value I currently offer? Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product 2. Options for offering digital products: Publishers, TV companies, media owners and other companies that can offer digital products such as published content, music or videos now have great flexibility to offer a range of product purchase options at different price points, including: Subscription. Pay-per-view. Bundling. Ad-supported content. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product 3. Options for changing the extended product When a customer buys a new computer or mobile phone it consists not only of the tangible product, and peripheral devices, but also the information provided by the salesperson, the instruction manual, the packaging, the warranty and the follow-up technical service. These are elements of the extended product. Chaffey and Smith (2012) suggest examples of how the Internet can be used to vary the extended product: Endorsements. Awards. Testimonies. customer lists. customer feedback. Warranties. guarantees. money-back offers. customer service (see people, process and physical evidence). Incorporating tools to help users during their selection and use of the product. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product 4. Conducting research online Options for performing new product development research online include: Online focus group. Online questionnaire survey. Social media listening. Customer feedback or support forums. Web analytics. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Product 5. Speed of new product development Digital channels give instant access to target markets and provide platforms, which enable new products to be developed more rapidly as it is possible to test new ideas and concepts and explore different product options through online market research. 6. Speed of new product diffusion Tipping point: Using the science of social epidemics explains principles that underpin the rapid spread of ideas, products and behaviours through a population. There are three main laws that are relevant from The Tipping Point: 1. The law of the few 2. The stickiness factor – excellent, uniqueness, engagement (emotional involvement), cost (value for money) 3. The power of context-product should be devised and tested to fit their context, situation, or occasion of use. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  The long tail concept Long tail concept A frequency distribution suggesting the relative variation in popularity of items selected by consumers. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Branding in a digital environment - Branding Branding is the process by which companies distinguish their product offerings from the competition by the sum of the characteristics of the product or service as perceived by the customer. - Brands Organisations are able to get into the minds of the customers, to position their brands, using a range of brand elements contributing to brand equity: brand domain – key target markets, where the brand competes; brand heritage – the background and culture of the brand; brand values – the core characteristics, e.g., price, quality, performance; brand assets distinctive names, symbols, images; brand personality – the character of the brand; brand reflection – how the customer perceives themselves as a result of buying the brand. - Brand equity: The assets (or liabilities) linked to a brand’s name and symbol that add to (or subtract from) a service. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Branding in a digital environment Success factors for brand sites Some of the methods Flores suggests to encourage visitors to return include: Creating a compelling, interactive experience including rich media that reflects the brand. Considering how the site will influence the sales cycle by encouraging trial. Developing an exchange (permission marketing) programme on your website to begin a ‘conversation’ with the most valuable customer segments. Brand advocate A customer who has favorable perceptions of a brand who will talk favourably about a brand to their acquaintances to help generate awareness of the brand or influence purchase intent. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Branding in a digital environment Brand identity The totality of brand associations, including name and symbols that must be communicated. Brand names for online brands 1. The Law of the Common Name. They say ‘the kiss of death for an Internet brand is a common name’. The idea is that common names such as Art.com or Advertising.com are poor since they are not sufficiently distinctive. 2. The Law of the Proper Name. They say ‘your name stands alone on the Internet, so you’d better have a good one’. This suggests that proper names are to be preferred to generic names, e.g. PinkMoods.com against Woman.com. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Price The price variable of the marketing mix refers to an organisation’s pricing policies, which are used to define pricing models and to set prices for products and services, which ultimately differentiate a brand. The main implications of the Internet for the price aspect of the mix are: 1. increased price transparency and its implications on differential pricing. 2. downward pressure on price (including commoditisation). 3. new pricing approaches (including dynamic pricing, price testing and auctions). 4. alternative pricing structure or policies. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Price 1. Increased price transparency and its implications on differential pricing. - Price transparency Customer knowledge about pricing increases due to increased availability of pricing information. - Differential pricing Identical products are priced differently for different types of customers, markets or buying situations. - Price elasticity of demand Measure of consumer behaviour that indicates the change in demand for a product or service in response to changes in price. Price elasticity of demand is used to assess the extent to which a change in price will influence demand for a product. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Price 2. Downward pressure on price The competition caused by price transparency and increased number of competitors is the main reason for downward pressure on price. Baker et al. (2000) suggested that companies should use the following three factors to assist in pricing. 3. Precision. Each product has a price-indifference band, where varying price has little or no impact on sales. 4. Adaptability. This refers simply to the fact that it is possible to respond more quickly to the demands of the marketplace with online pricing. 5. Segmentation. This refers to pricing differently for different groups of customers. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Price 3. Innovative pricing approaches The Internet has proved to have the technological capacity to create new pricing options. Figure 5.6 summarises different pricing mechanisms, which have been used effectively online. While many of these were available before the advent of the Internet and are not new, the Internet has made some models easier to apply. In particular, the volume of users makes traditional or forward auctions (B2C) and reverse auctions (B2B) more tenable – these have become more widely used than previously. Forward auctions Item purchased by highest bid made in bidding period. Reverse auctions Item purchased from lowest-bidding supplier in bidding period. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Figure 5.6 Alternative pricing mechanisms Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Price 4. Alternative pricing structure or policies Pricing options that could be varied online include: Basic price. Discounts. Add-ons and extra products and services. Guarantees and warranties. Refund policies. Order cancellation terms. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Place Place variable The element of the marketing mix that involves distributing products to customers in line with demand and minimising cost of inventory, transport and storage. The main implications of digital for the Place aspect of the mix reviewed in this section are: 1. Place of purchase. 2. New channel structures. 3. Channel conflicts. 4. Virtual organisations. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Place 1. Place of purchase Suggesting the concept of place in relation to the Internet may seem peculiar, but as it is a global virtual environment that crosses geographical boundaries, the issues associated with distribution, logistics and the point at which sales and other transactions take place are important for digital marketers. 2. New channel structures The main types of phenomena that companies need to develop strategies for are: 1. Disintermediation: Options for selling direct to customers 2. Reintermediation: New intermediaries should be evaluated suitability for partnering in affiliate arrangements. 3. Countermediation: refers to the strategic options to make better use of online intermediaries, such as through partnering with independent intermediaries, purchasing or creating an independent intermediary Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Place 3. Channel conflicts A significant threat arising from the introduction of an Internet channel is that while disintermediation gives a company the opportunity to sell direct and increase profitability on products, it can also threaten distribution arrangements with existing partners. 4. Virtual Organisations The following features of a virtual organisation, which remain relevant: Processes transcend the boundaries of a single form and are not controlled by a single organisational hierarchy. Production processes are flexible, with different parties involved at different times. Parties involved in the production of a single product are often geographically dispersed. Given this dispersion, coordination is heavily dependent on telecommunications and data networks. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Promotion The Promotion variable of the marketing mix refers to how marketing communications are used to inform customers and other stakeholders about an organisation and its products. Communications Tool Online implementation Advertising Interactive display ads, pay-per-click search advertising, targeted ads in social networks Selling Virtual sales staff, site merchandising, assisted selling (including livechat) and affiliate marketing Sales promotion Incentives such as coupons, rewards, online loyalty schemes Public relations Online PR and influencer outreach, blogs, e-newsletters, newsletters, social networks, links and viral campaigns Sponsorship Sponsoring an online event, site or service Direct mail Opt-in email using e-newsletters and focused ‘solus’ emails Exhibitions Webinars, virtual exhibitions and white-paper distribution Merchandising Promotional ad-serving on retail sites, personalised recommendations and email alerts Packaging Virtual tours, real packaging displayed online Word of mouth Social, viral, affiliate marketing, email a friend, links Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Promotion The Promotion element of a marketing plan also requires three important decisions about investment for the online promotion or the online communications mix: 1. Investment in site promotion compared to site creation and maintenance. 2. Investment in online promotion techniques in comparison to offline promotion. 3. Investment in different online promotion techniques. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  People Process and Physical evidence The People, Process and Physical evidence elements of the mix are closely related and often grouped as ‘the service elements’. They are significant since the level of perceived service will impact on a customer’s loyalty and the probability of their recommending the service. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  People The People variable of the marketing mix relates to how an organisation’s staff interact with customers and other stakeholders during sales and pre- and post- sales communications with them. To manage service and quality, organisations must devise plans to accommodate the five stages 1. Customer define support query 2. Receipt of email and acknowledgement 3. Routing of emails 4. Compose response 5. Follow-up Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Process: The Process variable of the marketing mix refers to the methods and procedures companies use to achieve all marketing functions – such as new product development, promotion, sales and customer service (as described in the previous section). Customer contact strategies for integrating web and email support into existing contact center operations usually incorporate elements of the following options: Customer-preferred channel. Company-preferred channel. Delivering customer services and assisted sales through Livechat is increasingly popular. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Physical evidence - The Physical evidence variable of the marketing mix refers to the tangible expression of a product and how it is purchased and used. In an online context, ‘physical evidence’ refers to the customer’s experience of the company through the website. It includes issues such as site ease of use or navigation, availability and performance. - A customer’s experience of the company through the web site and other digital media. Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -  Case study: Spotify streaming develops new revenue models Question: Assess how Spotify compete with traditional and online music providers by reviewing the approaches it uses for different elements of the marketing mix Source: https://www.recode.net/2018/2/28/17064460/spotify-ipo-charts-music-streaming-daniel-ek Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved Restricted -