Marketing in the New Economy - Online Marketing


By

Joe Mary George
Lecturer in Management
SEMCOM College
V.V. Nagar, Anand
 


What is E-business, e-commerce and E-Marketing

Before going into the topic let us understand the basic difference between Internet and World Wide Web.

The internet is a worldwide network of computers networks. And the World Wide Web is one of the Internet's most popular services, providing access to over two billion Web pages.

Do you think there is any difference between E- Business and E-commerce?

What is E-Business?

E-business primarily concerns the applications of digital technologies to business within the firm. E-business refers primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm. It does not include commercial transactions involving an exchange of value across organizational boundaries. For example, a company online inventory control mechanisms are a component of e-business, but such internal processes do not directly generate revenue for the firm from outside business or consumers. E-business applications turn into e-commerce precisely when an exchange of value occurs.

And e-commerce and e-business systems can and do blur together at the business firm boundary, at the point where internal business systems link up with suppliers, for instance.

We are living in an exciting time. The Power, capabilities, and worldwide reach of the Internet are quickly changing the way the world does business. E-business means any business conducted using electronic media such as the Internet, other computer networks, wireless transmissions, etc. It also stands for electronic business and refers to any kind of sales, services, purchasing or commerce on the Internet.

What is E-commerce?

E-commerce means the use of internet and the web to transact business. E-commerce primarily involves digitally enabled commercial transactions between and among organisations and individuals.

What is E-marketing?

Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is "meeting needs profitably". The newest channels for direct marketing are electronic. E-business describes a wide variety of electronic platforms, such as the sending of purchase orders to suppliers via electronic data interchange (EDI) or extranets; the use of fax and e-mail to conduct transactions; the use of ATMs, and smart cards to facilitate payment and obtain digital cash; and the use of the Internet and online services. All of these involve doing business in a "market space" as compared to physical "market place".

The Internet today functions as an information source, an entertainment source, a communication channel, a transaction channel, and even a distribution channel. One can use it as a shopping mall, a TV set, a news paper, a library, or a phone. Users can send e-mail, exchange views, shop for products, and access news, recipes, art and business information.

The internet provides marketers and consumers with opportunities for much greater interaction and individualization. Companies in the past would send standard media –magazines, newsletters, ads- without any individualization or interaction. Today these companies can send individualized content and consumers themselves can further individualize the content; and today companies can interact and dialogue with much larger groups than ever in the past.       

Very simply put, eMarketing or electronic marketing refers to the application of marketing principles and techniques via electronic media and more specifically the Internet. The terms E-Marketing, Internet marketing and online marketing, are frequently interchanged, and can often be considered synonymous.

E-Marketing is the process of marketing a brand using the Internet. It includes both direct response marketing and indirect marketing elements and uses a range of technologies to help connect businesses to their customers.

By such a definition, eMarketing encompasses all the activities a business conducts via the worldwide web with the aim of attracting new business, retaining current business and developing its brand identity.

The seven unique features of E-commerce Technology

1. Ubiquity

E-commerce liberates the market from being restricted to a physical space and makes it possible to shop from our desktop, at home, at work, or even from our car. From customer point of view, ubiquity reduces transaction costs, (the cost of participating in a market) time spend and money traveling to a market.

2. Global reach

E-commerce permits transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce.

3. Universal standards

The technical standards for conducting e-commerce are universal standards. The standards are shared by all nations around the world. The universal technical standards of e-commerce greatly lower market entry costs and search costs for customers by creating a single, one-world market space where prices and product descriptions can be displayed for all to see.

4. Reachness

During the traditional market it was not possible to reach up to the different places of the market but e-commerce enables the businessman to reach out even to the last customer living at the end of the world at any time with the development of the web.

5. Interactivity

E-commerce makes it possible for two-way communication between businessman and customers which was not possible in traditional market. Customers are able to get the latest of information about the product that they want to use at any time, sitting at any corner of the world.

6. Information density

E-commerce technologies reduce information collection, storage, processing and communication costs. At the same time increase greatly the currency, accuracy an d timeliness of information –making information more useful and important than ever. In e-commerce markets, prices and costs become more transparent. Therefore the consumer and the merchant both are benefited by e-commerce.

7. Personalization/Customization

E-commerce technologies permit personalization. Merchants can target their marketing messages to specific individuals by adjusting the message to a person's name, interests and past purchases.

Types of E-commerce

There are different types of e-commerce. Following are the lists of five major types of e-commerce.

1. Business-to-Consumer e-commerce (B2C)

In this type, online business attempt to reach individual consumers to sell out the goods.

The most frequent online consumer purchases have been books, music, software, air tickets, PC peripherals, clothing, videos, hotel reservations, toys, flowers and consumer electronics.

2. Business-to-Business e-commerce (B2B)

In this type businesses focus on selling to other business. There are number of B2B business models developed, including e-distributors, B2b service providers, matchmakers, and infomediaries that are widening the use of B2B e-commerce.

Forrester and Gartner, major research firms on online commerce estimated that B2B commerce is 10 to 15 times greater than B2C commerce. Firms are using B2B auction sites, spot exchanges, online product catalogues, and other online resources to obtain better prices.

3. Consumer-to-Consumer (C2C)

In this type of e-commerce consumers sells to other consumers with the help of an online market maker, such as the auction site eBay. In C2C e-commerce, the consumer prepares the product for market, places the product for auction or sale, and relies on the market maker to provide catalog, search engine, and transaction-clearing capabilities so that products can be easily displayed, discovered, and paid for. The size of the market is estimate over $5 billion and is growing rapidly.

AOL boasts some 14000 chat rooms covering such topics as healthy eating, caring for your Bonsai tree, and exchanging views about latest soap opera happenings.

4. Peer-to-Peer e-commerce (P2P)

Peer-to-peer technology enables internet users to share files and computer resources directly without having to go through a central Web server. In this e-commerce no intermediary is required.

Examples: 1. Gnutella is a peer-to-peer freeware software application that permits users to directly exchange musical tracks, typically without any charge.

2. Napster.com established to aid internet users in finding and sharing online music files known as MP3 files.

5. M-commerce

Mobile commerce or m-commerce refers to the use of wireless digital devices to enable transactions on the Web. It utilizes wireless networks to connect call phones and handheld devices such as the PalmVIIx to the Web. Once it is connected the mobile consumers can conduct many types of transactions, including stock trades, in-store price comparisons, banking, travel reservations, and more. It is most widely used in Japan and Europe where cell phones are more prevalent than in the United States but it is expected to grow more rapidly. 

Marketing in new globalised economy

Today's Companies need fresh thinking about how to operate and compete in the new economy. Today's economy is made up of old and new elements and is essentially a hybrid. We want to emphasize new elements such as the following:

* Companies are increasingly subcontracting activities to outsourcing firms.
Their principle is to outsource those activities that others can do cheaper and better but retain core activities.

* Companies are increasingly benchmarking their performance against best-of-class companies anywhere in the world.

* Companies are deepening their partnering arrangements with key suppliers and distributors.

* Companies are emphasizing interdepartmental teamwork to manage Key processes rather than relying on traditional departmental systems.

* Companies are recognizing that, much of their market value comes from intangible assets, particularly their brands, customer base, employees, distributor and supplier relations, and intellectual capital.

* Companies are making substantial investments in information systems as the key to lower their costs and gain a competitive edge.

Many standard marketing practices like mass media advertising, sales promotion, sales force calls were part of the old economy. They will continue to be important, but today's businesses will have to answer such questions as:

1. "Is too much money being spent on mass advertising and not enough on one-to-one customer relationship management?
2. "Will companies need as many salespeople as before in an information-rich economy?"
3. "Should companies reduce their huge sales promotion expenditures and move to everyday low prices?"

The major driver's of the new economy

Many forces play a major role in reshaping the world economy, among them technology, globalization and market deregulation play a major role. Here we will describe four specific drivers that strengthen the new economy:

1. Digitalization and connectivity
2. Disintermediation and reintermediation
3. Customization and customerization
4. Industry convergence

1. Digitalization and connectivity

Today most appliances and systems operate with digital information, which convert text data, sound, and images into a stream of zeroes and ones that can be combined into bits and transmitted from appliance to appliance. Software is essentially digital instructions for operating systems, games, storage, and other applications.

But bits will not reside in separate appliance unless connectivity is established. For bits to flow from one appliance and location to another, a wired or wireless communication network is necessary. The Internet, the "information highway," can dispatch bits at incredible speeds from one location to another. Much of today's business is carried over networks connecting people and companies. When they connect people within a company to one another and to the company mainframe these networks are called Intranets. Extranets when they connect a company with its suppliers and distributors; and the Internet when they connect users to a large worldwide "information repository." Connectivity is further enhanced by wireless communication. Consumers and business people no longer need to be near a computer to send and receive information. All they need is a cellular phone or personal digital assistant (PDA, such as a Palm). While they are on the move, they can connect with the internet to check stock prices, the weather, sports scores, or send and receive email messages. They can place online orders by simply using a phone or a PDA.

2. Disintermediation and reintermediation

The new technological capabilities have led thousands of entrepreneurs to launch a dotcom in the hope of striking gold. The amazing success of early online dot-coms such as AOL, Amazon, and yahoo struck terror in the hearts of many established manufacturers and retailers. For example, Compaq had its hands tied because it sold its computers through retailers, whereas Dell Computer grew faster by choosing to sell online. Established store-based retailers- notably bookstores, music stores, travel agents, stockbrokers and car dealers – began to doubt their future as more businesses went into direct online marketing. They feared, and rightly so, being disintermediated by the new e-tailers.

But disintermediation was only half the story. Reintermediation took place on a grand scale. New online middlemen appeared such as mysimon.com, Priceline.com, lifeshopper.com, buy.com, compare.com.

As for the traditional "brick-only" firms – such as Compaq and Merrill Lynch started their own online sales channels becoming "brick-and-click" competitors.

3. Customization and customerization

The old economy revolved around manufacturing companies whose main drive was to standardize production, products, and business processes. Through standardization and branding, manufacturers hoped to grow and take advantage of economies of scale. In contrast, the new economy is supported by information businesses. As companies grew proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories were designed more flexibly, they increased their ability to individualize their market offerings, messages and media.

For example, Dell Computer invites customers to specify exactly what they want in a computer and delivers a custom-built one in a few days.

The combination of operational customization and marketing customization has been called customerization. A company is customerized when it is able to dialogue with individual customers and respond by customizing its products, services and messages on a one-to-one basis.

Customization is not for every company: There are several downsides.

(a) Customization can raise the cost of goods by more than the customer is willing to pay.
(b)Some customers do not know what they want until they see actual products.
(c)Customers cannot cancel the order after the company has started the work on the product.
(d)The product may be hard to repair and have little sales value.

In spite of this, customization has worked well for some products like laptop computers, apparel, skincare products, and vitamins and is an opportunity worth investigating.

4. Industry convergence

Industry boundaries are blurring at an incredible rate. Film companies such as Kodak are also chemical companies, but they are moving into electronics to digitize their image-making capabilities. Disney is not only into cartoons and theme parks, but it makes major films, licenses characters, and manage retail stores, hotels, cruise ships, and educational facilities. In all these cases, companies are recognizing that new opportunities lie at the intersection of two or more industries.

How business practices are changing 

(a) From organizing by product units to organizing by customer segments.
(b) From focusing on profitable transactions to focusing on customers lifetime value.
(c) From focusing on just the financial scorecard to focusing also on the marketing   scorecard.
(d) From focusing on shareholders to focusing on stakeholders.
(e) From Marketing being the exclusive responsibility of the marketing department to marketing being every employee's responsibility.
(f) From building brands through advertising to building brand through performance.
(g) From focusing on customer acquisition to focusing on customer retention.
(h) From no customer satisfaction measurement to in-depth customer satisfaction measurement.
(i) From over-promise, under-deliver to under-promise, over-deliver.
(j) Today's marketplace is made up of traditional consumers (who do not buy online), cyber consumers (who mostly buy online), and hybrid consumers (who do both). Most consumers are hybrid. They shop in grocery stores but occasionally order from Peapod; they buy books in Barnes & Noble bookstores and sometimes order books from bn.com.

But people still like to squeeze the tomatoes, touch the fabric, smell the perfume, and interact with salespeople. Consumers are motivated by other needs than only shopping efficiency. Most companies will need a presence of both offline and online to cater to these hybrid consumers.

Companies are adjusting their marketing practices to meet new conditions. Two newer practices that companies and their marketers are getting involved are:

1. E-business and
2. Customer relationship management.

How marketing practices are changing:

1. E-business

E-business describes the use of electronic means and platforms to conduct a company's business. The advent of the internet has greatly increased the ability of companies to conduct their business faster, more accurately, over a wide range of time and space, at reduced cost, and with the ability to customize and personalize customer offerings. Countless companies have set up websites to inform and promote their products and services. They have created Intranets to facilitate employees communicating with one another and to facilitate downloading and uploading information to and from the company's computers. Companies have also set up Extranets with major suppliers and distributors to facilitate information exchange, orders, transactions, and payments.

E-commerce is more specific than e-business; it means that in addition to providing information to visitors about the company, its history, policies products, and job opportunities, it also offers to transact or facilitate the selling of products and services online. Amazon.com, e-plasticsnet, e-steel are examples of e-commerce sites.

E-commerce has given rise in turn to e-purchasing and e-marketing.

E-purchasing means companies decide to purchase goods, services, and information from various online suppliers. Smart e-purchasing has already saved companies millions of dollars.

E-marketing describes company efforts to inform, communicate, promote and sell its products and services over the Internet.

2. Customer relationship marketing

Customer relationship marketing (CRM) enables companies to provide excellent real-time customer service by developing a relationship with each valued customer through the effective use of individual account information. Based on what they know about each individual customer, companies can customize market offerings, services, programs, messages and media.

Examples for E-marketing

These are the examples/names of the companies and their products which sell their products through online.

1. Sony Company

The products of Sony Company are as under:

1. Sony cameras and optics
2. Sony digital cameras
3. Sony laptops and accessories
4. Sony TV and accessories
5. Sony LCD TV
6. Home Audio
7. Portable CD player
8. T.V. remote
9. Computer
10. Sony hardware
11. Sony mobile games
12. Walkman
13. In-car entertainment
14. Battery & charger

2. IBM (International Business Machines)

The products of IBM Company are as under:

1. Punched card machinery
2. Time clock
3. Typewriters
4. Mainframe computers
5. Minicomputer
6. Softwares
7. Small business products
8. Medium business products
9. All IT services like, IT strategies, security and privacy services, integrated communication services, etc
10. System and servers

3. Nike Company

1. Watches
2. Digital sports watch
3. Compass watch
4. Clothes (men & women)
5. Bags
6. Shoes
7. Spectacles
8. Sandals
9. Sports digital audio play
10. Jackets
11. Water shoes
12. Hiking shoes

4. Adidas

1. Basketballs
2. Golf
3. Tennis
4. Foot ball
5. Eyewear
6. Watches
7. Deo spray (Action 3)
8. Bags
9. Hats
10. Balls
11. Apparel for men and men
12. Gloves

Pros and Cons of Online Marketing

*
Pros

1. Convenience:
Customers can order products 24 hours a day wherever they are.

2. Information:
Customers can find reams of comparative information about company's products, competitors and prices without leaving their office or home.

3. Fewer hassles:
Customers don't have to face sales people or open themselves up to persuasion and they don't have to wait in line.

4. Lower costs:
On-line marketers avoid the expense of maintaining a store and the costs of rent, insurance and utilities.

* Cons

1. Limited Consumer exposure and buying:
Web users are doing more surfing than buying. Only an estimated 18% of surfers actually use the web regularly for shopping or to obtain commercial services such as travel information.

2. Chaos and clutter:
The Internet offers millions of web sites and a staggering volume of information. Navigating the web can be frustrating. Many sites go unnoticed.

3. Security:
Consumers worry that unscrupulous interlopers will intercept their credit-card numbers.

4. Skewed user demographics and psychographics:
Online users are more upscale and technically oriented than the general population, making them ideal for computer, electronics and financial services but less so for mainstream products.

Case Study on Ultralase advertising

Ultralase are a company offering laser eye treatment – a high value consumer service.In 2003 their market was characterised by intense competition with other suppliers such as Optimax, Optical Express and AccuVision. Ultralase had relatively low brand awareness and was struggling with a long sales cycle and relatively uninformed customers. The main communications disciplines used were:

* Press
* Direct Mail
* PR
* Brochures
* From 2004 onwards, they increased their digital expenditure and in 2006 at Ad Tech presented their achievements through their agency, Agency.com. These included:
* 10 Million site visits per year
* 3.7 billion ad impressions (Jan to Sept 2006)
* Reach between 18M and 22M unique users per month - Now the dominant online brand with a high brand awareness and a shorter sales cycle.

To achieve this, they introduced online media channels including:

* Affiliate marketing
* Paid search marketing
* Display advertising
* Email marketing based on permission-based lead generation through offers on their website.
* DVD's

Ultralase case study from agency Advertising.com - they are one of the largest UK Internet advertisers.

Costly product – up to four thousand plans.

Laser eye surgery clinics – 100,000 UK customersIn 2003, relatively there was low brand awareness, long sales cycle, and low brand familiarity. Reassurance and education are important. Their advertising objectives with new agency were to improve these areas.Big Internet display ad campaign run by Agency.com more or less continuously - 2006 to-date with 3.7 billion ad impressions generating 18 to 20m unique users per month. If we assume 1 visit per unique visitor I make that around 0.5% click through, so probably higher since more than one.Ultralase use a direct response model – customers register for more information – pack and book a consultation by phone or by call-centre. All data is stored within E-CRM system.  They track individual customers through their terms, e.g. Brand clicks e.g. Ultralase Generic only, e.g. Laser eye treatment When volumes highest, found increased searches on brand term, increased conversion rates on search and higher conversion rate from E-CRM / E-mail marketing activity. Shorter conversion from consultation to treatment.

Found two types of leads:

* Fast online lead – direct response – only works well over 25% of ad inventory
* Complex online lead – halo effect – longer period – works over more of network to increase leads – searches, etc. Ultralase have a deep site engages people through interactive consultation guides and consultation.

Nike versus Adidas Case Study

EXECUTIVE SUMMARY

Nike and Adidas are two primary footwear companies along with their competitors who have adopted an online e-commerce strategy to increase their sales and product awareness. Most importantly, companies like Nike and Adidas have invested heavily into online brand building and image development. Nike launched the nike.com web site in August 1996 primarily to provide information to its consumers. In 1996, there were no e-commerce capabilities present, however the web site served as a brand building tool for the company. In 1999, Nike redesigned their web site with expanded e-commerce functionality. Adidas launched their web site in the spring of 2000, which was later integrated with e-commerce capabilities.
In order to maximize their market share, both Nike and Adidas have placed a great importance in developing their branding and marketing strategies on the net through web appearance and user friendly functionalities such as ease of purchase, speed, and navigation.

Nike and Adidas have adopted a merchant model which encompassed three pillars of their e-commerce strategy: pure-play e-tailer, bricks and clicks, and their online store. The main purposes of acquiring relationships with pure-play e-tailers is to promote and market products; focus on the content to create new exposure and; gather, gain and transfer market knowledge to their business counterparts.
The Internet has proven to be a useful tool for firms such as Nike and Adidas by increasing sales and reducing cost.

But most importantly their web sites have provided them with an intangible asset such as market research and consumer buying behaviors. With the data retrieve from consumers, these firms are able to analyze and monitor the buying behaviors of their consumers. The data can also be used to exploit new marketing campaigns and promotions. Furthermore, the data collected can be used to produce innovative designs and improve their research capabilities.

Although, there are perceived benefits in conducting e-business over the Internet there are also potential barriers. The major barrier of e-commerce with respect to large firms such as Nike and Adidas is the technological barrier ranging from infrastructure to security. An ongoing battle the e-commerce industry faces is security. With time and additional research and resources, this problem will be mitigated. Meanwhile, both Nike and Adidas must minimize their technological risks.
While both Nike and Adidas currently have an essential advantage over their rivals, but there are chances that their advantages will not last forever.

Although, Nike and Adidas have engaged in e-commerce there are apparent gaps within their e-business strategy. E-commerce is only available in restricted regions such as the United States and the United Kingdom, therefore opportunities exists within the global market to expand.

INTRODUCTION

A daring dream began in 1920 when Adi Dassler fashioned his first shoe in Herzogenaurach, Germany. In 1948, Adidas was founded along with its identifying trademark, the three stripes.

From its inception, Adidas has faithfully adhered to three guiding principles embedded deep into its DNA:

1. Produce the best shoe for the requirements of the sport,
2. Protect the athlete from injury, and
3. Make the product durable.

As time has passed, Adidas has evolved and is now one of the premier global leaders in sporting brands offering athletic footwear, apparel and accessories. This feat has been cultivated through continuous innovation and a broad product portfolio. With time, Adidas discovered that in order to continue to evolve further its strategy had to include the Internet. This led to the development of www.thestore.adidas.com, an e-commerce site focused on interactively profiling Adidas's extensive product offerings accompanied by detailed product information.

Initially, what started as Blue Ribbon Sports in 1962 became Nike Inc. in 1972, based in Beaverton, Oregon. Nike was named for the Greek winged goddess of victory. The founders were Bill Bowerman, a track & field coach and Phil Knight, a runner under Bowerman. From their modest start, Nike has grown to be a global leader in the sporting goods industry. It is recognized as the world's leading designer, marketer and distributor of athletic footwear, apparel, and accessories for a wide variety of sports and fitness activities. For Nike, an established and growing organization, a strong Internet presence felt like a natural extension to their already globally focused strategy. Today www.niketown.com, Nike's e-commerce site offers a unique experience, products and product information for its potential and existing customers.

VALUE CONFIGURATION The inputs to the e-commerce value configuration for both Nike and Adidas are:

1. Brand Image,
2. Price,
3.  Web site design,
4. Service, and
5. Innovation.

In financial Analysis of Nike and Adidas
SWOT Analysis for Nike.com & Adidas.com

STRENGTHS

1. First movers advantage in e-commerce
2. Diversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.)
3. Innovative designs in footwear enabling consumers to design their own shoes online
4. Diversity and variety in products offered on the web (footwear, apparel, sporting equipment, etc.) Adidas    even offers items not available in its retail stores
5. Secondary web sites (i.e. soccerevolution.com to simply promote soccer, Adidas leads the market in this sport)

WEAKNESSES

1. E-commerce is limited to USA
2. The direct sale to consumers is creating conflicts with its own resellers
3. Currently available supply chain, manufacturing, and fulfillment technologies aren't easily integrated with   online build-to-order not known for its research and development leading to innovative designssystems
4. The e-commerce is limited to USA, however, has planned to expand to Canada and international in the near future
5. Online customer service not "helpful" or easy to find

OPPORTUNITIES

1. Increasing demand in the industry for products available online
2. E-commerce will reduce the cost of goods sold thus improving the "bottom line"
3. New technology and innovation to stay on top of market needs
4. Expand e-commerce to global markets
5. Possibility of outsourcing the web development and e-commerce to a third party developer
6. E-commerce will reduce the cost of goods sold thus improving the "bottom line"
7. Expand e-commerce to global markets
8. Collaborate with other online retailers to offer Adidas products

Because of E-commerce

Nike's ability to realize the potential of the Internet has placed them in the e-commerce leadership position among other sporting goods companies.

Both Adidas's and Nike's strategy seem to be well ahead of their competition contributing to their e-commerce success. No other athletic footwear company is able to outshine these two firms when it comes to e-commerce, at least for now and in the near future as this task would involve large infrastructure investment and more importantly thorough commitment.

Reference:

* http://www.sony.co.in/section/product?site
* http://www.ibm.con/products/us/en/
* http://www.altrec.com/outdoors/nike/
* http://www.adidas.com/com/performance/products.asp
* Marketing Management by Philip Kotler (10th & 11th edition)

Case study:

* http://wwwoecheat.com/essay.php?t=27606
* http://www.davechaffey.com/E-commerce-internet-marketing-case-studies
 


Joe Mary George
Lecturer in Management
SEMCOM College
V.V. Nagar, Anand
 

Source: E-mail February 21, 2008

          

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