Marketing in the Digital Age Chapter 3

Objectives Be able to identify the major forces shaping the digital age. Understand how companies have responded to the Internet with e-business strategies. Be able to describe the four major e-commerce domains.

Objectives Understand how companies use e-commerce to profitably deliver greater value to customers. Realize the promise and challenges that e-commerce presents for the future.

Charles Schwab c Invented discount brokerage category First U.S. major player to go online Initially offered two-tiered trading system to protect profits / stop cannibalization Later became first true click-and-mortar full-service brokerage Now world’s largest e-commerce site 85% online trades; 21% of trade volume; Strong stock return

Forces Shaping the Internet Age Figure 3-1: Forces Shaping the Internet Age

Major Forces Shaping the Digital Age Digitalization & Connectivity The flow of digital information requires connectivity Intranets, Extranets and the Internet

Major Forces Shaping the Digital Age The Internet Explosion Key driver of the New Economy

Major Forces Shaping the Digital Age New Types of Intermediaries Brick-and-mortar firms often face disintermediation from click-only competitors The click-and-mortar business model has been highly successful

Major Forces Shaping the Digital Age Customization and Customerization Information businesses are at the heart of the New Economy Has enhanced marketer’s ability to customize and “customerize” product offerings

Major Forces Shaping the Digital Age Customerization: Reflect.com allows clients to create their own beauty products. What other businesses could implement customization to better serve their customers?

Marketing Strategy in the Digital Age E-business: uses electronic means and platforms to conduct business.

Marketing Strategy in the Digital Age E-commerce: facilitates the sale of products and services by electronic means.

Marketing Strategy in the Digital Age E-marketing: Includes efforts that inform, communicate, promote, and sell products and services over the Internet.

Marketing Strategy in the Digital Age Buyer Benefits of E-Commerce: Convenience Easy and private Greater product access/selection Access to comparative information Interactive and immediate

Marketing Strategy in the Digital Age Seller Benefits of E-Commerce: Relationship building Reduced costs Increased speed and efficiency Flexibility Global access

Figure 3-2 E-Marketing Domains

E-Commerce Domains Major Domains B2C B2B C2C C2B Online consumers Now more mainstream and diverse Offers new targeting opportunities Online behavior differs by age Online consumers differ from traditional off-line consumers They initiate and control the exchange process Value information highly Major Domains B2C B2B C2C C2B

E-Commerce Domains Major Domains B2C B2B C2C C2B B2B sales far exceed B2C sales B2B sales are estimated to reach $4.3 trillion in 2005 Open trading networks E-marketspace bringing sellers and buyers together Private trading networks Links sellers with their own trading partners B2C B2B C2C C2B

E-Commerce Domains Major Domains B2C B2B C2C C2B C2C web sites help consumers exchange goods or information eBay is one example Auction sites facilitate the exchange process Allow access to a much larger audience Newsgroups / forums Help consumers to find and share information Major Domains B2C B2B C2C C2B

E-Commerce Domains Major Domains B2C B2B C2C C2B Allow consumers to search out sellers, learn about offers, initiate purchase, or dictate purchase terms Ex: Priceline.com Some sites facilitate the feedback process between customers and companies Ex: Planetfeed.com Major Domains B2C B2B C2C C2B

Figure 3-3: Types of E-Marketers

Conducting E-Commerce Click-Only Competitors E-tailers Search engines and portals ISPs Transaction sites Enabler sites

Conducting E-Commerce Dot.coms failed for many reasons Lack of planning and research Overemphasis on acquisition Poor web site design and distribution problems Low margins

Conducting E-Commerce Click-and-Mortar Companies Channel conflict was initially a concern E-commerce often created new buyers, rather than cannibalizing existing ones

Conducting E-Commerce Click-and-Mortar Companies Many firms now enjoy greater success than their click-only competition Trusted brand names, greater financial resources, larger customer base, industry knowledge and strong supplier relationships were key advantages

Setting Up For E-Marketing Figure 3-4: Setting Up For E-Marketing

Conducting E-Commerce E-Marketing Corporate web sites Build goodwill and relationships; generate excitement Marketing web sites Engage consumers and attempt to influence purchase Web site design 7 Cs of effective web site design Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting

Conducting E-Commerce Evaluate the iVillage website with respect to the 7 C’s: Context Content Community Communication Connection Commerce Customization Clicking the WWW icon will open your web browser and link to the web site pictured in the screen shot.

Conducting E-Commerce E-Marketing Online forms of ads and promotions Banner ads/tickers Skyscrapers Interstitials Browser ads Content sponsorships Microsites Viral marketing Future of online ads Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting

Findwhat.com Video Clip BusinessNow Findwhat.com Video Clip Findwhat.com is a search engine company. Paid search is a key revenue tool. Click the picture above to play video

Viral Marketing . . . Creating a Marketing Event BMWFilms.Com Viral Marketing . . . Creating a Marketing Event The Problem: BMW’s market research revealed that the brand was not appealing to younger luxury car buyers. Also, competition was increasing. References: Visit www.bmwfilms.com to download a currently playing mini-film. NOTE: Most films are approximately 100 megabytes in size. The BMW mini-film campaign has been discussed in several trade articles: BMW films put 'e' in entertainment; Peter Gwin; Europe, Washington; Jul/Aug 2001, Iss. 408; pg. 5, 1 pgs BMWfilms.com; Jeff Howe; Brandweek, New York; Nov 12, 2001; Vol. 42, Iss. 42; pg. IQ5, 1 pgs BMWfilms.com; Jeff Howe; Mediaweek, New York; Nov 12, 2001; Vol. 11, Iss. 42; pg. IQ5, 1 pgs BMWfilms.com; Jeff Howe; Adweek, New York; Nov 12, 2001; Vol. 42, Iss. 46; Eastern edition; pg. IQ5, 1 pgs Super Reggie Winner: Crouching brand, hidden bimmer; Karl Greenberg; Brandweek, New York; Mar 18, 2002; Vol. 43, Iss. 11; pg. R4, 4 pgs Thrill ride; Barbara Lippert; Adweek, New York; Oct 28, 2002; Vol. 43, Iss. 43; Eastern edition; pg. 22, 1 pgs

BMWfilms.com The Solution Objectives: Make BMW cool and relevant to 25-44 year-old buyers new to the luxury-car market without alienating existing customers Capture qualified buyers and ultimately increase sales Target Market: Doesn’t watch a lot of TV; tends to resent marketing Thinks of technology as their friend 85% of this group use the Web to research cars before visiting dealerships

BMWfilms.com The Solution BMWfilms.com Instead of using traditional TV advertising, BMW launched five short Internet films in April 2001, featuring edgy stars, action-oriented plots, and famous directors. Web Promotion: Three months prior to the premiere, Internet-movie rumor sites, chat rooms, and fan sites were seeded with information. These efforts formed the core of viral marketing campaign.

BMWfilms.com The Solution Off-line PR Strategy: PR firm pitched the films as reviewable movies to Time, Entertainment Weekly, NY Times, and generated reviews in the film section. Off-line Ad Strategy: BMW ran 15-second teasers resembling movie trailers on A&E, Bravo, & Independent Film Channel with tag, “Now playing at BMWfilms.com”

BMWfilms.com The Results 85% perception increase among film viewers vs. nonviewers Planned dealer visits for target market film viewers rose 550% 12.5% sales increase in 2001 despite no major product launches; 3-series increase of 37% in 4 months that films ran. As of March 2002, over 11 million people had logged onto the BMWfilms web site. Traditional buyers (median age 32, HH income $88,000) were majority of those requesting more information.

Discussion Question Visit the Babycenter.com web site What forms of online ads and promotion does this site feature? Were you surprised by any of the ads featured on this site? Why?

Conducting E-Commerce E-Marketing Web communities allow members with special interests to exchange views Social communities Work-related communities Marketers find well-defined demographics and shared interests useful when marketing Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting

Conducting E-Commerce E-Marketing E-mail marketing Key tool for B2B and B2C marketing Clutter is a problem Enriched forms of e-mail attempt to break through clutter Webcasting Auto downloading of customized content to recipients’ PCs Creating web sites Placing online ads and promotions Creating or using web communities Using E-mail and webcasting

Is this the Future of E-mail? E-mail is the golden child of web marketing due to its: low cost per contact quick response time response tracking ability response rates Enriched e-mail executions (see ad at left) are on the rise. What are the drawbacks of using the enriched e-mail format for your marketing messages?

Promise and Challenges of E-Commerce The Promise The future of B2B E-commerce is bright

Promise and Challenges of E-Commerce The Promise A few click-only companies may succeed Most companies will integrate online marketing into the overall marketing mix, rather than treat it as a separate component.

Promise and Challenges of E-Commerce Challenges: The Web’s Darker Side Few B2C companies are profitable: Limited exposure, and skewed demographics Navigating the web is often problematic

Promise and Challenges of E-Commerce Challenges: The Web’s Darker Side Online privacy and security concerns Internet fraud The digital divide Access by vulnerable or unauthorized groups