© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Internet Marketing & e-Commerce “The goal is to move from the current situation of complexity and frustration to one where technology serves human needs invisibly, unobtrusively: the human- centered, customer-centered way.” Donald Norman, The Invisible Computer

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Introduction to Internet Marketing — Today’s Objectives Objectives will be to: –Define the scope of Internet marketing –Explore the stages of Internet marketing –Discuss the relationship stages and the Marketspace Matrix –Examine guidelines for success

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Origins of the Internet Researchers began work in 1960s

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Origins of the Internet Researchers began work in 1960s Two key early adopters: –University instructors and researchers –The United States military

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Origins of the Internet Researchers began work in 1960s Two key early adopters: –University instructors and researchers –The United States military Governed initially by the National Science Foundation, which prohibited all commercial transactions

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Internet Goes Mainstream propelled the Internet off campus and outside the military

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Internet Goes Mainstream propelled the Internet off campus and outside the military Government regulation dissolved in early 1990s

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Virtuous Cycle and The Internet Boom Web Content Popular Fascination Consumer and Business Internet Access

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation A Dot Com World The virtuous Web cycle leads to rapid growth of –Consumer access –Internet usage –Content online

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Booms and Busts Fascination with the web also led to an infusion of investment capital Aggressive, expensive battle for customers doomed many start-ups Greater discipline and more cost- effective marketing plans allowed the dot-com era to take root

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation What Lies Ahead Just 15 percent of the world’s 6.3 billion population is online

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation What Lies Ahead Just 15 percent of the world’s 6.3 billion population is online And the dominance of American users is steadily shrinking

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth Potential in Developing Countries Top countries for Internet use, 2004 *New to list in 2004 Source: CIA Factbook

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation New Technologies, New Opportunity Advanced Connection Devices – from cell phones to home wireless systems – increase the potential online consumer audience

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation New Technologies, New Opportunity Advanced Connection Devices – from cell phones to home wireless systems – increase the potential online consumer audience Faster Internet Connections bring marketing messages to the audience more swiftly

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation New Technologies, New Opportunity Advanced Connection Devices – from cell phones to home wireless systems – increase the potential online consumer audience Faster Internet Connections bring marketing messages to the audience more swiftly New Information Appliances, such as Apple’s iPod, integrate technology advances with specific consumer demands

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation A Shift for Marketing From “Selling the Brand” – The old model emphasized on mass production and a promoting a distinct brand To “Managing the Consumer” – Online marketing puts focus on the customer’s individualized interests and demands

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketing the World’s Game Online Static websites provide basic information and game broadcasts

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Static What makes this a Static Website ? Broadcasts Disseminates Information

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Static : Publishing Site Pictures/Information

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketing the World’s Game Online Static websites provide basic information and game broadcasts Dynamic websites allow greater fan interaction and facilitate ecommerce

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Dynamic: Databases and Forms To find out the travel distances between the host cities: Select your starting point Select your destination Bordeaux Paris Toulouse Marseilles Toulouse Marseille – 404km

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Dynamic What Makes this a Dynamic Website? Ability to retrieve information to respond to user requests

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketing the World’s Game Online Static websites provide basic information and game broadcasts Dynamic websites allow greater fan interaction and facilitate ecommerce Personalized websites respond to individualized fan interaction

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalization If you are an area team WC98 member and are using a computer other than the one you originally joined WC98, enter your nickname and password now.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalized What Makes this a Personalized Website? More than ask-respond Anticipates Suggests

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketing the World’s Game Online Static websites provide basic information and game broadcasts Dynamic websites allow greater fan interaction and facilitate ecommerce Personalized websites respond to individualized fan interaction Keyword Advertising links fans to potential travel and tourism sites

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rethinking Marketing Strategy Three General Purposes Technologies form the foundation of Internet marketing and pave the way for greater innovation:

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rethinking Marketing Strategy Three General Purposes Technologies form the foundation of Internet marketing and pave the way for greater innovation: The Digital Revolution

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rethinking Marketing Strategy Three General Purposes Technologies form the foundation of Internet marketing and pave the way for greater innovation: The Digital Revolution Networking

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Rethinking Marketing Strategy Three General Purposes Technologies form the foundation of Internet marketing and pave the way for greater innovation: The Digital Revolution Networking Individualization

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation An Internet Framework The Web is fundamentally about individuals using a network to access digital products Marketing TechnologyEconomics Internet Marketing Digital Networked Individuals

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Definition of Marketing and Internet Marketing Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. –Mission is to attract and retain customers Internet Marketing is the process of building and maintaining customer relationships through online activities to facilitate the exchange of ideas, products, and services that satisfy the goals of both parties. –Technology-enabled screen-to-face interfaces

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Narrow versus Broad view of Internet Marketing Narrow View—only focus on the online efforts and sales revenue derived from online Broad View—Focus on the revenue and activities realized from cross-channel marketing efforts

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Cell 4 Cell 2 Cell 3 Cell 1 Location of Revenue Stream Bricks-and- Mortar Online Marketing Resource Allocation OfflineOnline Internet Marketing Impact Assessing the Impact of Internet Marketing

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Seven-Stage Cycle of Internet Marketing Step 2 Formulating the Marketing Strategy Step 3 Designing the Customer Experience Step 4 Crafting the Customer Interface Step 5 Designing the Marketing Program Step 6 Leveraging Customer Information Through Technology Step 7 Evaluating the Marketing Program Step 1 Framing the Market Opportunity

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Framing the Market Opportunity An analysis of market opportunities and developing the business concept –Where will the business compete? –How will it succeed? –How to define the “marketspace” or the equivalent of a physical-world marketspace. –Identification of potential customers and competitors

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Framework for Market Opportunity Opportunities in Existing and New Value System Identify Unmet and Underserved Need(s) Identify Target Segment(s) Declare Company’s Resource-Based Opportunity for Advantage Assess Competitive, Technological, and Financial Opportunity Attractiveness Make “Go / No-Go” Assessment

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Framework for Market Opportunity Microsoft CarPoint Example Opportunity--Leverage the Internet to Improve the Consumer Car-Buying Process Need--Car Buyers Are Dissatisfied With Current Retail Car-Buying Process Target--Shoppers Who Feel Intimidated by Sales People & Look for More Efficient Way Resource--Microsoft’s Software and Free Placement on All Its Websites How Big Is the Online Car-Buying Market? Who Are CarPoint’s Main Competitors? Make “Go / No-Go” Assessment MSN CarPoint identified an opportunity to leverage the Internet to deliver customer value in the car industry The retail car-buying process was frustrating and inefficient: Little information available to the consumer Bargaining with salesperson viewed as an hassle Long process overall MSN CarPoint selected two primary target segments for its service: “The intimidated by the process” “The information seekers” MSN CarPoint could leverage Microsoft’s expertise in software development, its brand name and its multitude of online properties Competition was getting fierce with more and more online car services entering the market… But the financial opportunity was large: 66% of new car buyers were estimated to use online services in 2000 In 1996, the first version of CarPoint was shipped By 1998, CarPoint was driving $5 million in car sales a day

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Internet Goes Mainstream propelled the Internet off campus and outside the military Government regulation dissolved in early 1990s By 1994, the Internet had gone commercial

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Formulating the Marketing Strategy Strategic Fit –Matching resources of the company to opportunities in the marketplace Marketing strategy has three main components –segmentation, or identifying relevant market segments with specific needs –targeting, or choosing an attractive segment consistent with a firm’s resources and goals –positioning, or strategically communicating the product’s benefits to the target segment.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Designing the Customer Experience The interpretation of a user’s complete encounter with the site, from the initial look at the homepage through the purchase experience, including decisions such as whether to abandon a shopping cart. Elements of the customer experience –Objective--functionality of expected features –Perceived--interpretation of the encounter –Encounter—process and output measures of the shopping experience –Reactions to stimuli—response to online experience –Sensory—sight and audio files or direct contact with a service representative –Cognitive and emotional—think and feel about the site –Relative—compare to other shopping experiences

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Crafting the Customer Interface The interface is the virtual (largely visual) representation of a firm’s chosen value proposition. Similar to a retail storefront, a website provides significant information to current and prospective target market customers. Design Elements of Customer Interface –Context—aesthetics and functional look-and-feel –Content—digital subject matter on the website –Community—set of relationships built upon shared interests –Customization—site’s ability to modify itself to/by each user –Communication—dialogue between website and users –Connection—network of links between the site and other sites –Commerce—transactional capacity of a site—sale of goods, products, or service on the site

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Designing the Marketing Program Designing a particular combination of marketing actions or levers –Product—physical good or service –Price—Internet offers new pricing options –Communication—an activity to informs target customer about firm and its products –Community—set of relationships built upon shared interests –Distribution—power to shift customers to a new channel or use Internet in combination with other channels –Branding—outcome of the firm’s activities and part of marketing strategy Create target customer –Awareness—basic information –Exploration/Expansion—pursue deeper connection—trial, site visits, etc. –Commitment—sense of obligation or responsibility for product or firm.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Awareness Exploration / Expansion Exploration / Expansion Commitment Dissolution Four Key Stages of Customer Relationship The Four Key Stages of Customer Relationship

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Four Key Stages of Customer Relationship by Level of Intensity Level of Intensity Stages of Customer Relationships AwarenessExplorationCommitmentDissolution Intensity

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Internet Marketing Mix Branding Product Pricing Communication CommunityDistribution

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Impact of the 2Is on the Internet Marketing Mix Branding Product Pricing Individual Communication Distribution Community Interactivity

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Marketspace Matrix Relationship Stages Categories of Levers Branding Branding can also accentuate (or lessen) the impact of the levers in each cell The 2Is should influence the design of each cell in the matrix

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Leveraging Customer Information Through Technology The use of technology to better understand and leverage customers through the following information processes: –Market research –Database marketing –Customer relationship management

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation –A market is a network of interactions and relationships where information, products, services, and payments are exchanged. –The market handles all the necessary transactions. –An electronic market is a place where shoppers and sellers meet electronically. –In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line. Electronic Markets

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation 11 Shopper/PurchaserSeller/Supplier Electronic Market (Transaction Hander) Electronic commerce network (Infrastructure) Product/service information request Purchase request Payment or payment advice Purchase fulfillment request Purchase change request Response to fulfillment request Shipping notice Payment approval Electronic transfer of funds Shopper/Purchaser’s Bank Payment remittance notice Electronic transfer of funds Transaction Handler’s Bank (Automated Clearing House) Seller/Supplier’s Bank Electronic Markets © Prentice Hall, 2000 Response to information request Purchase acknowledgment Shipping notice Purchase/service delivery (if online) Payment acknowledgment

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Evaluating the Marketing Program In order to assess the performance of the Internet Marketing Programs: –Financial benchmarks Sales Profits –Marketing Health of the customer base and its contribution to profits –Integrative approach Online and offline marketing metrics appropriate for the four customer relationship stages –Awareness –Exploration/Expansion –Commitment –Dissolution

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The New Rules of Marketing for the Global Digital World The New Rules 1.Target segments of one, and create virtual communities 2.Design for customer-led positioning 3.Expand the role of branding in the global portfolio 4.Leverage consumers as coproducers through customization 5.Use creative pricing in the Priceline.com world 6.Create anytime/anyplace distribution and integrated supply chains 7.Redesign advertising as interactive and integrated marketing, communication, education and entertainment 8.Reinvent marketing research and modeling as knowledge creation and dissemination 9.Use adaptive experimentation 10. Redesign the strategy process and supporting organizational architecture Source: Wind, Jerry and Vijay Mahajan. Digital Marketing. New York: John Wiley and Sons, p.8.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Point-Counterpoint: New Rules or Old Rules of Marketing Point-Counterpoint

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation –Traditional marketing methods are still highly relevant in the networked economy, though firms must now consider a host of new and innovative marketing methods available online (e.g., dynamic pricing, online community) –In contrast to the one-way mass promotion that characterizes modern marketing, Internet marketing enables firms to engage the individual in personalized dialogues –Individualization and Interactivity are two forces that make online marketing different –Marketing, and the relationships it creates, should be considered in the context of particular processes and stages Introduction to Internet Marketing — Conclusion

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 1 The concept of __________________is at the core of both online and offline marketing programs. –A) Promotion –B) Distribution –C) Management –D) Exchange

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 2 To measure the independent effects of online and offline marketing programs, firms must be sensitive to –A) Increased effects of exchanges –B) Cross-channel effects of exchanges –C) Decrease effects of exchanges –D) Elimination of exchanges

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 3 Experience has shown that: –A) Customers behave the same way online as offline. –B) Segmentation is not useful in Internet marketing. –C) Online personalization is a waste of time and money. –D) The Internet offers new ways to segment customers.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 4 Ideally, the Internet Marketer would like to achieve customer: –A) Commitment –B) Exploration –C) Expansion –D) Dissolution

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 5 The Internet represents both: –A) A new communications medium and a new pricing strategy. –B) New branding opportunities and new products –C) New distribution channels and new market designs –D) A new Channel and a new communications medium