Building Inclusive E-Markets E-M ARKETING /6E C HAPTER 4

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-2 C HAPTER 4 O BJECTIVES  After reading Chapter 4, you will be able to:  Discuss overall trends in Internet access, usage, and purchasing around the world.  Define emerging economies and explain the vital role of information technology in economic development.  Outline how e-marketers apply market similarity and analyze online purchase and payment behaviors in planning market entry opportunities.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-3 C HAPTER 4 O BJECTIVES, CONT.  Describe how e-marketing strategy is influenced by computer and telephone access, credit card availability, attitudes toward Internet use, slow connections, website design, and electricity problems.  Review the special challenges of e-marketing on the wireless Internet in the context of emerging economies.  Discuss the controversy related to the Digital Divide.  Explain how e-marketing is being used with very low income consumers.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-4 I DOL G OES G LOBAL  American Idol is broadcast in over 100 countries, often 48 hours after the show has been aired in the U.S.  Its popularity has spawned 39 national versions in countries such as Ethiopia, the Philippines, Russia, and Kazakhstan.  Indian viewers vote for singers and apply to be a participant on Indian Idol through SMS.  The sharing of popular culture has been enhanced by the convergence of TV, Internet, mobile phones, and short message services.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-5 O VERVIEW OF G LOBAL E-M ARKETING I SSUES  Users from other countries, speaking languages other than English, will dominate the Internet.  By 2010 there were approximately 499 million English-speaking and 407 million Chinese- speaking web users.  The online marketplace is changing and will require that global e-marketers understand country e-readiness.  E-marketers must differentiate between industrialized nations and emerging economies. Discuss overall trends in Internet access, usage, and purchasing around the world.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-6 WORLDWIDE INTERNET USAGE

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-7 G LOBAL M ARKETS  Globalization has changed the way marketers conduct business.  Market places that either have been difficult to access because of their physical distance from company headquarters or because of a consumer buying profile that did not match the firm’s core customer is increasingly being targeted.  Exhibit 4.1 shows that worldwide Internet usage increased more than 45% between 2007 and Asia has the most Internet users. Africa saw the greatest growth in Internet use. North America has the highest penetration as a percent of the population.

E MERGING E CONOMIES  Countries that have high levels of economic development (United States, Canada, Japan, etc.) are classified as developed countries.  Highly industrialized and use technology to increase their production efficiency.  Countries that are still struggling with standards of living for their citizens are called emerging economies and are poised for rapid technological growth. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-8 Define emerging economies and explain the vital role of information technology in economic developme nt.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-9 E MERGING E CONOMIES, C ONT.  Emerging economies are characterized by a rapidly developing middle class, which creates demand for products and services.  Four countries represent the power and opportunity in emerging markets: Brazil, Russia, India and China (BRIC).  Countries with emerging economies can be found on every continent.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-10 I MPORTANCE OF I NFORMATION T ECHNOLOGY  Technology can increase a nation’s overall production capacity and efficiency.  The Internet accelerates the process of economic growth through diffusion of new technologies.  Bangalore, India is the center of India’s explosive growth in software and IT.  E-marketers in emerging economies must meet marketing issues and unique challenges related to the conditions of operating within a still developing nation.

I MPORTANCE OF I NFORMATION T ECHNOLOGY, C ONT.  In economic development  Information technology opens up new, exciting, global markets  The Internet can jump-start many national economies  Allows for instant access to a global marketplace ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-11

I MPORTANCE OF I NFORMATION T ECHNOLOGY, C ONT.  Unique challenges in the still Developed countries  Slow connection speeds  High costs of domestic phone calls  ISP costs  Privacy concerns  Censorship  Navigation difficulties  Taxes  Lack of content in one’s own language  Lack of local content  Limited credit card use  Lack of secure online payment methods  Unexpected power failures ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-12

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-13 C OUNTRY AND M ARKET O PPORTUNITY A NALYSIS  Marketers in emerging economies must find market similarities in order to be successful in selling products. Outline how e- marketers apply market similarity & analyze online purchase & payment behaviors in planning market entry opportunitie s.

C OUNTRY AND M ARKET O PPORTUNITY A NALYSIS, C ONT.  E-marketing plan guides the marketer through the process of identifying and analyzing potential markets.  Market differences and market similarities must be measured and compared to determine strengths and weaknesses.  Global e-marketers bust balance two different analytical approaches.  Market differences  Market similarity ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-14

M ARKET DIFFERENCES  Market differences are ways in which two markets exhibit dissimilar characteristics. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-15

M ARKET SIMILARITY  Market similarity refers to ways in which two markets exhibit similar characteristics  If a firm is based in an emerging economy and wants to market to its home target, the marketer must identify market differences within the population. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-16

M ARKET SIMILARITY, C ONT.  Marketers will choose foreign markets that have similar characteristics to their home market for initial market entry.  All similar markets between developed countries have  High literacy rates  High Internet usage rates  Clearly defined market segments willing to shop various products  High Credit card usage rate  Secure, trusted online payment mechanisms  Efficient package delivery services ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-17

M ARKET SIMILARITY, C ONT.  Diaspora Communities  A large number of people living together in a common neighborhood or city abroad  E-businesses in countries with emerging markets use market similarity to target their own diaspora communities living abroad  Market similarity can be seen in “market convergence” phenomena that is “markets that were once very different become more similar over time” ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-18

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-19 E-C OMMERCE P AYMENT AND T RUST I SSUES  E-commerce in emerging markets is often disadvantaged by:  Limited credit card use and consumer skepticism.  Customers did not think shopping online was “fun”  Customers did not “trust” online brands  Firms reassured customers concerning online security Nepal, for example, is still predominately a cash- based economy and credit cards are scarce. In Bolivia, only 2.3 percent of the population has a credit card. Credit card use is virtually non-existent in Ethiopia. Describe how e-marketing strategy is influenced by computer & telephone access, credit card availability, attitudes toward Internet use, slow connections, website design, & electricity problems.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-20 E-C OMMERCE P AYMENT AND T RUST I SSUES, CONT  E-marketers working in emerging economies should also understand attitudes toward online purchasing.  A 2007 study in Lithuania found that 51% of Internet users had not made an online purchase because they thought it was too risky.  Alternative payments were accepted  Bank transfers  Cash on delivery  Postal orders  eBanka debit cards specifically created for online buying Czech Republic, eBanka, an Internet bank, was established in 1998 to handle secure online purchases.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-21 C ONSUMER CONCERN ABOUT ONLINE USE OF CREDIT CARDS

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-22 T ECHNOLOGICAL R EADINESS I NFLUENCES M ARKETING  E-marketers must deal with scary issues of basic technology: 1. Limited access to and use of computers and telephones 2. High Internet connection costs 3. Slow Internet connections speeds 4. Unpredictable power supplies

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-23 C OMPUTERS & T ELEPHONES  Computers  Historically, Internet connection is with a desktop PC and dial-up ISP  Emerging economy countries do not have many privately owned computers  Creates opportunities for local, small business entrepreneurs  Telephone  Telephone land lines are entering the decline stage of their product life cycle  As wireless technology increases, landlines will become less useful and ultimately obsolete

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-24 C OMPUTERS & T ELEPHONES, C ONT.  Challenges  Global computer ownership and access is unevenly distributed.  Ownership ranges from 84% in Kuwait to 2% in Bangladesh.  Telephones (and connectivity) can be scarce and expensive.  Many consumers in countries with emerging economies access the Internet from telecenters “small shops that offer Internet connections”.  Many customers have cell phones, but not land lines

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-25 I NTERNET C ONNECTION C OSTS  Countries with emerging economies often have higher Internet-related costs.  If an emerging economy customer has a telephone, chances are the Internet connection costs are extremely high.  Dial-up costs can vary considerably.  Many customers in emerging economies have cell phones, but not land lines

C ONNECTION S PEEDS : B ROADBAND ' S I NFLUENCE  Broadband connections are developing quickly and growth is predicted to come from emerging markets.  South Korea has one of the highest broadband penetration rates and one of the world’s fastest, cheapest networks.  E-marketers must analyze the relationship between Web site design and customer’s connection speeds.  Many feel the dial-up era is quickly coming to an end  Online companies with a diverse customer base must keep their Web sites simple  E-marketer’s must understand how connection speeds influence download rates  E-marketers and graphic designers must differentiate between what “can” be done and what “should” be done. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-26

E LECTRICITY P ROBLEMS  Emerging economies’ Sporadic electricity can also be a challenge for e-marketers.  Internet based business cannot complete transaction if customer’s have no electricity. ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-27

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-28 WIRELESS INTERNET ACCESS  Countries with emerging economies are often market leaders in cellular technology  At the end of 2010, there were billion mobile phone subscriptions worldwide.  Cell phone technology is relatively inexpensive and effective  Two-thirds of the world are now connected via mobile phones.  Challenges of wireless e-marketing:  Modification of website content for small screens  Text entry using tiny keypads  Content development  Pricing and easy and secure payments  Differences in consumer behavior with the mobile Internet  Example text messaging. Review the special challenges of e- marketing on the wireless Internet in the context of emerging economies.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-29 T HE D IGITAL D IVIDE  E-marketers must consider the social environment in which e-business operates.  Least Developed Countries (LDC)  Those countries with the world’s poorest economies  Economically underdeveloped  Dual Economy – haves and have-nots All emerging economies have upper and middle income citizens Two completely different economies exist side by side in an LDC Discuss the controversy related to the Digital Divide.

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-30 T HE D IGITAL D IVIDE, C ONT.  Digital divide: Is that between countries and between different groups of people within countries, there is a wide division between those who have real access to information and communications technology and are using it effectively, and those who don’t”  The digital divide raises challenging questions for global policy, international business, and entrepreneurship.  The World Wide Web is not really worldwide

©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-31 B UILDING I NCLUSIVE E-M ARKETS  Explosive growth of mobile phones has enabled e-marketers to reach base of the pyramid consumer segments.  Mobile banking is one of the most successful e-marketing efforts in LEAST developed countries (LDCs.)  In heavily agricultural countries, mobile applications for farmers are making them more productive (e.g. Uganda, India & Indonesia) Explain how e- marketing is being used with very low income consumers.

B UILDING I NCLUSIVE E-M ARKETS, C ONT.  The Internet is aiding in closing the technology and financial gap in several ways:  Financial assistance Micro loans Microfinance Credit can be issued to low income consumers  Technological assistance Mobile phones Satellite Internet access  Banking assistance Solve the rural related problem Many people are “unbankable” Mobile phones can be used to conduct banking ©2012 PEARSON EDUCATION, INC. PUBLISHING AS PRENTICE HALL 4-32

4-33 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2012 Pearson Education, Inc. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall