Chapter 4 Marketing on the Web

Chapter 4 Marketing on the Web
When to use product-based and customer-based marketing strategies Identifying and communicating with different market segments Customer relationship intensity and the customer relationship life cycle Using advertising on the Web Technology-enabled customer relationship management Creating and maintaining brands on the Web Affiliate marketing strategies Viral marketing strategies Search engine positioning Domain name selection

Understanding the Opportunities for Doing Business on the Web
Opportunity 1: Branch Office Opportunity 2: World Market Opportunity 3: Direct Sales Opportunity 4: Networking Opportunity 5: Segmented Market Opportunity 6: Competitive Advantage

Opportunity 1: Branch Office Read the brochures in the rack by the door, Pick up a copy of your "Common Questions People Ask About our Business," Solve their own problems with your detailed Troubleshooting Guide, Scribble messages on the pad of question forms you've provided, Look at detailed information and specs about each product you offer, and, if you have a vending machine in your lobby, Make purchases day or night. How much is rent for the branch office? Newbies see the Internet as advertising. But a business website is better understood as a branch office, a place of doing business. It's like opening a second office where you can entertain customers, except this office has the lights on and coffee ready 24 hours a day, seven days per week. People can stop in at their convenience any time they want and browse through your offerings. They'll Read the brochures in the rack by the door, Pick up a copy of your "Common Questions People Ask About our Business," Solve their own problems with your detailed Troubleshooting Guide, Scribble messages on the pad of question forms you've provided, Look at detailed information and specs about each product you offer, and, if you have a vending machine in your lobby, Make purchases day or night. What's the monthly rent? Somewhere between $20 to $100 per month for smaller businesses. And the initial build-out of your branch office costs only a few thousand dollars. Sure, you'll need to remodel every year or two to keep it up-to-date. But that's a small price to pay for the new customers your branch office will bring. Remember, don't think "advertising," think "branch office," and you'll begin to grasp the Internet opportunity.

Opportunity 2: World Market Canada 30 million USA 300 Million Europe 377 Million Asia ?? Middle East ??? Margin * Volume On the Internet, geography has ceased to be a barrier Opportunity 2: World Market I'm amazed how many people are blind to the second business opportunity the Internet offers -- a world market. Not too long ago a medium-size mail order executive told me, "The boss insists that we need to prevent people from other countries from ordering on our new site. We just don't do much international business, and it's a pain to ship outside the country." I gritted my teeth and tried to smile. A rapidly increasing number of people around the world use the Internet to purchase items they can't find locally. In early 1999, for example, 1.5 million Chinese now are connected to the Internet, along with half a million from India and a quarter million Malaysians. One million in France are now online, and nearly half the population of Sweden. Israel boasts half a million Internet users, and the list goes on and on. If you're fast on your feet, you have the opportunity to make some of them your customers. Don't know how to market to those abroad? You'll find lots of free information online (such as and Don't neglect the resources your national government provides. They want to help you bring more money flowing into your country. Think about it. The Internet provides a small business in Peoria, Illinois, or Istanbul, Turkey, the opportunity to be a global company, with little expenditure except time given to learning. On the Internet, geography has ceased to be a barrier. A small business market used to be limited to a one hour drive from its store or office. No more. People now shop a global directory on the Web and let the best site win. Of course, some products don't lend themselves to a global market. Take pizza, for example. Can you imagine delivery of a flat box containing two-day-old pepperoni with anchovies? Gross! When I first began to write and speak about the Internet in 1995, I'd say, "If you sell pizza, you probably won't do well on the Internet." Then I heard about Pizza Hut in Santa Cruz, California, taking orders from students at the nearby University of California campus. The store hurdled convenience barriers (busy signals on a Friday night) and propelled this savvy local businesses to increased sales. Brainstorm, my friends. Dream! A global opportunity awaits you.

Opportunity 3: Direct Sales Disintermediation Catch 22 Agony! What do you do when the Dell Computer equivalent in your industry sells directly over the Web, pulls in $14 million per day in revenue, and grows faster than any other competitor? Opportunity 3: Direct Sales A third opportunity is direct sales, jumping the existing distribution chain that ratchets up prices to the end user. Many online-only businesses are essentially order-taking front offices. Product fulfillment is through manufacturers and distributors who agree to drop-ship directly to the customer. This way the Web retailer doesn't incur expenses for inventory and warehousing. (Nor does he have the ability for superior customer service, but that's another story.) A really scary development to many manufacturers is the growing temptation to sell directly on the Web and by-pass the complex distribution chain they have built over many years. The manufacturer doesn't want to anger distributors and dealers. But increasingly, competing manufacturers sell direct from the factory and undercut the price to the end user. For many manufacturers, it's a decision to either sell directly or lose marketshare. Agony! What do you do when the Dell Computer equivalent in your industry sells directly over the Web, pulls in $14 million per day in revenue, and grows faster than any other competitor? You sweat bullets, and finally bite the bullet. (Oh, the agony of mixed metaphors!) Direct retail sales via the Internet is growing exponentially. What an opportunity for your business!

Opportunity 4: Networking Why does a company network its desktop computers? Bern, Switzerland, is closer to Abu Dhabi, United Arab Emirates Affiliate networks Opportunity 4: Networking Why does a company network its desktop computers? To increase communication, collaboration, and productivity. The Internet networks half the computers in the world! Think of the possibilities. Now Bern, Switzerland, is closer to Abu Dhabi, United Arab Emirates, than ever before. Small businesses partner with others half a continent away to allow both of them to tackle contracts they could never handle alone. Virtual companies operate from inexpensive offices thousands of miles apart. Talk about opportunities for your business! But this network aids commerce in other ways, too. You can hyperlink shoppers to products at Amazon.com and earn a referral fee. For a fraction of the cost of other advertising, your online store can acquire new customers by means of an affiliate network. New opportunities abound.

Opportunity 5: Segmented Market this vast network automatically segments the market into demographic units Want to market only to those searching for your particular product or service? #3 on an Excite search for the phrase "body surfing" or "sand candles.“ ( for an industry keyword a fellow learner rather than a salesman Opportunity 5: Segmented Market Better yet, this vast network automatically segments the market into demographic units. Want to market only to those searching for your particular product or service? Purchase a banner ad that pops up only when someone searches on "life insurance" and you've suddenly begun to strike gold. It's even less expensive to position one of your webpages to come up #3 on an Excite search for the phrase "body surfing" or "sand candles." If you search Deja News ( for an industry keyword, you'll find discussion lists and newsgroups populated by just the people you want to reach. Now, be careful to observe established Netiquette, or you'll blow your company's chances for good. But there are your prospects, chatting happily away, a neatly segmented market. Join in the discussion as a fellow learner rather than a salesman, and you'll begin to attract new business. What an opportunity!

Opportunity 6: Competitive Advantage Small business to compete with larger business Opportunity 6: Competitive Advantage One of my friends tells of a call from a Japanese businessman a couple of years ago. "Several of us will visit San Francisco next month," said the caller. "Can we arrange a tour of your world headquarters while we're in the area?" After my friend had replied, as graciously as he could, that San Francisco was a long way from his city, he walked from his home office to the kitchen. "Dear, there's a group of Japanese businessmen who want to visit the world headquarters of our company next month." His wife's face showed panic. "Are they coming here?" she gasped. No, they didn't come, but ever after this couple shows off to their friends the room they jokingly call "our company's world headquarters." What I'm describing is the ability of an Internet-savvy businessperson to be every bit as competitive on the Web as a 20- or 200- or 2,000-employee business. It's harder than it used to be. Large companies now budget tens of millions of dollars for their websites. That's hard to match with a $2,000 to $20,000 small business website. But it's not impossible to do a very credible job, nevertheless. The market is so huge that even a small slice can generate a quite substantial income for a small business. Opportunities are boundless.

Web Marketing Strategies
The essential issues of marketing are also referred to as the four Ps of marketing. Product Price Promotion Place Companies use the term “marketing mix” to describe the combination of elements that they use to achieve their goals for selling and promoting their products or services. A company calls its particular “marketing mix” its marketing strategy.

Increasingly, companies are classifying customers into groups and creating targeted messages for each group. The size of these groups can be smaller when dealing with the Web. New research has suggested ways in which Web sites can respond to visitors who arrive with different needs at different times.

Market Segmentation Geographic segmentation – location
Demographic segmentation – information, such as age, gender, family size, income, education, religion, or ethnicity Psychographic segmentation – variables, such as social class, personality or their approach to life The identification of specific portions of a market and targeting them with specific advertising messages is called market segmentation. Market segmentation divides the pool of potential customers into segments. The practice of targeting very small market segments is called micromarketing. Marketers have traditionally used three categories of variables to identify market segments

Communicating with Different Market Segments
Identifying a group of potential customers is just the first step in selling to those customers. Equally important is the selection of the communication media to carry the marketing message. Media selection can be critical for an online firm because it does not have a physical presence. In the physical, world companies can convey a large part of their message by the way they construct buildings and design floor space. The only contact a potential customer might have with an online firm could well be the image it projects through the media and through and through its Web site. The challenge for online businesses is to convince customers to trust them even though they do not have an immediate physical presence

Trust and Media Choice The Web is an intermediate step between mass media and personal contact. Using the Web to communicate with potential customers offers many of the advantages of personal contact and many of the cost savings of mass media. Figure 4-4 shows how these three information dissemination models compare on another important dimension, trust.

Segmentation Using Behavior
In the physical world, businesses can sometimes create different experiences for customers in response to their needs. The creation of a separate experience for customers based on their behavior is called behavioral segmentation. Customizing visitor experiences to match the site usage behavior patterns of each visitor or type of visitor is called usage-based segmentation.

Researchers have begun to identify common patterns of behavior and to categorize those behavior patterns. One set of categories that marketers use today includes browsers, buyers, and shoppers. A person might visit a Web site one day as a browser, and then return later as a shopper or buyer.

Recent study conducted in 2000 by a major consulting firm examined the behavior of 50,000 users and identified six different groups of active internet users Simplifiers Surfers Bargainers Connectors Routiners Sportsters

Choosing a Targeting Strategy
Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Customized Marketing

Market Segmentation on the Web
The Web gives companies an opportunity to present different store environments online Both the Old Navy and Eddie Bauer Web sites are well-designed and functional. However, you will notice that they are addressed to different market segments. Old Navy is targeted towards young, fashion-conscious buyers. Eddie Bauer is rendered in a more muted, conservative style.

Customer-based Marketing Strategies
Web sites can be created that are flexible enough to meet the need of many different users. Instead of thinking of their Web sites as a collection of products, companies can build their Web sites to meet the specific needs of various types of customers. Dell A good first step in building a customer-based marketing strategy is to identify groups of customers that share common characteristics. For example, dell directs customers into one of two branches

Product-based Marketing Strategies
Managers at many companies think of their businesses in terms of the products and services they sell When customers are likely to buy items from particular product categories, this type of product-based organization makes sense Staples Most office supplies stores on the Web believe their customers organize their needs into product categories. The Staples home page uses product categories as a very strong organizing theme. The Staples page has tabbed headings near the top of the page that links to product categories.

Offering Customers a Choice on the Web
Dell Computer has done many things well in its online business. Dell offers customers a number of different ways to do business with the company. Dell has links for each of the major groups of customers it has identified and also includes links to specific product categories.

Customer Relationship Intensity and Life-cycle Segmentation

Customer Relationship Intensity and Life-cycle Segmentation
Five stages of loyalty: Awareness Exploration Familiarity Commitment Separation One goal of marketing is to create strong relationships between a company and its customers. Good customer experiences can help to create an intense feeling of loyalty towards the company and its products or services. Researchers have identified five stages of loyalty as customer relationships develop over time.

Advertising on the Web Advertising is all about communication Communication between a company and its current customers Communication between a company and potential customers Communication between a company and its former customers To be effective, firms should send different messages to each of these audiences.

Advertising on the Web Most companies that launch an electronic commerce initiative will already have an advertising program. Online advertising should always be coordinated with existing advertising efforts. For example, print ads should include the company’s URL.

Banner Ads Full banner Half banner Square button
Most advertising on the Web uses banner ads. A banner ad is a small rectangular object on a Web page that displays a stationary or moving graphic and includes a hyperlink to the advertisers Web site. The most common sizes of banner ads are: Full banner Half banner Square button

Banner Ad Placement There are three different ways to arrange for other Web sites to display your banner ads. A banner exchange network coordinates ad-sharing so that other sites run your ad while your site runs other exchange members’ ads. The second way is to find Web sites that appeal to one of the company’s market segments and then pay them to carry the ads. A third way is to use a banner advertising network.

Other Web Ad Formats Another format of Web advertising is the pop-up ad. A pop-up ad is an ad that appears in its own window when the user opens or closes a Web page. Another type of pop-up ad is called the pop-behind ad. A pop-behind ad is a popular ad that is followed very quickly by a command that returns focus to the original window The window is parked behind the user browser waiting to appear when the browser is closed.

Marketing Since advertising is a process of communication, it is easy to see that can be a very powerful element in any company’s advertising. Many businesses would like to send messages to their customers and potential customers about new or existing products. However, industry analysts have severely criticized some companies for sending messages to customers or potential customers. Some companies have faced legal action after sending out mass ings.

E-Mail Marketing Unsolicited e-mail is often considered to be Spam.
Sending messages to Web site visitors who have expressly requested the messages is a completely different story. A key element in any marketing strategy is to obtain customer’s approval before sending any them any that includes a marketing or promotional message.

Permission Marketing Strategies
Many businesses may send messages to their customers and potential customers. The practice of sending messages to people who have requested them is a part of marketing strategy called permission marketing. One Web site that offers opt-in services is yesmail.com.

Customer Relationship Management
The nature of the Web allows firms to gather more information about customers’ behavior and preferences than they can gather using micromarketing approaches. Technology-enabled relationship management occurs when a firm obtains detailed information about a customer’s behavior, preferences, needs, and buying patterns, and uses that information to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer.

Customer Relationship Management
Although companies can use technology-enabled relationship management concepts to help manage relationships with vendors, employees, and other stakeholders, most currently use these concepts to manage customer relationships Technology-enabled relationship management is often called Customer relationship management (CRM) Technology-enabled customer relationship management Electronic customer-relationship management (eCRM)

Creating and Maintaining Brands on the Web
A known and respected brand name can present to potential customers a powerful statement of quality and value. Branded products are easier to advertise and promote, because each product carries the reputation of the brand name. Companies have nurtured and developed their branding program in the physical marketplace for many years. The key elements of a brand are differentiation, relevance, and perceived value. Product differentiation indicates that the company must clearly distinguish its product from all others in the market. Relevance is the degree to which the product offers utility to a potential customer. Perceived value is a key element in creating a brand that has value.

Cost of Branding Transferring existing brands to the Web or using the Web to maintain an existing brand is much easier and less expensive than creating an entirely new brand on the Web. Promoting the company’s Web presence should be an integral part of brand development and maintenance. Integrating the URL with the company logo on brochures can also be helpful.

Brand-Leveraging Strategies
Rational branding is not the only way to build brands on the Web. One method that is working for well-established Web sites is to extend their dominant positions to other products and services. Yahoo! is an excellent example of this strategy.

Brand Consolidation Strategies
Another way to leverage the established brands of existing Web sites was devised by Della & James, an online bridal registry. Della & James offers a single registry that connects to several local and national department and gift stores, including Crate & Barrel, Dillard’s, Gump’s, Neiman Marcus, and Williams-Sonoma.

Affiliate Marketing Strategies
In affiliate marketing, the affiliate firm’s Web site includes descriptions, reviews, ratings, or other information about a product that is linked to another firm’s site that actually offers the item for sale. The affiliate site receives a commission. The affiliate site also obtains the benefit of the selling site’s brand in exchange for the referral.

Viral Marketing Strategies
Viral marketing relies on existing customers to tell other persons about the products or services that they have enjoyed using. Viral marketing approaches use individual customers to spread the words.

Search Engine Positioning
Potential customers find Web sites in many different ways. Some site visitors will be referred by a friend, others by affiliates, some will see the site’s URL in a print advertisement or on television. Many site visitors will be directed to the site by a search engine.

A search engine helps people find things on the Web. A search engine has three major parts The first part called a spider, a crawler or a robot The second part called its index or database The third part of the search engine is the search utility

Marketers want to make sure that when a potential customer enters search items that relate to their products or services, their companies’ Web site URLs appears among the first 10 returned listings. The combined art and science of having a particular URL listed near the top of a search engine results is called search engine positioning. Search engine positioning is also called: Search engine optimization Search engine placement

Web Site Naming Issues The legal and marketing aspects of Web site naming can be complicated. Obtaining identifiable names to use for branded products on the Web is important. URL brokers sell or auction domain names. The Internet Corporation for Assigned Names and Numbers (ICANN) maintains a list of accredited domain name registrars.

Chapter 4 Marketing on the Web

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