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Transcript
Chapter 14 Marketing in the Digital Age Previewing the Concepts: Chapter Objectives 1. 2. 3. 4. 5. Discuss how the digital age is affecting both consumers and the marketers who serve them. Explain how companies have responded to the Internet and other powerful new technologies with e-business strategies, and how these strategies have resulted in benefits to both buyers and sellers. Describe the four major e-commerce domains. Discuss how companies go about conducting e-marketing to profitably deliver more value to customers. Overview the promise and challenges that e-commerce presents for the future. JUST THE BASICS Chapter Overview Some say the new digital technologies have created a new economy. Few would disagree that the Internet and other powerful new connecting technologies are having a dramatic impact on marketers and buyers. Companies need to retain most of the skills and practices that have worked in the past, but they will need to add major new competencies and practices if they hope to grow and prosper in the changing digital environment. Much of the world’s business today is carried out over networks that connect people and companies. Intranets, extranets, and the Internet itself have all changed the way companies do business, and customers find the products and services they want. The explosive worldwide growth in Internet usage forms the heart of the so-called new economy. However, the Internet has also allowed new companies to compete, and the formation of new types of intermediaries and new forms of channel relationships caused existing firms to re-examine how they served their markets. E-commerce continues to offer both great promise and many challenges for the future. Conducting business in the new digital age will call for a new model for marketing strategy and practice. Some strategists envision a day when all buying and selling will involve direct electronic connections between companies and their customers. But the fact is that today’s marketing requires a mixture of old economy and new economy thinking and action. E-business involves the use of electronic platforms such as intranets, extranets, and the Internet to conduct a company’s business. E-commerce is more specific than e-business. 322 E-commerce involves buying and selling processes supported by electronic means, primarily the Internet. E-marketing is the marketing side of e-commerce. There are several e-marketing domains, including business-to-consumer (B2C), businessto-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B). Each of these domains meets the specific needs of each of the segments addressed, and they all continue to grow. E-commerce is conducted in many ways. Companies can be “click-only” in that they are located only on the Internet. They include e-tailers, search engines and portals, Internet Service Providers (ISPs), transaction sites, content sites, and enabler sites. Many companies today, however, are “click-and-mortar” companies, because they maintain their traditional channels of distribution while simultaneously providing an Internet channel. There are various types of Web sites. Corporate Web sites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships, and generate excitement about the company. Marketing Web sites engage consumers in an interaction that will move them closer to a direct purchase or other marketing outcome. Online advertising includes things such as banner ads and tickers; skyscrapers, which are tall, skinny ads at the side of a web page; rectangles; and interstitials—online ads that pop up between changes on a Web site. Viral marketing involves creating an email message or other marketing event that is so infectious that customers will want to pass it along to their friends. E-commerce continues to offer both great promise and many challenges for the future. Online marketing will become a successful model for some companies. However, there is a darker side to Internet marketing. One major concern is profitability, especially for B2C dot-coms. Although expanding rapidly, online marketing still reaches only a limited marketplace. There are also broader ethical and legal questions. Online privacy is perhaps the number one e-commerce concern. Many consumers also worry about online security, as well as the privacy rights of children. Many companies have responded to consumer privacy and security concerns with actions of their own. Still, examples of companies aggressively protecting their customers’ personal information are too few and far between. Chapter Outline 1. Introduction a. Chances are, when you think of shopping on the Web, you think of Amazon.com. Amazon.com first opened its virtual doors in mid-July 1995, selling books out of founder Jeff Bezos’s garage in suburban Seattle. b. It still sells books—by the millions. But it now sells products in a dozen other categories as well. 323 c. d. e. f. g. 2. In perfecting the art of online selling, it has also rewritten the rules of marketing. Its most ardent fans view Amazon.com as the model for businesses in the new digital age. Not everything has clicked smoothly for Amazon.com. It has more than 39 million customers in more than 220 countries, but Amazon.com didn’t turn its first full-year profit until just last year, and those profits were modest. Amazon.com obsesses over making each customer’s experience uniquely personal. Visitors to Amazon.com’s Web site receive a unique blend of benefits: huge selection, good value, convenience, and what Amazon vice president Jason Kilar calls “discovery.” In fact, Amazon.com has become so good at managing online relationships that many traditional “brick-and-mortar” retailers are turning to Amazon for help in adding more “clicks” to their “bricks.” Recent technological advances have created a new digital age. Widespread use of the Internet and other powerful new technologies are having a dramatic impact on marketers and buyers. The Digital Age a. Much of the world’s business today is carried out over digital networks that connect people and companies. 1. Intranets are networks that connect people within a company to each other and to the company network. 2. Extranets connect a company with its suppliers, distributors, and other outside partners. 3. The Internet is a vast public web of computer networks; it connects users of all types all around the world to each other and to an amazingly large “information repository.” Use Key Terms Intranet, Extranet, and Internet here. Use Discussing the Issues 1 here. b. c. d. e. With the creation of the World Wide Web and web browsers in the 1990s, the Internet was transformed from a mere communication tool into a certifiably revolutionary technology. The explosive worldwide growth in Internet usage forms the heart of the so-called new economy. The Internet has been the revolutionary technology of the new millennium, empowering consumers and businesses alike with blessings of connectivity. Last year, Internet penetration in the U.S. had reached 68 percent, with more than 202 million people not using the Internet. Some 14.6 percent of the world population---more than 938 million worldwide—are now online. The average U.S. Internet user spends 28 hours a month surfing the Web at home, plus another 76 hours a month at work. 324 f. g. The Internet and other digital technologies have given marketers a whole new way to reach and serve customers. 1. The amazing success of early click-only companies such as Amazon.com caused brick and mortar manufacturers and retailers to reexamine how they served their markets. 2. Now, almost all of these traditional companies have become clickand-mortar competitors. It’s hard to find a company today that doesn’t have a substantial Web presence. Use Figure 14-2 here. Use Chapter Objective 1 here. Let’s Discuss This How much time do you spend on the Web each day? How much money do you spend ordering goods and services online? How does this compare to your parents’ usage and money spent? 3. Marketing Strategy in the Digital Age a. Conducting business in the new digital age will call for a new model of marketing strategy and practice. b. The Internet is revolutionizing how companies create value for customers and build customer relationships. c. The digital age has fundamentally changed customers’ notions of convenience, speed, price, product information, and service. d. The fact is that today’s marketing requires new thinking and action. 1. Companies need to retain most of the skills and practices that have worked in the past. 2. But they will also need to add major new competencies and practices if they hope to grow and prosper in the new environment. E-Business, E-Commerce, and E-Marketing in the Digital Age e. E-business involves the use of electronic platforms—intranets, extranets, and the Internet—to conduct a company’s business. 1. Almost every company has set up a Web site to inform about and promote their products and services. 2. Most companies have also created intranets to help employees communicate with each other and to access information found in the company’s computers. 3. Companies also set up extranets with their major suppliers and distributors to enable information exchange, orders, transactions, and payments. 325 Applying the Concept How might a company use an intranet to help their sales force be more efficient? Could it offer any help to the manufacturing plants? f. E-commerce is more specific than e-business. 1. E-business includes all electronics-based information exchanges within or between companies and customers. 2. In contrast, e-commerce involves buying and selling processes supported by electronic means, primarily the Internet. 3. E-markets are “marketspaces” rather than physical marketplaces. i. Sellers use e-markets to offer their products and services online. ii. Buyers use them to search for information, identify what they want, and place orders using credit or other means of electronic payment. 4. E-commerce includes e-marketing and e-purchasing. i. E-marketing is the marketing side of e-commerce. It consists of company efforts to communicate about, promote, and sell products and services over the Internet. ii. E-purchasing is the flip side of e-marketing. It is the buying side of e-commerce. It consists of companies purchasing goods, services, and information from online suppliers. Use Key Terms E-Business, E-Commerce, and E-Marketing here. Benefits to Buyers g. Internet buying benefits both final buyers and business buyers in many ways. 1. It can be convenient. 2. Buying is easy and private. 3. The Internet often provides buyers with greater product access and selection. 4. E-commerce channels also give buyers access to a wealth of comparative information about companies, products, and competitors. 5. Online buying is interactive and immediate. Benefits to Sellers h. There are also many benefits to sellers. 1. The Internet is a powerful tool for customer relationship building. 2. The Internet and other electronic channels can also reduce costs and increase speed and efficiency. 326 3. 4. E-marketing can also offer greater flexibility, allowing the marketer to make ongoing adjustments to its offers and programs. The Internet is a truly global medium that allows buyers and sellers to click from one country to another in seconds. Use Chapter Objective 2 here. Use Discussing the Issues 2 here. 4. E-Marketing Domains a. The four major e-marketing domains are shown in Figure 14-1. Use Figure 14-1 here. Use Chapter Objective 3 here. B2C (Business-to-Consumer) b. The popular press has paid the most attention to B2C (business-toconsumer) e-commerce—the online selling of goods and services to final consumers. Use Key Term B2C (Business-to-Consumer) E-Commerce here. c. d. e. Online consumer buying continues to grow at a healthy rate. Last year, U.S. consumers spent $117 billion online, and consumer spending online is expected to exceed $316 billion by 2010, accounting for 12 percent of total sales. 1. As the Web has matured, Internet demographics have changed significantly. 2. Whereas 66 percent of adults use the Internet, 87 percent of teens go online. Consumers aged 50 and older make up almost 20 percent of the online population. More than 22 million Americans over 65 are expected to be online by 2009. 3. E-marketing targets people who actively select which Web sites they will visit and what marketing information they will receive about which products and under what conditions. Consumers can find a Web site for buying almost anything. The Internet is most useful for products and services when the shopper seeks greater ordering convenience or lower costs. 327 B2B (Business-to-Business) f. Consumer goods sales via the Web are dwarfed by B2B (business-tobusiness) e-commerce. Use Key Term B2B (Business-to-Business) E-Commerce here. g. h. Most major business-to-business marketers now offer product information, customer purchasing, and customer support services online. Increasingly, online sellers are setting up their own private trade exchanges. These exchanges link a particular seller with its trading partners. 1. Private exchanges give sellers greater control over product presentation and allow them to build deeper relationships with buyers and sellers by providing value-added services. Use Key Terms Open Trading Exchanges, Private Trading Exchanges here. Use Discussing the Issues 4 here. C2C (Consumer-to-Consumer) i. Much C2C (consumer-to-consumer) e-commerce and communication occurs on the Web between interested parties over a wide range of products and subjects. Use Key Term C2C (Consumer-to-Consumer) E-Commerce here. 1. j. C2C involves interchanges of information through Internet forums that appeal to specific special-interest groups. 2. Blogs are online journals where people post their thoughts, usually on a narrowly defined topic. Blogs can be about anything, from politics to baseball to haiku or car repair. 3. Many marketers are tapping into blogs as a medium for reaching carefully targeted consumers. Blogs offer a fresh, original, personal, and cheap way to reach today’s fragmented audiences. C2C means that online visitors don’t just view consumer product information. Increasingly, they create it. They join Internet interest groups to share information, with the result that “word of web” is joining “word of mouth” as an important buying influence. C2B (Consumer-to-Business) k. C2B (consumer-to-business) e-commerce allows today’s consumers to communicate more easily with companies. 328 l. Most companies now invite prospects and customers to send in suggestions and questions via company Web sites. Use Key Term C2B (Consumer-to-Business) E-Commerce here. 5. Marketing on the Web a. Companies of all types are now marketing online. The different types of emarketers are shown in Figure 14-2. Use Figure 14-2 here. Use Chapter Objective 4 here. Click-Only versus Click-and-Mortar E-Marketers b. The Internet gave birth to a new species of e-marketers—the click-only dot-coms—which operate only online without any brick-and-mortar market presence. c. Brick-and-mortar companies have now added e-marketing operations, transforming themselves into click-and-mortar competitors. d. Click-only companies come in many shapes and sizes. 1. E-tailers are dot-coms that sell products and services directly to final buyers via the Internet. i. This group includes search engines and portals. ii. Internet service providers (ISPs) are click-only companies that provide Internet and email connections for a fee. iii. Transaction sites take commissions for transactions conducted on their sites. iv. Content sites provide financial, research, and other information. 2. In the late 1990s, dot-coms reached astronomical levels but then collapsed in the year 2000 because of lavish spending and reliance on spin and hype. 3. Now on firmer footing, dot-coms are surviving and even prospering in today’s marketspace. Use Key Term Click-Only Companies here. Use Table 14-1 here. Use Application Questions 2 here. e. Many established companies moved quickly to open Web sites providing information about their companies and products. 329 1. 2. 3. 4. 5. Most resisted adding e-commerce to their sites. They worried that this would produce channel conflict—that selling their products or services online would be competing with their offline retailers and agents. However, they soon realized that the risks of losing business to online competitors were even greater than the risks of angering channel partners. Most established brick-and-mortar companies are now prospering as click-and-mortar companies. Most of these click-and-mortar companies have found ways to resolve channel conflicts. Established companies have known and trusted brand names and greater financial resources. They have large customer bases, deeper industry knowledge and experience, and good relationships with key suppliers. By combining online marketing and established brick-and-mortar operations, they can offer customers more options. Use Key Term Click-and-Mortar Companies here. Use Linking the Concepts here. Let’s Discuss This Would you rather buy online from a company whose name you know? Are you willing to buy online, giving out your credit card number to someone you never heard of before? How do you decide? Setting Up an Online Marketing Presence f. Companies can conduct e-marketing in any of the four ways shown in Figure 14-3. Use Figure 14-3 here. g. The first step in conducting e-marketing is to create a Web site. 1. The most basic type is a corporate Web site. i. These sites are designed to build customer goodwill and to supplement other sales channels, rather than to sell the company’s products directly. ii. Corporate Web sites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships, and generate excitement about the company. 330 iii. These sites generally provide information about the company’s history, its mission and philosophy, and the products and services it offers. Use Key Term Corporate Web site here. 2. Other companies create a marketing Web site. i. These sites engage consumers in an interaction that will move them closer to a direct purchase or other marketing outcome. ii. Such sites might include a catalog, shopping tips, and promotional features such as coupons, sales events, or contests. Use Key Term Marketing Web site here. Use Discussing the Issues 3 here. h. Creating a Web site is one thing; getting people to visit the site is another. 1. The key is to create enough value and excitement to get consumers to come to the site, stick around, and come back again. 2. This means that companies must constantly update their sites to keep them current, fresh, and exciting. 3. A key challenge is designing a Web site that is attractive on first view and interesting enough to encourage repeat visits. 4. To attract new visitors and to encourage revisits, one expert suggests playing close attention to the seven Cs of effective Web site design. i. Context—the site’s layout and design. ii. Content—the text, pictures, sound, and video that the Web site contains. iii. Community—the ways that the site enables user-to-user communication. iv. Customization—the site’s ability to tailor itself to different users or to allow users to personalize the site. v. Communication—the ways the site enables site-to-user, user-to-site, or two-way communication. vi. Connection—the degree that the site is linked to other sites. vii. Commerce—the site’s capabilities to enable commercial transactions. 5. Ultimately, it is the value of the site’s content that will attract visitors, get them to stay longer, and bring them back for more. 331 Use Application Questions 1 here. i. E-marketers can use online advertising to build their Internet brands or to attract visitors to their Web sites. Use Key Term Online Advertising here. 1. 2. 3. 4. 5. 6. 7. Online ads that pop up while Internet users are surfing online include banner ads and tickers. Skyscrapers are tall, skinny ads at the side of a Web page, while rectangles are boxes that are much larger than a banner. Interstitials are online ads that pop up between changes on a Web site. Rich media ads incorporate animation, video, sound, and interactivity. Content sponsorships are another form of Internet promotion. Many companies gain name exposure on the Internet by sponsoring special content on various Web sites, such as news or financial information. Internet companies can develop alliances and affiliate programs, in which they work with other companies online and offline to promote each other. Online marketers use viral marketing, the Internet version of wordof-mouth marketing. Viral marketing involves creating an email message or other marketing event that is so infectious that customers will want to pass it along to their friends. Use Key Term Viral Marketing here. Use Marketing at Work 14-1 here. Use Discussing the Issues 5 here. Use Under the Hood/Focus on Technology here. 8. Online advertising serves a useful purpose, especially as a supplement to other marketing efforts. i. Online advertising should be as much as 10 to 15 percent of the overall media mix in low-involvement products such as packaged goods. ii. Online advertising opens a two-way exchange to better educate consumers about products. 332 j. The popularity of blogs and other Web forums has resulted in a rash of commercially sponsored Web sites called web communities, which take advantage of the C2C properties of the Internet. Use Key Term Web Communities here. Use Discussing the Issues 6 here. Use Applications Questions 3 here. 1. k. Such sites allow members to congregate online and exchange views on issues of common interest. 2. Visitors to these Internet neighborhoods develop a strong sense of community. i. Such communities are attractive to advertisers because they draw consumers with common interests and well-defined demographics. ii. Cyberhood consumers visit frequently and stay online longer, increasing the chance of meaningful exposure to the advertiser’s message. iii. Web communities can be either social or work related. Email has exploded onto the scene as an important e-marketing tool. 1. To compete effectively in this ever-more-cluttered email environment, marketers are designing “enriched” email messages that are animated, interactive, and personalized messages full of streaming audio and video. 2. The recent explosion of spam—unsolicited, unwanted commercial email messages that clog up your email inbox—has produced consumer frustration and anger. Use Key Term Spam here. Use Marketing at Work 14-2 here. 6. The Promise and Challenges of E-Commerce a. E-commerce continues to offer both great promise and many challenges for the future. Use Chapter Objective 5 here. The Continuing Promise of E-Commerce b. Its most ardent apostles still envision a time when the Internet and ecommerce will replace magazines, newspapers, and even stores as sources of information and buying. 333 c. d. Online marketing will become a successful business model for some companies. However, for most companies, online marketing will remain just one important approach to the marketplace that works alongside other approaches in a fully integrated marketing mix. Eventually, as companies become more adept at integrating e-commerce with their everyday strategy and tactics, the “e” will fall away from ebusiness or e-marketing. The Web’s Darker Side e. Along with its considerable promise, there is a “darker side” to Internet marketing. f. One major concern is profitability, especially for B2C dot-coms. 1. Surprisingly few Internet companies are profitable. 2. One problem is that, although expanding rapidly, online marketing still reaches only a limited marketspace. 3. The Web audience is becoming more mainstream, but online users still tend to be somewhat more upscale and better educated than the general population. 4. Another problem is that the Internet offers millions of Web sites and a staggering volume of information. 5. A great number of click-only online retailers are small, niche marketers, and niches can become crowded and competitive. g. From a broader societal viewpoint, Internet marketing practices have raised a number of ethical and legal questions. 1. Online privacy is perhaps the number one e-commerce concern. i. Most online marketers have become skilled at collecting and analyzing detailed consumer information. ii. This may leave consumers open to information abuse if companies make unauthorized use of the information in marketing their products or exchanging databases with other companies. 2. Many consumers worry about online security. i. Consumers fear that unscrupulous snoopers will eavesdrop on their online transactions or intercept their credit card numbers and make unauthorized purchases. ii. Companies doing business online fear that others will use the Internet to invade their computer systems for the purposes of commercial espionage or even sabotage. iii. Of special concern are the privacy rights of children. iv. Many companies have responded to consumer privacy and security concerns with actions of their own. v. Still, examples of companies aggressively protecting their customers’ personal information are too few and far between. 334 Applying the Concept What kind of privacy concerns would a company confront when setting up a Web site that offers information? One that allows consumers to transact business? How should they respond to consumer concerns? 3. h. Consumers are also concerned about Internet fraud, including identity theft, investment fraud, and financial scams. 4. There are concerns about segmentation and discrimination on the Internet as well. i. Some social critics and policy makers worry about the socalled digital divide—the gap between those who have access to the latest Internet and information technologies and those who don’t. ii. A final Internet marketing concern is that of access by vulnerable or unauthorized groups. As it continues to grow, online marketing will prove to be a powerful tool for building customer relationships, improving sales, communicating company and product information, and delivering products and services more efficiently and effectively. Use Focus on Ethics here. Travel Log Discussing the Issues 1. Discuss the differences between intranets, extranets, and the Internet. What purpose does each serve for businesses? Intranets are networks that connect people within a company to each other and to the company network. Extranets connect a company with its suppliers, distributors, and other outside partners. And the Internet, a vast public web of computer networks, connects users of all types all around the world to each other and to an amazingly large information repository. 2. How does e-commerce benefit buyers? How does it benefit sellers? Internet buying benefits both final buyers and business buyers in many ways. It can be convenient. Buying is easy and private. In addition, the Internet often provides buyers with greater product access and selection. E-commerce channels also give buyers access to a wealth of comparative information about companies, products, and competitors. Finally, online buying is interactive and immediate. E-commerce also yields many benefits to sellers. First, the Internet is a powerful tool for customer relationship building. The Internet and other electronic channels can also reduce costs and increase 335 speed and efficiency. Finally, communicating electronically often costs less than communicating on paper through the mail. 3. Define the four major e-marketing domains and provide one example of each. B2C (business-to-consumer) e-commerce is the online selling of goods and services to final consumers. Amazon.com is a B2C marketer. B2B marketers use trading networks, auction sites, spot exchanges, online product catalogs, barter sites, and other online resources to reach new customers, serve current customers more effectively, and obtain buying efficiencies and better prices. Trane is a B2B marketer. Much C2C (consumerto-consumer) e-commerce and communication occurs on the Web between interested parties over a wide range of products and subjects. Ebay is a good example. The final ecommerce domain is C2B (consumer-to-business) e-commerce. Thanks to the Internet, today’s consumers are finding it easier to communicate with companies. PlanetFeedback is a C2B site. 4. What are the primary differences between open trading exchanges and private trading exchanges in B2B e-commerce? What are the advantages of each type of exchange? Some B2B e-commerce takes place in open trading exchanges—huge e-marketspaces in which buyers and sellers find each other online, share information, and complete transactions efficiently. However, despite the use of such open e-marketspaces, a lion’s share of all B2B e-commerce is conducted through private sites. Increasingly, online sellers are setting up their own private trading exchanges. Open trading exchanges facilitate transactions between a wide range of online buyers and sellers. In contrast, a private trading exchange links a particular seller with its own trading partners. Rather than simply completing transactions, private exchanges give sellers greater control over product presentation and allow them to build deeper relationships with buyers and sellers by providing value-added services. 5. Distinguish between the different forms of online advertising and promotion. What factors should a company consider in deciding between these different forms? The most common form of online advertising is the banner ad—banner-shaped ads found at the top, bottom, left, right, or center of a Web page. Banners go by many names, including tickers (banners that move across the screen), skyscrapers (tall, skinny banner ads at the side of a Web page), and rectangles (block ads appearing in the middle of the screen). Most banner ads contain links to the advertiser’s Web site. Interstitials are online ads that appear between screen changes on a Web site, especially while a new screen is loading. Pop-ups are online ads that appear suddenly in a new window in front of the window being viewed. Such ads can multiply out of control, creating a major annoyance. Another hot growth area for online advertising is search-related ads (or contextual advertising), in which text-based ads and links appear alongside search engine results on sites such as Google and Yahoo!. Finally, with the increase in broadband Internet access in American homes, many companies are developing exciting new rich media advertisements, which incorporate animation, video, sound, and interactivity. Rich media ads attract and hold consumer attention better than traditional banner ads. Firms should consider the exposure rate for targeted consumers when 336 selecting a form of advertising. In addition, firms should consider how well the form of advertising delivers the intended message. 6. What is a Blog? How are Blogs different from Web communities? Web logs, or blogs, are online journals where people post their thoughts, usually on a narrowly defined topic. Blogs can be about anything, from politics or baseball to haiku or car repair. Many marketers are now tapping into blogs as a medium for reaching carefully targeted consumers. One way is to advertise on an existing blog or to post content there. The popularity of blogs and other Web forums has resulted in a rash of commercially sponsored Web sites called Web communities, which take advantage of the C2C properties of the Internet. Such sites allow members to congregate online and exchange views on issues of common interest. They are the cyberspace equivalent to a Starbucks coffeehouse, a place where everybody knows your e-mail address. Application Questions 1. Getting consumers to spend time at a company’s Web site and to come back again are critical goals in Web site design. How can the seven Cs encourage revisits to a company Web site? Are some of these factors more important than others? Visit a Web site that you frequent and evaluate it using the seven Cs. How does it rate? Student responses will vary. To attract new visitors and to encourage revisits, suggests one expert, e-marketers should pay close attention to the seven Cs of effective Web site design: Context: the site’s layout and design Content: the text, pictures, sound, and video that the Web site contains Community: the ways that the site enables user-to-user communication Customization: the site’s ability to tailor itself to different users or to allow users to personalize the site Communication: the ways the site enables site-to-user, user-to-site, or two-way communication Connection: the degree that the site is linked to other sites Commerce: the site’s capabilities to enable commercial transactions And to keep customers coming back to the site, companies need to embrace yet another “C”—constant change. At the very least, a Web site should be easy to use and physically attractive. Ultimately, however, Web sites must also be useful. 2. Browse the products and features available at Target.com. Why might a consumer choose to make a purchase through Target.com rather than going to the brick-andmortar retail location? What benefits does the online store offer? What are some of its drawbacks? What benefits does Target.com offer over the Web sites of Internetonly retailers such as Amazon.com? 337 Consumers are likely to use Target.com to reap the benefits of e-commerce. Buying is convenient, easy, and private. The site also offers products not available online. However, consumers cannot experience the products online, and might prefer to see them in person before making a buying decision. As a result, Target might offer consumers the opportunity to research products online before going to the store to see them in person and avoid shipping costs. Those benefits are not available from Amazon.com. 3. Web communities allow members to congregate online and exchange views on issues of common interest. Do you belong to a Web community? Why or why not? Visit iVilliage.com. What benefits does the site offer to members? What opportunities does it offer to marketers? Student responses will vary. Under the Hood Rich media is making a splash online. One recent survey found that click-through rates for rich media ads are five times higher than for traditional online ad formats. According to Eyeblaster, a leading provider of rich media advertising technology, “rich media ads employ graphic movement, audio, video, innovative ad formats, and interaction to cut through the clutter of common Web ads by engaging the viewer in a richer and immediately compelling experience. When branding is a goal of the campaign, rich media ads can engage consumers in an interactive brand experience by allowing them to play games, view a video stream, or expand the ad to access more information.”* 1. Visit the Eyeblaster Web site and check out some of the ads the company has created (www.eyeblaster.com/knowledge/vertical_categories.asp). Do you find the ads compelling? Did you “click-through” for more information? Student responses will vary. 2. How do the ads you viewed help marketers build brands? How do they help create and reinforce customer relationships? Student responses will vary. By connecting with consumers through brand experiences, rich media ads help build relationships. *See www.eyeblaster.com for more information. Focus on Ethics As technology makes it easier for companies to share information about customers, consumer advocates are growing more concerned about protecting consumer privacy. Although individual consumers often say they are concerned about their privacy, very few take the time to read the privacy policies of the companies with which they build relationships. To help consumers surf the Web with confidence, TRUSTe, a non-profit organization, is on a mission to certify and monitor privacy protection on the Internet. As 338 a result, the company has become a leader in promoting Web site privacy policy disclosure, informed user consent, and consumer education, with nearly 1500 Web sites displaying its seals. What does all this mean? A company that achieves the TRUSTe “trustmark” has agreed to adhere to the organization’s privacy principles and to comply with TRUSTe oversight and consumer resolution. The “trustmark” assures Web users that a site will openly disclose what personal information is being gathered, where that information is going, how it will be used, and whether the user has the option to control its dissemination. TRUSTe believes it has a solution to the number-one concern of most Internet users—privacy and security. 1. Visit www.truste.com to learn more about the services TRUSTe provides. What are the advantages for an organization agreeing to self-regulate through TRUSTe? What are the disadvantages? Do the advantages outweigh the disadvantages? Student responses will vary. Organizations partnering with TRUSTe may have more credibility with consumers concerned about privacy online, which may increase sales and help build relationships. However, earning the Trustmark requires submitting to outside regulation and carefully reworking privacy policies and notices. 2. Use the TRUSTe Search for Sealholders feature to select three of the participants and visit their Web sites. Examine the sites’ privacy statements. What do the statements have in common? How do the policies help build relationships with consumers? Student responses will vary. 3. How much responsibility do marketers have in protecting the privacy of the consumers with whom they do business? How much responsibility do consumers, themselves, hold? Student responses will vary. GREAT IDEAS Barriers to Effective Learning 1. 2. The students will have grown up with the Internet, so there are few concepts in this chapter that will be totally new to them. However, the vocabulary and terminology could be new to them, so you will want to go through all the Key Terms carefully. Students will largely not have thought of e-commerce as having spawned new intermediaries, largely because they will not have even heard of that term prior to this class. Therefore, spend some time talking about the differences between click-only and click-and-mortar companies. Also, explain the problems brick-andmortar companies faced when the dot-com explosion first hit—should they develop their own Web sites and e-commerce facilities? If they did, should they separate them or keep them integrated into the rest of the business? This was a 339 3. 4. true period of disruptive technology, and many firms simply did not know how to respond. Most students will know the terms and concepts B2B and B2C, but C2C and C2B may be new to them, at least in terminology. Applying the C2C concept to the rise (and fall) of Napster will drive the point home, as will the various chat rooms and other cyber-communities. For C2B, ask if anyone has ever contacted a company via email to ask a question, lodge a complaint, or send a compliment. If not, have them send email to Snapple, a company that is known for responding to customers. Many students will have their own Web sites, either for personal use or through their college activities. They will understand the nuances of web design, but may not understand some of the key concepts of attracting and retaining customers through effective design decisions. Discussing Web sites that they enjoy using, as well as those they think are poorly designed, will help with these concepts. Student Projects 1. 2. 3. 4. 5. 6. 7. Find five Web sites that are transaction-oriented (i.e., you can order products or services) and five Web sites that just give information. What are the differences? What are the similarities? Send an information request to a chosen company via its Web site. Did the company respond in a reasonable amount of time? If it did, did a human respond, or did you get an automated response? If you received an automated response, how does that make you feel about your relationship to the company? Discuss the types of online ads you pay attention to. What gets your attention? How often to you “click through” when an ad has gained your attention? Discuss the types of online ads you ignore or that annoy you. What is it about them that you dislike? How are they different from the ones you do like? What makes an online ad effective or ineffective? Assume that you were called upon to make an argument to your board of directors that a New Economy exists and that the company’s policies of brick-and-mortar first are antiquated. What major points would you make? How would you avoid skepticism and tradition on the part of some board members? Using Amazon.com as an illustration of how to do it right on the Net, find an example of a company that seems to be doing it wrong. Comment on the company’s situation, what you have found, and suggest how to correct their Net policy. Take three competitors in an industry. Investigate how each has developed strategies to meet the challenges of the New Economy. Do this by examining their respective Web pages, looking at shareholder reports, and what the business press has said about them. Which company(ies) seems to have gotten their Net policy right? Which company(ies) seems to have gotten it wrong? Which company(ies) is(are) positioned for success in the next five years? What secrets to success on the Net have you learned? 340 8. 9. 10. Explain how your college or university might use the Internet to attract prospective students. If your university or college already has a Web site, critique it. You have been given the assignment by your company to design a company Web site. This new Web page should emphasize connections and relationships. By looking through existing Web sites on an online service (such as Yahoo! or America Online), describe what you would put in or on your fictitious Web page (you can be creative with your choice of company and its products or services). What does the e-marketer try to accomplish with a Web site? As marketing director of a small urban sportswear company, you have been given the assignment to spread the word to 18–25 year old Internet users that your company has some great products. One of the ways you intend to communicate this message is via Web communities. Outline a plan for doing so. What would you say? What Web communities might you choose? How would you avoid making your message sound like a sales pitch? How would you use viral marketing to aid your effort? Evaluate your chances of success using the Web community format. Interactive Assignments Small Group Assignments 1. Form students into groups of three to five. Each group should read the opening vignette to the chapter on Amazon.com. Each group should answer the following questions: a. How does Amazon.com connect with its customers? b. What are the advantages of this new type of intermediary? Are there any disadvantages? If so, what are they? c. Does Amazon.com have a role to play in the B2B domain? If so, what is it? If not, why not? d. Do you think click-only companies have a future? Explain your answer. Each group should share its findings with the class. Individual Assignments 1. Read the opening vignette to the chapter. Think about the answers to the following questions: a. How does Amazon.com connect with its customers? b. What are the advantages of this new type of intermediary? Are there any disadvantages? If so, what are they? c. Does Amazon.com have a role to play in the B2B domain? If so, what is it? If not, why not? d. Do you think click-only companies have a future? Explain your answer. Share your findings with the class. 341 Think-Pair-Share 1. Consider the following questions, formulate an answer, pair with the student on your right, share your thoughts with one another, and respond to questions from the instructor. a. What is the New Economy (new digital age)? b. What are the major forces shaping this New Economy? c. What is the difference between an intranet, an extranet, and the Internet? d. What is e-marketing? e. What is the most important benefit to a buyer for doing business online? Explain. f. Why does the B2B e-commerce model do so much more business than the other forms? g. What are your biggest fears about doing business online? How could a marketer deal with these fears and reduce them? h. How can marketers use viral marketing to their advantage? Outside Example The University of Phoenix was founded in 1976, well before there was at least one PC in every home. But its founding did happen to coincide with the debut of the first personal computer, the Apple 1. From its beginning, the University of Phoenix has focused on the educational needs of working adults—a constituency that was largely ignored prior to this. For several years, the University operated “on the ground”; that is, students had to go to class one or more nights a week, just like everywhere else. But the University’s “online campus” was established in 1989, well before the advent of and widespread use of the World Wide Web. And since then, the University of Phoenix has exploded, and more and more adults are earning their Bachelor’s, Master’s and even Doctoral degrees online. Because this model has been so successful, many traditional universities have added online options to their degree programs. Sometimes courses are only “Web enhanced,” meaning that the students still gather in a traditional classroom, but some work takes place on the Internet. Many colleges and universities, however, are moving at least some of their courses completely online. This allows them to reach many non-traditional students, and students who simply cannot relocate to the city in which their campus is located. 1. How has the University of Phoenix Online affected the college experience? Be specific. 2. What are the benefits of obtaining a degree online? What are the disadvantages, if any? How do both the advantages and disadvantages affect how the University of Phoenix reaches out to prospective students? 342 3. Analyze where the University of Phoenix Online advertises. Are they reaching their target audience? 4. Visit their Web site at www.phoenix.edu. Is it an effective Web site? Defend your answer. 5. Although many clicks-only companies struggle to become profitable, University of Phoenix’s parent, Apollo Group, is highly profitable. Comment on your feelings regarding a for-profit University. Classroom Exercise/Homework Assignment Online communities are becoming more and more important. Chat rooms are proliferating, but community-building on the Web is going far beyond that. New sites such as Friendster.com and LinkedIn.com are becoming the hot new way to make new friends, find old associates, and establish new business contacts. Visit www.linkedin.com to see a site that is dedicated to helping people increase their business through effective use of online networking. 1. LinkedIn.com, like most other social networking sites, is still in the beta stage of development. That means that their service is currently free. Would you be willing to pay for a service such as this? Or would you use it only if it continued to be free? Student responses will vary. Some may be willing to pay for a business networking site, but not for a purely social networking site. Some may not be willing to pay for either kind of site, because so much of the Internet is still currently free. Others will see business benefits, and will note that many in-person networking events have to be paid for, and will likely yield fewer results. 2. As a businessperson, how would you feel about providing your list of contacts to a site such as this? Again, student responses will vary. Because LinkedIn.com, in particular, makes sure that you get an opportunity to vet a networker before passing him or her along to one of your contacts, many students might be willing to share their contacts. Others might want to jealously guard them, as is frequently done in business today. Privacy concerns are paramount here, and it is up to the individual user to decide how much of his privacy and contacts he is willing to give up. 3. Plaxo.com is a form of rival to LinkedIn.com, although this site currently only allows you to keep your contacts up to date. Plaxo.com uses a viral marketing campaign to get new members, because when you send emails to all your contacts to allow them to update their information, Plaxo.com invites them to join as well. The company claims on its Web site to have more than one million members currently. Have you ever received an email from Plaxo.com? Have you updated your contact information? Did you join? Student responses will vary. 343 4. How easy would it be for Plaxo.com to become a full-fledged competitor of LinkedIn.com? Student responses will vary, but the fact that Plaxo.com already has one million members, and the contact information is already being exchanged—when a contact also joins Plaxo.com, as his or her information changes, Plaxo.com automatically updates everyone’s address book in which the person’s name appears—means that the logical next step will be to act as a business networking tool. Classroom Management Strategies As was noted previously, students today have grown up with the Internet and ecommerce. This chapter should not be difficult for them, although stressing the Key Terms will be important for them to be able to have intelligent business discussions about the uses of the Internet. 1. 2. 3. Spend 10 minutes each on the first two sections regarding the forces shaping the digital age and the strategies for responding. Figure 14-1, showing the forces that underlie the digital age, will be of great assistance in getting this topic across. E-Marketing Domains and Conducting E-Commerce should each receive 15 minutes. Again, although this material may well be familiar to students, they have not considered it from a business-building perspective and may not know all of the Key Terms. The figures, tables, and Linking the Concepts will help here, as will the Marketing at Work. The final section, on the promise and challenges of e-commerce, can be covered in 15 minutes. Continue the discussion from Chapter 13 on the Do Not Call laws being passed at the Federal level, and the effect they will have on email marketers. 344