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Implementation of Internet Marketing Strategy Stage Five: Designing the Marketing Program Entails designing a particular combination of marketing actions (termed levers) to move target customers from awareness to commitment. Framework used is the Marketspace Matrix. Stage Five: Designing the Marketing Program To understand the Marketspace Matrix, the four stages of the customer relationship and the six associated classes of levers that can be employed must be defined first. Four Stages of Customer Relationship: 1. 2. 3. 4. Awareness Exploration Commitment Dissolution Stage Five: Designing the Marketing Program Six Classes of Variables in the Internet Marketing Mix: 1. 2. 3. 4. 5. 6. Product Pricing Communication Community Distribution Branding Stage Five: Designing the Marketing Program Two more important concepts, Individualization (customization) and Interactivity, need to be explored to fully understand the profound implications the Internet brings to business. 1. Individualization The Internet enables the firm to engage in customerspecific actions – a broadcast to an audience of one. Equally important, the customer can control the degree of customization by taking action to set the level of customization desired. Stage Five: Designing the Marketing Program 2. Interactivity Defined as the extent to which a two-way communication flow occurs between the firm and customers. The Internet enables a level of customer dialogue that has not previously been experienced in the history of business. Products and services can be designed in real time by the customer, maximizing both interactivity and customization. Stage Five: Designing the Marketing Program The Marketspace Matrix The Marketspace Matrix is a framework illustrating the levers that the Internet marketer may choose to use at each stage of the customer relationship. The Internet’s 2is The 2is allow firms to choose levers that can move customers through the relationship phases faster and more effectively than ever possible. The 2is affect each category of levers differently, but the end results remain consistent across all levers. Product, Pricing, Communications, Community and Distribution. The Marketplace Matrix Relationship Stages Awareness Exploration Commitment Dissolution Product Categories Price of Levers Communication Distribution Community Two Integral Components of Implementation Objectives Deliver the promised customer experience Turn strategic intent / concepts into results Build the infrastructure to deliver on the brand promise Innovate / Renew the customer experience Source: Monitor Analysis Objectives Maintain fit between Marketspace evolution and the company’s delivery system and product offering Why Does Implementation Matter? Strategy Good Appropriate Inappropriate Success Roulette All that can be done to assure success has been done Implementation Trouble Poor Poor execution hampers good strategy Management may never become aware of strategic soundness because of execution inadequacies Good execution can mitigate poor strategy, forcing management to success or Same good execution can hasten failure Failure Difficult to diagnose - bad strategy masked by poor execution More difficult to fix - two things are wrong Source: Modified version of materials in The Marketing Edge by Thomas V. Bonoma. 1985. New York: The Free Press. Guidelines for the Marketspace Matrix No single best strategy Best strategies provide superior customer support Levers should emphasize the functional, symbolic and experiential aspects of consumption experience. Principles for Marketspace Matrix Design Which lever should be used? Choose Levers to Effect a Change Determine Which Levers Have the Most Leverage Consider Barriers to Advancement Consider the Medium’s Effect on Desired Behavior Level of Involvement Matters Understand Consumer Learning Trends Credibility of the Channel Matters The Choice of Levers Must be Consistent with Positioning Choice The Medium can be the Message – or the Product Matrix Design Must be Adaptive How should Marketing Resources be Allocated on a lever-by-Lever Basis? How should Marketing Resources be Allocated on a lever-by-Lever Basis? How do the Levers Interact? Consider Correlation of Effect Beware of Segment Alienation Selected Levers Must be Integrated How should the Levers be Sequenced? There is no one silver bullet Sequencing of Levers matters. Basic Product Development Levers Basic Product Packaging Attributes and Features Customer-Specified Attributes and Features Mass-Customized Product Augmented Product Development Levers Customer Service Programs Postsales support, customer care, & customer relationship management. Loyalty Programs and Privileges Availability of Complementary Products Upgrades Enabling Community Additional Functionality Fulfillment Capabilities How Products Enable Customer Relationships Two primary techniques: 1. 2. Deploying the product development levers that are appropriate for the existing relationship and Emphasizing the elements of the value proposition that are most relevant at a given stage of the relationship. How Product Enable Customer Relationships Relationship Stage Lever(s) AWARENESS Packaging EXPLORATION/ EXPANSION Packaging COMMITMENT Availability Features Fulfillment Capabilities Customer Experience products Customer-specified attributes and features Mass Customization Advanced Internet Functionality Upgrades Loyalty Product Attributes & Customer-specified attributes and features Mass Customization Postsales Support DISSOLUTION of complementary Customer Care Programs Customer Experience Enabling Community Customer Relationship Management Basic Pricing Strategies Cost Plus Target Profit Growth Target-Return Pricing Prestige Pricing Price as a Sign of Quality Cyclical Promotional Pricing (Hi-Lo) Everyday Low Pricing Fairness in Pricing Promotional Low-Cost Pricing Dynamic Pricing Strategies Dynamic Pricing is one of the most significant contributions the Internet and the 2Is have made to pricing strategy. The Internet has enhanced dynamic pricing in two ways: Decreased Menu Costs Interactivity Auction Types English Auctions Reverse-Price English Auction Dutch Auctions First Price Sealed-Bid Auctions Reverse First Price Sealed-Bid Auctions Group Buying Exchanges Implementation Across the Four Relationship Stages Relationship Stage Pricing Levers AWARENESS Promotions Price Bundling Frenzy Pricing Prestige Pricing EXPLORATION/ EXPANSION as a Sign of Quality Hi-Lo Pricing Dynamic Pricing Everyday Low Pricing Promotions Justify Prices Loyalty Programs COMMITMENT DISSOLUTION Promotions Affiliates Tiered Loyalty Programs Wide Variety of Pricing Programs Profit-Enhancing Discontinue Adversely Affect Pricing Promotions Reconfigure Loyalty Programs Opportunities Programs Profit How the Internet Affects Communications Competition and Expectations Transformation of Communication The 2Is Interactive Individual Importance of Integrated Communication Goal of marketing and communication is to convey relevant messages to the right consumers at the right time. Synergy between messages is integrated communications. Traditional and interactive marketing methods are converging. Communication Types – Marketing Levers 1. 2. 3. 4. Marketing communications, which includes all the points of contact that a firm has with its customers, can be grouped into four categories: Mass offline Personal offline Mass online Personal online Communication Types – The Marketing Levers Mass-Offline Marketing Levers: Broadcast Media: television, radio, outdoor & public relations Print Media: newspapers, magazines, yellow pages, brochures, newsletters Point-of-Purchase Displays Communication Types – The Marketing Levers Personal Offline Marketing Levers: Telemarketing Direct Mail Statement Stuffers Customer Service Communication Types – The Marketing Levers Mass Online: Basic Online Tools: banners, interstitials, search engines, point-of-purchase displays Applications of Basic Online Tools: partnerships and affiliate programs, sponsorships, chat rooms, serial marketing Communication Types – The Marketing Levers Personal Online: Personalized Commercial Websites E-mail Marketing: viral marketing, loyalty programs, customer service Communication Process 1. 2. 3. 4. 5. 6. Identifying the Target Audience Determining the Communication Objective Developing the Media Plan Creating the Message Executing the Campaign Evaluating the Effectiveness of the Campaign Implementation Across the Four Relationship Stages Relationship Stage Marketing Levers AWARENESS Online EXPLORATION/ EXPANSION Online COMMITMENT Online DISSOLUTION Personalized levers: online billboards, search engines, e-mail, viral marketing Offline levers: television, magazines, radio, yellow pages, billboards/ outdoor levers: online billboards, search engines, e-mail, viral marketing, website, permission marketing, serial marketing Offline levers: television, radio, newspapers, packaging levers: targeted email/ permission marketing, personalized pages Online/ Offline levers: loyalty programs, customer service Offline levers: telemarketing, direct mail permission marketing with personalized offers Termination pages Is the Internet a Distribution Channel? A distribution channel is the system of organizations involved in the process of making a product or service available for consumption or use. Marketing channels therefore facilitate the exchange of goods and services between buyers and sellers. How have the 2Is Revolutionized Distribution Channels The Internet: Is a substitute for other forms of communication. Has radically changed buyer-seller relationships. Has changed the customer shopping experience. Has increased the power of consumers. Objectives of Channel Intermediaries 1. 2. Efficiency: Distribution costs are reduced only if the retailers can perform the required functions more efficiently than the manufacturers could in the direct channel. Effectiveness: the ability of the channel to perform functions that create value for customers. Disintermediation A strategy that involves the elimination of a channel intermediary. Internet has become a driving force for disintermediation Overall result is positive because channel works more closely to create value for customers. Designing Channel Systems: The Distribution Levers Intermediary Type Direct Traditional Retailers Virtual Shopping Malls Internet Exchange Process: Designing Distribution Channels 1. 2. 3. 4. 5. Identify and evaluate consumer preferences by segment. Design a customer-based channel system. Modify channel strategy based on firm objectives and constraints. Select channel intermediaries or partners. Develop a channel feedback system. Distribution Levers and the Four Key Stages of Customer Relationships Awareness Exploration/ Expansion Degree of Channel Integration Number of Channels/ Intermediary Type Commitment Number of Intermediaries Number of Channels/ Intermediary Type Degree of Channel Integration Intermediary Type Number of Channels Intermediary Functions and Responsibilities Dissolution Elimination of Channel Types Reduction in the Number of Intermediaries Reduction in Channel Integration eBay’s Application of the Marketspace Matrix eBay’s Application of the Marketspace Matrix (1995-98) eBay provides a logical first example of Marketspace Matrix in action. Since the product – an online auction service – was completely new, its brand had little value. Thus branding levers were inapplicable at the start. Yet, eBay, even in its nascent phases, developed levers in nearly every category. eBay’s Application of the Marketspace Matrix (1995-98) Awareness Exploration/ Expansion Novelty of internet based, dynamic, auction-based pricing system Benefits to both buyers and sellers Low cost Viral marketing and word-of-mouth Strong presence at trade shows Focus in one key area: website itself Easy-to-use search engine and easy-to-explore community converted visitors to customers. With more converted customers, eBay fostered exploration and expansion by the community equity that arose. Commitment Relied primarily upon the enabling community product lever to advance users into the commitment phase. eBay’s Application of the Marketspace Matrix (1998-99) Once eBay had advanced a significant number of users into the exploration/ expansion phase, the firm needed to focus on sustaining commitment. As the firm’s needs changed, so did its Marketspace Matrix. eBay’s Application of the Marketspace Matrix (1998-99) Awareness Began first major advertising campaign in late 1998. Radio and print campaign with “You might just find it on eBay” slogan Strategic alliances with AOL.com and the now defunct Go.com Sponsored auction of famous memorabilia for free media exposure Exploration/ Expansion Added new attributes and features Offered complementary services Improved existing services Enhanced community offerings Forums where veteran eBay users will answer questions of new users eBay’s Application of the Marketspace Matrix (1998-99) Commitment Community enabling remains a constant product lever to advance user to and sustain commitment. Loyalty program where seller can earn “Power Seller” status. Dissolution Needed to dissolve relationships with customers who damaged the community. These were sellers who accepted bids and money and then never delivered the goods as well as buyers who bid and never paid. Relied on community and feedback forum to dissuade users from dealing with these miscreants. eBay’s Application of the Marketspace Matrix (2000-present) Having nearly perfected its community and ability to retain customers, eBay requires new buyers and sellers to continue its history of growth. Pursued international strategy through building international sites and acquiring competitors. To increase core business in the US, eBay has stepped up efforts to win new users. Television campaign in late 2000. Promote ancillary services including a bill-paying service called Billpoint which competes with PayPal, which allows anyone with an email to receive a payment. eBay’s Application of the Marketspace Matrix (2000-present) Awareness Offering price promotions to sellers to encourage them to list items for the first time – for free, provided they sign up for and accept Billpoint. Television ad campaign. Exploration/ Expansion Expansion of product categories to include real estate and cars. Added “buy it now” option. Augment offerings, e.g. deal to provide discounted UPS shipping to all eBay users through Mail Boxes Etc.