Download The E-Marketing Mix

The E-Marketing Mix:
A Contribution of the E-Tailing Wars
Kirthi Kalyanam & Shelby McIntyre*
Department of Marketing
Leavey School of Business
Santa Clara University
Santa Clara, CA 95053
February 27, 2002
The E-Marketing Mix:
A Contribution of the E-Tailing Wars
Abstract
One of the most ubiquitous aspects of the marketing landscape is the concept of a
marketing mix. The marketing mix has persisted now for over 40 years as the 4P’s of
Product, Price, Place and Promotion. However, in the post dot-com boom, marketing
managers are learning to cope with a whole host of new marketing elements that have
emerged from the on-line world of the internet. In some ways these new marketing
elements have close analogs in the off-line world, and yet from another perspective they
are revolutionary and worthy of a new characterization into what we coin as the EMarketing mix (or the e-marketing delta to the traditional marketing mix). Today, few if
any marketing plans can be complete without a blending of the E-Marketing mix into the
traditional mix to form an effective marketing strategy. The current work attempts to
identify and characterize the E-Marketing mix, catalog it’s evolving tool-kit of elements
and classify them into a taxonomy for marketing managers and researchers.
Keywords: E-Marketing Mix, E-Tailing, Marketing Mix, Marketing Strategy
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Introduction
In the 5-year period beginning about April 19951 and ending in April 20002, an
era known as the dot-com boom, hundreds of businesses that used the Internet as a
primary means of transacting with consumers (e-tailers) were taken to IPO. In what is
referred to as the dot-com bust, from April 2000 to December 2001, the common stock
issued by these companies, in virtually all cases, was trading below its issue price.
Subsequently, many of these companies terminated operations or ceased to exist as an
independent entity3.
The dramatic fall of these companies has been the focus of
considerable attention from the business press4 as well as scholarly research (Mahajan,
Wind and Srinivasan 2002). However, in the short period of their existence, these etailers developed and introduced new internet-based marketing techniques at a furious
pace, essentially creating a new world for marketing5.
While these techniques were mostly developed in the context of Internet
Retailing, they are being widely utilized by other Business-to-Consumer and Business-toBusiness organizations as well. For example, www.grainger.com the web site of W.W.
Grainger Inc., the leading supplier of Maintenance, Repair and Operating supplies
(MRO), indicates the depth and the sophistication with which W.W. Grainger Inc. has
adopted Internet marketing techniques. Similar conclusions can be drawn from visiting
the web site of Intuit, which targets its best selling Quicken financial software at both
businesses and consumers. Web sites in the airline industry, the hospitality industry, the
electronics industry, the software industry or virtually any other industry indicate that the
adoption of Internet marketing techniques has been pervasive.
In other words the
marketing techniques that were pioneered by e-tailers have evolved into E-Marketing.
1
The IPO of Netscape on August 9, 1995 was the first commercial web-browser company. Also, in 1995, a
number of Net related companies went public, but Netscape lead the pack with the 3rd largest ever market
cap for a NASDAQ IPO.
2
The first month of the precipitous decline in e-commerce stock prices
3
See the “dot-com graveyard” page at Upside.com
4
In fact a number of websites provide pages to track dot-com failures (e.g., the “dot-com graveyard” at
Upside.com, the “Dot-com Layoffs and Shutdowns” page of the WSJ, etc.).
5
Kurt Anderson provided an interesting perspective in the December 2000 issue of Inside Magazine. He
compared the internet business failures to a business model of Christopher Columbus’s voyage.
Columbus’s business model failed – no direct route to Asia, bad ROI on the venture – but he “discovered
America” and thereby changed the world, so too with the failed dot-coms.
2
However, depending on the area of interest, the marketing community has
developed a very selective view of these internet-marketing techniques.
To web
developers and technology integrators internet marketing is about building web sites that
are robust and scale with traffic.
To the advertising industry it is about internet
advertising and its impact on driving web-traffic and brand building. Auction oriented
sites such as eBay have grown through word of mouth and have emphasized community
building. To the Customer Relationship Management (CRM) community, it is about
personalization.
Apart from this selective emphasis, the internet-community has also introduced
overlapping vocabulary to describe the techniques.
For example, the technique of
growing the customer base through referrals, often termed word-of-mouth in the
literature, is also referred to as organic growth (Wall Street Journal 2001) or Viral
Marketing (Godin 2001). Another example is the term “collaborative filtering.” This
term usually refers to the provision of recommendations to a user on the basis of the
similarity of that user’s purchases to others who are like him. However, the terms
“recommendation engine”, “data mining”, “personalization”, “mass customization” and
“one-to-one marketing” are all sometimes used, in one way or another, to refer to the
same concept.
This lack of a common vocabulary, a categorization of techniques and an
integrating framework creates fundamental problems for practitioners and academics,
much as was the case in the 1950’s before E. Jerome McCarthy (1960) introduced the
4P’s standardization of the marketing mix: First, there is the fundamental question
“What is E-Marketing?”. Second there is the follow up question “How is E-Marketing
different?”. Third, the lack of a framework means that managers do not have a natural
starting point for developing the e-marketing aspects of the strategy. Fourth, since the
scope of marketing activities is not well established the specification and communication
of the marketing plan, a key marketing activity (Winer and Lehmann 1991), is more
difficult. Fifth, it is hard for a marketing manager to have an appropriate emphasis (and
budget) across all the elements in the marketing mix without a clear delineation of them.
For example, customer acquisition might be overemphasized relative to customer
retention. Sixth, the integration of the techniques might be insufficient leading to a
marketing program that is disjoint from the consumer’s perspective. Finally, without a
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complete understanding of the scope of the marketing elements, it is difficult to identify
how different strategies are being implemented through a differential blending of the
marketing elements.
In summary there are several ramifications of the fact that these e-marketing
techniques are not well categorized, the interrelationships not well understood and a
holistic view is not specified. Without such integration, it is difficult to: (a) create,
maintain and communicate an appropriate marketing plan to support the strategy, (b)
budget across the elements of the mix, (c) align the organizational structure of the
marketing effort, and then (d) assign appropriate responsibilities while still maintaining
the needed integration6. While there are several textbooks providing an overview of
Internet Marketing (Hanson 2000, Turban, et. al. 2002), they do not emphasize a
categorization or an integrative framework that enables us to answer these fundamental
questions.
This paper, therefore, focuses on internet-based marketing techniques (emarketing7) which first emerged during the dot-com boom. The research is exploratory
and descriptive in nature. Building on the concepts of the “marketing mix” and its
vertical analog in the “retailing mix,” attention is focused on characterizing an EMarketing Mix and describing and motivating each element. As Niel Borden said long
ago: “To define the concept of a Marketing Mix is one way to define Marketing” (Borden
1965). Thus, identifying the E-Marketing Mix actually answers the question of “What is
E-Marketing?” Comparing each E-Marketing element with its off-line analog can start to
address the question of “How different is E-Marketing.”
A two stage iterative procedure has been used to triangulate on a characterization
of the E-Marketing mix. The 4P’s of the traditional marketing mix serve as a starting
point. In the first stage, we conducted audits of industry web sites and determined what
modifications of the 4P’s framework are needed to reflect the E-Marketing activities.
This provided an initial characterization of the E-Marketing mix. However this first stage
would probably not have provide adequate coverage of E-Marketing techniques that are
not executed using the web site. Hence, in the second stage we compiled an inventory of
6
The same statement about integration problems exists for the traditional marketing mix, but arguably
more so currently for the newer e-marketing elements.
7
E-Marketing is meant to connote any use of an electronic or internet-based capability to interface with
customers or prospects with a ‘marketing intent’.
4
E-Marketing techniques by reviewing articles published in the industry and trade press,
Internet Marketing textbooks and academic journals. When the literature review did not
provide adequate information, additional information was gathered through depth
interviews of experts and practitioners. For each microelement (technique), we provide:
(a) a description, (b) a comparison to an offline analog, (c) key implementation decisions,
and (d) metrics. For the purposes of brevity and clarity, we focus directly on these new
e-techniques while understanding that they must integrate holistically with the traditional
marketing mix.
While the 4Ps characterize the current marketing mix, we find it worthwhile to
characterize the E-Marketing Mix using a 4Ps+P2C2S2 acronym8. In other words we keep
the original 4Ps and add Personalization9 and Privacy being the 2 new P’s, Customer
Service and Community being the 2 new C’s, and Security and Site Design as the 2 new
S’s to characterize the E-Marketing mix (See Figure 1). In addition we find that the
concepts of (a) Personalization, (b) Privacy and (c) Security plus relational database10
management as pervasive and best to be treated as a foundation for the whole framework.
Thus that is the depiction of these elements in Figure 1. These four concepts then
provide a helpful policy and technological basis for integration of the various elements.
In contrast, the traditional marketing mix did not depict a policy or technological basis
for integration. Perhaps, as a partial result, in traditional organizations of the past, the
elements of the marketing mix too often tended to become “silos” and were sometimes
implemented as vertically separated blocks each with its own corporate manager11.
The sheer number of macro-elements and micro-elements in Figure 1 suggests
that there has been a considerable amount of innovation in marketing techniques over the
past 5-7 years. However since the E–Marketing Mix, as depicted in Figure 1, provides a
birds-eye view of these numerous techniques, at a marco-level and in a standardized
8
The mnemonic, or memory device, is important here, particularly when confronting a 10-element macromix. The squared terms are meant to connote the power of the internet and, therefore, are depicted as
exponential rather than additive elements.
9
We adopt the convention of underlining the first letter of each macro-element of the E-Marketing Mix and
suggest that this be used as common practice to identify these elements.
10
Relational database is not taken as part of the E-Marketing Mix because it is only a technology and not a
function that the manager manipulates to address the customer (while, say, Personalization is).
11
The brand management system can be perceived as an attempt to re-capture the integration essential for
an appropriate marketing mix.
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vocabulary, it should help a manager to quickly summarize the E-Marketing effort and to
see how it relates to the overall marketing strategy.
Before proceeding, it is important also to describe what what is not within our
scope. It is beyond our focus to prescribe marketing strategies and programs for either
traditional businesses or internet-based businesses. Thus, it is only implicitly assumed
that the e-marketing mix elements we describe will be a part of the overall marketing
program for a firm, and that a complete description of such programs requires a holistic
blending of the on-line aspects with off-line ones. Also, we do not delve into when
different sub-elements should be used or how to use them. In short, the treatment is not
normative, but descriptive.
In the next section, we provide some perspectives on the Marketing Mix, and then
present the first stage results of characterizing the E-Marketing Mix. This is followed by
our second and third stage analysis and cataloging of the E-Marketing mix elements. We
close with a summary of the perspectives developed in this paper and opportunities for
future work in this area.
Background: The Marketing Mix & The Retailing Mix
The Marketing Mix
The “marketing mix” and also its extension as the “retailing mix” are concepts
that provide a standard vocabulary for the marketing community. At first the idea of a
“marketing mix” was somewhat controversial. Many competing characterizations were
proposed, from a mix of just two elements (the “offer” and the “tools”) (Frey 1961), to
one with three elements (“goods mix”, “distribution mix” and “communication mix”)
(Kelly 1962) to one with 12 elements (Borden 1965). Ultimately a 4Ps depiction of the
marketing mix became what today is one of the most standardized and universally
accepted aspects of the marketing landscape. Professor E. Jerome McCarthy (1960), in
his textbook Basic Marketing: A Managerial Approach, first popularized this particular
categorization. The basis for the characterization of the marketing mix was the very
much simpler marketing world of the 1950’s when TV was just taking the country by
storm as the new marketing medium. It was a time of the “masses” with mass-marketing
capitalizing on mass-communication to move mass-production through mass-distribution
and mass-retailing to the swelling masses of the post-world-war-II middle-class.
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As McCarthy (1960) so eloquently pointed out:
“The number of possible strategies – the ‘marketing mix’ – is infinite. A
product can have many different tastes, odors, and appearances; the package can
be of various sizes, colors, or materials, the brand names and trade-marks can be
changed; services and return goods privileges can be adjusted; advertising
media used can be newspapers, magazines, radio, television, billboards, and so
on; the company’s own salesmen or various kinds of wholesalers and retailers
can be used, and one or more salesman or distributors can be assigned to an area
to obtain more intensive coverage. Many different prices can be charged; the
cash discounts and markups can be changed; a higher quality of salesman or
distributor may be used; intensity of sales effort may be varied from one locality
to another; credit and other financial considerations may be adjusted; and so on.
For each of these marketing variables there are many possible values or
variations. Thus the number of possible marketing mixes is very large, and it’s
no wonder that managers make some mistakes in the selection of an effective
mix.”
… Perhaps things are not as complicated as they seem at first
appearance. Perhaps the variables can be categorized and the conceptual
problem thereby reduced.
There are several benefits for the marketing mix. First and foremost, it provides a
standardized vocabulary for the marketing community. The mix helps to categorize what
would otherwise be potentially thousands of microelements in a full-blown marketing
campaign into manageable macro-elements that can be the basis for the development and
communication of a more macro marketing strategy.
The marketing industry is
organized into verticals around the elements of the marketing mix (e.g. Advertising,
Direct Marketing, Pricing, Sales promotion, Branding) with associated industry
organizations, conferences, tradeshows, textbooks and academic courses.
Since the
marketing mix specifies the scope of marketing activities, it serves as the natural
reference point for budget allocation. Vertical industries differ in the manner in which
they allocate their marketing budget across the marketing mix.
For instance, the
marketing budget in the pharmaceutical industry is heavily skewed towards a sales force
that targets doctors, whereas the more typical approach in packaged goods is to
emphasize TV advertising to consumers. It is not unusual for marketing managers to
benchmark their budgetary allocations with the typical allocation in their industry.
Within an industry, the marketing mix can be used to characterize competitive
marketing strategy. For instance, “push” and “pull” strategies of marketing are stylized
descriptions of a blending of the marketing mix elements wherein some elements are
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being emphasized over others. And of most importance, undoubtedly, has been the use
of the marketing mix as a tool or framework to communicate the marketing strategy in a
standardized way and also to organize teaching and research about marketing.
Perhaps the key point is that the concept of a marketing mix has survived the test
of time as a central contribution to the practice of marketing, particularly with regard to
organizing marketing strategy and for teaching and communicating about the marketing
strategy and process. This core need still exists today, maybe even more so, in the post
dot-com world when marketing managers now must grapple with a host of additional
potential marketing elements.
The Retailing Mix
Over time, the marketing mix has been adapted to meet the needs of various
industries. This includes vertical depictions of the mix for Bank-marketing, Sportsmarketing, Event-marketing, Cause-marketing, Social Marketing, etc.
Often these
vertical adaptations emphasize the elements and sub-elements that are important or
idiosyncratic to the industry. In this vein, the retailing mix (Levy and Weitz, 2002) is an
emphasis of the marketing mix to reflect the needs of the retail industry. However the
retailing mix is noteworthy because it contributes a customer-facing12 perspective to the
marketing mix. The customer-facing perspectives include Location, Store Design and
Layout, and Customer Service. In retrospect this is quite understandable because the
manufacturer of consumer products typically delegates most customer-facing activities
and operations to the retailer.
Another point of departure is with respect to ‘Place’. The traditional marketing
mix uses place to refer to the channel of distribution. Since the retailer itself is the
channel, the place element, as conceptualized in the marketing mix, is not meaningful for
the retailer. In lieu of channel decisions, the retailer focuses on locating stores to be
convenient to target customers.
Hence the retailing mix substitutes ‘Location’ for
‘Place’.
A third point of departure is with respect to ‘Product’. Retailers are generally
concerned with an assortment -- multiple products within a category and multiple
12
The term “customer-facing” here means directed at the customer, and particularly when interacting
with the customer either directly, one to one (as in a service encounter), or in the actual transaction of a
sale or delivery.
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categories. Even within a category, the assortment (depth) typically spans the product
lines of multiple manufacturers and hence is broader in scope.
In summary, the retailing mix adds customer-facing elements and de-emphasizes
channel management. Location and assortment decisions substitute for channel and
product decisions. Figure 2 graphically portrays the overlap between the marketing mix
and the retailing mix.
The E-Marketing Mix
As discussed in the introduction, the first stage of our analysis involves
incrementing the 4P’s of the marketing mix with web site audits. In the interest of space
we discuss in detail only the following web sites: a retailer (Amazon.com), a
manufacturer of consumer electronic products (Hewlett Packard), a manufacturer of
networking gear (Cisco Systems Inc) and an industrial distributor (W.W. Grainger Inc).
We note that a vast majority of companies have web sites and that the URL of a
company’s web site is increasingly included in product packaging, company advertising,
company letterhead and at the bottom of business cards.
Also, more and more
organizations have a designated “web master” if not a web-division. This all suggests
that Site Design should be treated as a separate macro-level marketing control variable13.
In a similar vein, a quick review of all four web sites in Figure 3 indicates that
each includes a customer service function be it in the form of a Help desk on
Amazon.com or in the form of a “contact us” link at www.Grainger.com or in the form of
a service and support section at www.cisco.com. This indicates to us that in the internet
world, Customer Service should also be broken out as a separate macro-element of the
mix.
Furthermore, the service and support section at www.cisco.com contains a link to
a section titled “Consult Networking Communities,” which is “a gathering place for
networking professionals to share questions, suggestions and information about
networking solutions, products and technologies”. Cisco hosts these communities so that
its customers can interact with one another and provide technical assistance. Ebay is
another site that promotes and leverages a community structure. Ebay has designated an
13
A potential counter argument would be that the web site should be treated merely as a
promotional tool and, therefore, would best be categorized as a promotion sub-element.
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individual with the title “community relations” manager to be responsible for the
community aspects of the site. And Amazon provides customer-based book reviews and
a rating system, which is also a community building mechanism. Thus it seems that,
Community should be regarded as yet another separate macro-element of E-Marketing.
Another powerful feature of these web sites is their personalization. For example
Amazon allows users to create accounts and log in to their personal account. At Cisco,
business accounts form the basis of business practices and these are managed on the web
site. Hence we propose that Personalization should be treated as a separate element.
Once the user creates an account and a profile, in principle this information can be used
to personalize any aspect of the user’s interaction with the site. Hence Personalization
transcends all aspects of E-Marketing and should be treated as a foundation. Along with
personalization come the twin concerns of Privacy and Security. Like Personalization,
Privacy and Security concerns transcend all aspects of E-Marketing and hence should be
included in the foundation.
At this juncture it is useful to inquire whether the notion of place has some unique
connotations on the online environment. The relevance of place can be best illustrated
with an example. Consider the Yahoo! Shopping site (Figure 4). Yahoo! Shopping can
be considered a mall with tenants. The web sites of these tenants are replicated on
Yahoo! using a technology called remote merchant hosting. Consumers on Yahoo!
Shopping can browse the retailer’s site in a manner that makes it transparent as to where
they are. However, when a consumer makes a purchase, Yahoo! handles the billing and
the transaction. The retailer receives the order and ships the goods and pays Yahoo! a
commission. In other words, Yahoo! Shopping is a channel for the retailer. Retailers
now have to consider the possibility that they need channel partners and for some
customers their position may have moved upstream in terms of the transaction14.
Figure 1 summarizes these perspectives. It presents the E-Marketing mix as the
original 4P’s of the marketing mix and then 2P’s, 2C’s and 2S’s. Hence we use a 4P’s +
P2C2S2 acronym to refer to the E-Marketing mix. Figure 2 compares the E-Marketing
mix to the original marketing mix and the retailing mix. The added elements suggest that
the e-marketing mix is broader in scope and distinct from the marketing mix and the
14
Given this example, it is natural to ask whether a banner ad with a “buy now” link to the retailer is a
promotion or a channel? Since the transaction itself will occur at the retailer, our categorization would
suggest that this is an example of a paid-for promotion rather than a channel intermediary.
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retailing mix. Further the four concepts of Personalization, Privacy, Security and a
relational database provide a helpful policy and technological basis for integration of the
various elements. In contrast, the traditional marketing mix or the retailing mix did not
depict a policy or technological basis for integration. Finally, based on Figure 2, an
argument could be made that the E-Marketing mix, though distinct from the marketing
and retailing mix, has enough overlap to be considered evolutionary rather than
revolutionary. We recognize that this is a matter of debate depending on the weight that
one would assign to Personalization, Community and Site design, their digital
underpinning and their integration potential.
It is important to emphasize that the
previous discussion is about categorization at the top-level of the mix. Sub-elements of
the E-Marketing mix (e.g., banner ads, search engines, etc.) would be distinct from the
traditional Retailing mix or the Marketing mix. These sub-elements are cataloged and
discussed in the next section.
Cataloging E-Marketing Elements and Sub-Elements
In the second stage of our analysis, we compile a list of E-Marketing mix subelements and categorize each sub element within a macro-element. This process of
categorization should triangulate on the E-Marketing mix. Specifically it will indicate if
the characterization in Figure 1 should be expanded or collapsed and if the nomenclature
of the macro-elements is reflective of the sub-elements.
The list of E-Marketing sub-elements was compiled by a search of the popular
business press, textbooks and the academic literature. Our search spanned hundreds of
articles. In the interests of space, we limit our citations to certain key articles. When the
literature review did not provide adequate detail, additional information was gathered
through depth interviews of experts and practitioners. For each sub-element, we provide:
(a) a description, (b) a comparison to an off-line analog, (c) key implementation
decisions, and (d) metrics-.
Table 1 summarizes this discussion.
These detailed
descriptions characterize each sub-element and provide a basis for the categorization.
Categorizing the sub-elements can be tricky.
For example, consider E-Mail
marketing. Should E-Mail be a separate macro-element or should it be categorized as a
sub-element of customer service or promotion? We resolve this issue by adopting a rule
to categorize elements based on function not on form. This rule suggests that E-Mail is
not a separate E-Marketing macro-element.
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Since E-Mail is used extensively for
customer service, it is a sub-element for Customer service (e.g., E-Mail Response
Management). Since E-Mail is also used for customer promotions it is a sub-element of
Promotion (e.g., Outbound E-Mail).
Another such example relates to product configuration engines. Should this subelement be classified under Product? Since the typical owner of this sub-element in an
organization is the site design team (Seiff, 2002) it is more appropriate to classify the
product configuration engine under Site design. This suggests another classification rule:
Categorize elements based on the typical organizational owner.
The outermost circle of Figure 1 presents the catalog of E-Marketing subelements and our categorization of them into the inner circle of macro-elements. We
expect this catalog, and particularly the sub-elements, to evolve as technologies improve
and are deployed in new ways in the Internet marketing domain. Figure 1 and Table 1
provide a road map for the discussion that follows.
Personalization, Privacy and Security
In traditional retailing, neighborhood shopkeepers sometimes learned to greet
their good customers by name and thus could recommend items to them based on
knowing them personally. In an analogous way, Personalization in the on-line world is a
term used to connote any aspect of a web-site or web-service that is tailored individually
in response to a returning customer. Usually users register with a site and create a
profile. The profile along with other information such as visit history is stored in a
database. When the users return they are only shown the information that they signed up
for or find relevant. Personalization on the web can be widespread compared to what a
neighborhood shopkeeper could achieve, even for a few of his very best customers.
Personalization at Amazon.com takes place in the form of personalized book
recommendations for well over 30 million shoppers (as of this writing). Some of the key
decisions in personalization include what to personalize, how to assemble customer
profiles, how to implement content architecture and what rules to implement.
With respect to the decision of what to personalize, in principle Personalization
can be pervasive covering all aspects of a user’s interaction with a site. A relational
database that captures all aspects of a users interaction enables pervasive personalization.
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Figure 1 reflects this perspective by visually depicting personalization as potentially
underlying all E-Marketing activities. When Personalization takes into account other
marketing activities that are directed at the user it naturally becomes a focal point for the
integration of various E-Marketing elements.
Obviously, the Personalization, based on database procedures as it is, relates
directly to the privacy of information. This creates the need, almost inherently, for the
site to adopt a policy about the relationship between Personalization, record keeping,
Privacy and Security. Some industry studies report that privacy concerns top the list of
challenges for personalization. Sites have responded by crafting detailed privacy policies
and posting them on the web site. A typical privacy policy addresses what information is
being collected and how it will be used and whether the information will be sold or
shared with third parties and if so in what context. Further, it provides the option to optin or opt-out of receiving targeted mailings and promotions. The opt-in/opt-out policy is
discussed in the Privacy policy but the user makes the choice when a personal profile is
created.
Along with Personalization and Privacy a related concern is with the Security of
the web site itself. Specific issues of concern include whether someone can intercept the
transaction and the credit card information and how easy it would be for a hacker to enter
the web site. Sites address these issues with a security policy that addresses among other
issues (1) what aspects of the site and the transaction are secure, (2) what technology is
being used, (3) what the liability of the customer is if a credit card number is stolen or
there is a security breach.
Site Design
Traditional retailers have long known that the look and layout of a store is crucial
for maximizing sales potential. In an analogous way, one of the crucial elements of the emarketing mix is the design of the web site. After all, an important culmination point for
the outbound marketing activities is to generate customer visits to the web site. It is
when the customer visit finally occurs that effective web Site design becomes critical.
Effective web Site design has evolved from focusing simply on the novelty of it all to
ensuring that the web Site design provides a compelling customer experience. Just as
traffic generation is an important metric for promotions, customer conversions and
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retention measures are important measurements for the effectiveness of the design of the
web site. The fundamental building blocks of web-site design are: (a) the home page, (b)
navigation and search, (c) the design and layout of each page, (d) site tools and (e)
performance and usability testing. These building blocks have to be optimized for the
customer activities of search, display, purchasing and order tracking.
The Home Page
As with the traditional retailer’s display window, the home page is the most
important real estate on the web site. Some of the most critical decisions include how to
use the real estate on the home page, how it should be displayed and how the look-andfeel relates to the overall branding strategy. Many sites feature breaking news, updates
and promotions on the home page. Another critical issue with regard to the home page is
what target constituencies and “use scenarios” to support.
Navigation & Search
Traditional retailers know that store directories and signage are important. In an
analogous way, another crucial area for E-Marketing decisions is the Navigation Bar,
defined as the piece of real estate that visitors use to navigate the content on the site. The
Navigation bar serves as a central access point that links to critical information on the
site. In addition, the navigation bar allows the information to be organized in a logical
fashion. At any point during a site visit, the navigation bar should tell the user where he
or she currently is and what subsections of the site have already been visited to arrive at
the current location.
Large malls and supermarkets often have layout directories, category-level
signage, and even searchable kiosks for their patrons in order to help them find what they
are looking for. Also, clerks are often trained to respond to a patrons question about
where an item is shelved by leading them all the way there. In an analogous way,
complex company web-sites and/or sites with large amounts of content provide search
engines which can be a crucial navigational aid. But the new aspect of this element on
the web is that the search engines are self-service and very powerful. Users can search
by keyword, product ID number or descriptions and phrases, all depending on the
technology used in the search engine and the customer’s desired search mode. Some of
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the implementation issues with regard to search engines are what search engine
technology to use and what keywords to support.
Page Design and Layout
A third aspect of site design is the look and feel of each page, which is analogous
to the “shelf display” at a traditional retail store. Issues to address here include the layout
of graphics, text and buttons for other functional utilities that are relevant to each page.
The quality of the image is considered quite important in presenting the product. For
example, a retailer like Pottery Barn might show a sofa on a page that also might include
buttons for a zoom-in view, dimensions and recommended accessories such as matching
end tables.
Site Tools: Configuration Engines, Size Matchers etc.
For products such as automobiles and computers there are many features and each
feature has multiple levels. For example, during the course of a computer purchase, one
has to make choices with respect to the amount of memory and the size of the hard disk.
Considering all possible combinations of all features would lead to numerous product
variants (often many thousands of them). Traditionally, personnel in the sales and
engineering departments of an organization have been responsible to tailor “solution
packages” for customers, but the process has been costly, time-consuming and too often
fraught with errors and bureaucracy.
Even in the online environment this is a tedious problem since a specific web
page would have to be created and maintained for each product variant. Configuration
engines provide an alternative approach to static pages for each product variant. A single
page is created for the core product, and the features and the various levels are presented
as pull down menus. As users select various combinations of products, the price is
automatically re-calculated. Apart from this convenience, configuration engines also
automatically validate the technical correctness of the product choices that are being
made. Configuration engines, therefore, offer a quite unique capability for automating
the product configuration process and putting it on a self-service basis enabling what has
been called “mass customization” (Peppers and Rogers 1997) in the online environment.
Decisions about Configuration engines include: a technology make or buy
decision, how much (or detailed) configuration to allow, the user interface to employ and
15
how this might be customized to the individual user, whether to include up-selling and
cross-selling recommendations in conjunction with configuration, how far to take
automation of the process as opposed to having an 800-number to handle the harder
cases.
Configuration engines are but one instance of the types of tools that are required
on a site. Other tools include ordering systems (shopping baskets and checkouts), size
matchers (www.nordstrom.com), layout and planning tools (www.garden.com).
Site
design teams work with product managers and merchants in designing and maintaining
these tools.
Usability & Testing15
Web site design specifications are increasingly emphasizing the following: (1)
Easy Search, (2) Effective Display, (3) Easy Purchase, and (4) Easy Tracking. These
steps, which mimic some core steps of consumer buying behavior, are similar to store
customer flow analysis conducted by retail anthropologists (Underhill, 2000).
Easy search refers to the requirement that the visitor can quickly and easily find
the information/merchandise that he/she is looking for. Effective display refers to the
manner in which information and the merchandise is displayed on the page.
Easy
purchase refers to the ease with which the order can be placed. Amazon.com has an
important innovation in this context in the form of 1-click ordering. Finally, once the
order has been placed, an ability to easily track the order online is also important. In
industry parlance, usability generally refers to these four core aspects.
Testing the usability of web sites is an increasingly common practice. A variety
of testing approaches have been advocated. Dreze and Zufryden (1998) suggest that web
designers create alternative renditions of web sites and test these in live and natural
settings using experimental design techniques.
Lohse (1999) shows how mouse
movements can be traced to examine navigation on a page. A niche industry called
Customer Experience Management16, has emerged to provide usability testing services
for web sites. Vendors use proprietary statistical methodologies along with user panels to
test the performance of sites on critical “use scenarios.”
15
As elements of the marketing mix, Testing is much like Marketing Research. These “research elements”
can be viewed as a mix component, or simply be treated as “research” in preparation for design of the
mix (as has been the typical treatment in past discussion of the Marketing Mix).
16
See for example www.vividence.com
16
Another aspect of the web site that is frequently tested is the site performance and
availability (See for example, www.keynote.com). Industry experts argue that waiting for
a page to load is like waiting in line for the cashier at the checkout or for the store to
open. Hence they measure performance, which is defined as the average number of
seconds it takes for the home page to load. In addition to performance, they measure
availability (uptime), which is an estimate of the % of time the web site is available.
With respect to usability the following yardsticks are typically monitored: 3
Clicks to find the merchandise, 1 click to purchase, and 3 clicks to track the order.
Additional metrics that are often monitored include the number of clicks needed to
perform crucial tasks, the number of dead ends reached in navigation, the % conversion
of the web site, and the % of abandoned shopping carts resulting from usability issues.
Product
The Assortment
This aspect of the E-Marketing mix has many similarities to the assortment
selection practices of retailers. The assortment strategies of retailers have been well
documented and discussed in the literature (e.g., Levy and Weitz 1998). Given these
similarities, we focus discussion on some of the more unique capabilities in the online
environment.
Merchandising & Recommendations
Once the assortment has been selected, it is common practice in the retail industry
for the merchant to provide some creative expression for the product. For instance,
retailers often display the merchandise in some specific context, perhaps with
accessories, or against the backdrop of a particular environment.
Online, these
merchandising practices can be enhanced by the use of multi-media audio and visual aids.
The context and the accessories that are highlighted in the merchandising can
form the basis for recommendations. The recommendations can be made accessible to
the consumer using buttons for recommendations, callouts, accessories or suggested use.
These recommendations are based on the expertise of the merchants.
In contrast to these expert recommendations, in the online world, one can provide
recommendations based on a data mining technique that has been popularly referred to as
collaborative filtering.
Collaborative filtering forms the basis of the well-known
17
recommendation engine on Amazon. In this approach, recommendations are generated
by comparing the purchase patterns of past customers to the preference patterns of the
current customer based on their similarities. Thus if John is on the site and has purchased
5 books in the past, he can be compared to other customers who also bought those 5
books and what else those other customers have purchased. Those other purchases would
become natural recommendations for John.
Price
There has been considerable attention paid to the issue of price sensitivity in the
online environment (Bailey 1998; Brynjolfsson and Smith 2000). Specifically it has been
argued that in the online environment it is easy to make price comparisons across
retailers. Hence price sensitivity should be higher in online environments and in turn this
should reduce the price dispersion across retailers selling comparable goods. We will
focus the discussion around online pricing techniques, particularly those that are
substantially new.
Dynamic Pricing
In the offline world, the airline industry popularized the notion of dynamic pricing
and called it yield management. In this approach, the number of seats allocated to a price
category on a particular route is continuously modified to match demand. For example,
demand on the Phoenix-Las Vegas sector might be currently very low and the airline
might release a block of seats in the $99 price category. Conversely when demand is
high, the airline might reduce the number of seats allocated in the low price category and
increase the number of seats in the high price category. The abundance of data online
expands the scope of dynamic pricing techniques. Product sales can be continuously
monitored and if sales are below expectations, then prices can be adjusted accordingly.
Another opportunity in the online world is to conduct early testing of product sales rates.
Such tests can be executed in a non-obtrusive manner, targeted at select customers
through catalog like mailings. The observed sales rates can provide some information of
overall season sales. A potential issue is with respect to the types of products where
dynamic pricing can be beneficial. In some situations consumers might expect stable
prices and could consider the price volatility to be disruptive. Such concerns have to be
balanced against the profit improvements from dynamic pricing.
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Forward Auctions
The forward auction (sometimes called the English Auction), as popularized by
eBay, is perhaps the most widely used auction technique on the web. In this approach the
seller places an item for auction. The item is available over a pre-specified time interval.
The seller may or may not stipulate a minimum reserve price. Interested buyers bid on
the item until the auction closes. From a marketing manager’s perspective a natural
question to ask is when and why this type of pricing mechanism should be used? A key
insight from auction theory is that auctions are a useful way to price a product when there
is ambiguity about the value of the item. The value of the item might be ambiguous
when it is unique, one of a kind, custom built or when it is used. The popularity of
forward auctions for selling used products, collector’s items and specialty products on
eBay is consistent with the theoretical insights.
In addition to Ebay, other sites such as Yahoo! and Amazon host forward
auctions. However our review indicates that the use of forward auctions by traditional
retailers is not widespread. A possible explanation for this phenomenon might be that the
product assortment sold by traditional retailers is skewed towards items that have a clear
market value. For example for many branded products, manufacturers recommend a
price (MSRP) and this price along with the margin offered to retailers creates in effect a
‘retail price’ for the product. So when the market value of the item is established and one
of the key benefits of an auction mechanism is obviated. In addition, an auction involves
higher transaction cost in terms of time and effort and might not be worth the additional
effort for low priced items.
Reverse Auctions
Reverse auctions (sometimes called Dutch Auctions) are the other form of auction
that has been used online. FreeMarkets, Inc. has used this approach in the Business-toBusiness context, particularly in lieu of sealed bids. The FreeMarkets reverse auction
begins with a buyer providing technical specifications for a project. Several qualified
sellers are allowed to bid on the project. The difference in the reverse auction model
compared to a sealed bid model is that the bidding is sequential and sellers can bid
multiple times before the auction closes. In effect, in a reverse auction we have supply
chasing demand, whereas in a forward auction we had demand chasing supply.
17
FreeMarkets Inc. reports
19
savings of $6.4 billion on the sourcing of $30 billion to date
from using the reverse auction process. The extent and scope of the use of reverse
auctions is yet to be determined and is the topic of ongoing research (Jap 2002).
Name Your Price
The ‘Name your Price’ model, introduced by Priceline.com is a variant of the
auction model. In this model, the buyer specifies a product or service and a desired
purchase price. The site then matches the buyer’s offer with the available offers from
sellers. If a match is located, the buyer is notified and the transaction closes. Once the
buyer has specified the offer he/she is bound to make good on that offer if a seller is
located.
A potential benefit of this model to sellers is that it allows buyers to state their
reservation prices and only then matches them to sellers, which enables the type of 3rd
degree price discrimination noted by Pigou (1945). The suggested benefit to sellers is a
fuller extraction of the reservation prices of buyers.
Promotion
Banners
Banners are the equivalent of advertisements on the web. The standard banner
usually appears at the top of a web page as a rectangular box of text with some graphics.
The banner will link to a target web page, which may be the homepage of the advertiser
or a page developed by the advertiser that is more directly relevant to the message or is
an elaboration of the message. Banners can also come in the form of buttons (smaller,
usually in the left hand column), or be hosted on delay pages or pop-up pages. The
banner ads, when appearing on a search engine site, can be keyed to appear when certain
terms are used in the search query, which is a form of context marketing. Banner ads are
frequently served by third party companies (e.g. www.doubleclick.com) who specialize
in feeding millions of banner ads to different pages. These companies claim that they can
schedule and rotate ads even down to the level of each individual visitor.
Click-thru rates have been the primary focus in terms of measuring the
effectiveness of banner ads. However there has been considerable discussion around the
17
http://www.freemarkets.com/benefits/, data collected on 2/10/02.
20
fact that such hard measures do not correlate well with subsequent sales, awareness and
brand-associations (Briggs and Hollis 1997).
Sponsored Links
Web advertisers often pay content providers or search engine sites (e.g.
Google.com) to host “sponsored links” which are a close cousin to banner ads. This is a
link that can be traversed by an online shopper from that search engine to the sponsor’s
web page. This is analogous to buying an ad or listing in the yellow pages. Industry
research (Modahl, 1999) increasingly suggests that generally, search engines are the most
popular approach for locating information on the web. Hence sponsored links at search
engines can be very effective at driving traffic. Further, the user is already searching for
specific information and the link promises to provide relevant information.
In this
manner, sponsored links are contextually very relevant and this contributes to their
effectiveness. Moreover, most web-users are well educated in the use of web-links and
find it natural to follow them to new sites. The decisions about this tool are what key
words and searches to sponsor, where and how the sponsored link should appear, where
to direct those who click-thru, and to find sites that are cost/benefit effective in terms of
cost per thousand.
Outbound e-mail
One of the most effective forms of Internet-based direct marketing (Nail, et. al,
2001) is the use of personalized e-mails. Given a database of prospects and customers email messages can be highly targeted. Experimental designs can be used to pre-test
messages on samples and predict response rates that can be expected from the rest of the
database. Email campaigns can rely on “opt-in” or “permission marketing” to be sure
that respondents do not receive unsolicited messages. Apart from text, emails include
video, audio, and web pages. E-mail campaigns have become almost ubiquitous, to the
degree that Jupiter Media Metrix projected over 50 billion marketing e-mails being sent
out in 2001. Retailers that we interviewed consider email marketing to be their most cost
effective approach for retaining and communicating with existing customers.
Most email marketing campaigns begin with list building. Testing commercially
available lists to ensure good coverage of the desired target audience is a first step.
Companies with an established installed base of customers acquire email addresses and
21
permissions through direct response tactics such as promotional mailing and in store
campaigns. Once the email database is assembled, key decisions include who to target
for what message, determining the frequency of communications, and the type of copy
and graphics to include in the message.
Viral Marketing
Viral Marketing is a technique that uses a company’s best customers to promote
the product. Hotmail pioneered this technique when it launched a free web-based email
service with the tag line (at the bottom of each email) "Get your free email at Hotmail."
As customers used this email service, and were e-mailing others, they were effectively
sending an advertisement for Hotmail. This attracted new customers, who repeated the
process. Hotmail soon became the fastest growing media company in history.
The term viral marketing comes from biology and the notion of how a virus
spreads by first finding a host and subsequently by contaminating those who come in
contact with the host. Similarly in viral marketing, a customer becomes a host by
adopting a product and then spreads the word to others thereby infecting them. To put
this in perspective, Viral marketing is the online analog of word of mouth marketing.
The key difference online is expanded scale and accelerated speed. Some products and
services are inherently more viral than others. For instance, the web site Evite.com
enables users to set up a party or social event using the web site. E-mailings to those
invited to the party provide a natural viral marketing scheme since the invitees are
induced to consider Evite for subsequent parties that they might initiate. Similarly
PayPal.com is a site that allows one e-mail user to send funds to another. An individual
with a PayPal account who sends e-mail funds to another user necessitates that
subsequent user to sign up for PayPal to collect the funds.
However, it is important to
recognize that “viral” aspects can often be included in many products or services
provided the marketing manager is sensitive to the possibility.
The steps in a viral marketing campaign include the goal of the campaign, the
target for it and the level of inducement to the individual for participating (e.g., at one
time PayPal gave a person $10 to send to a friend who would then need to open an
account to collect the money already in it for him.)
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E-Coupons
Coupons are a ubiquitous feature of the consumer-oriented marketing mix in the
traditional marketing plan. In the on-line world, coupons become e-coupons and are
delivered as part of an e-mail or web ad placement program. E-coupons are just like
normal coupons except that they come from the web and are printed out by the consumer.
This arrangement saves the cost of distributing coupons and allows consumers the
convenience of finding the coupons they want on the web with search engines and sites
dedicated to the purpose. As with all coupons they are inducements for a specific act on
the part of the receiver. The steps involved in an e-coupon offering include deciding:
what is the goal of the coupon effort, what act is to be required of the recipient to qualify
for the coupon, how much value will be offered by the coupon, the form of the
inducement, how to distribute the coupon, and sometimes how to promote the existence
of the coupon. The key metric in coupons is the number of them distributed, the
redemption rate, and the cost of the program relative to its goal attainment.
Place
As discussed previously, even an internet retailer relies on intermediaries to drive
sales. One class of intermediaries consists of the large portals like Yahoo!. Then there
are much smaller intermediaries that are called affiliates.
Remote Hosting
Portals like Yahoo! maintain and run shopping sections on their web site.
Retailers can rent space on these shopping sections. Using a technology called remote
merchant hosting the portal can host a mirror image of the site. The portals take the order
and forward it to the retailer. This approach provides convenience to the consumers and
allows them to perform the transaction at the portal itself thereby eliminating the need to
create an account and login in again at the retailer. The fee structure for this hosting can
vary from a flat fixed fee to a variable fee per transaction.
Some implementation
decisions include choice of portal and the type of compensation scheme. Metrics include
customer acquisition, quality of customers acquired and revenue generated.
Affiliates
An affiliate program is a form of pay-for-performance advertising, on the web,
and rewards the affiliates (self-selected advertisers) for actual transactions that take place
23
at the target site. An affiliate program uses a multi-level marketing concept where
affiliates attract additional customers. Some affiliate programs are multi-tiered, thus
increasing the incoming earning opportunities for the affiliates (rewarded for their traffic
and the traffic of affiliates they recruit). Marketers have the option of developing their
own in-house affiliate program (Amazon.com and BarnesAndNoble.com are examples)
or joining one or more of the large affiliate networks (Beefree, Linkshare or
CommissionJunction.). Critical decisions about affiliates program include: to use an inhouse approach or join one of the networks, which network to choose, the commission
scheme, the program to select (since there are pre-packaged promotional packages at the
affiliate networks). Important metrics include the percentage of sales that come from
each affiliate link, new customer acquisition rates, LCV of acquired customers, and
distribution of revenue across affiliates.
Customer Service
FAQ’s and Help Desks
Given the self-help nature of the web most sites feature a help desk or a support
link on their navigational bar or their home page. This link leads to a help desk or a
support page that provides users with links to specific customer support tools. A very
common customer support tool is a frequently asked questions (FAQ) list. This list is
usually reflective of the most common types of customer support issues. As described in
the next section, it is often compiled from inbound customer queries either over email or
from other channels. The customer support site, can also provide a button to email the
company with a question or a clarification. From a customer expectations perspective it
is extremely important to manage this inbound email stream effectively. Automated
approaches to do this are described in the next section.
e-Mail Response Management
When marketing campaigns are successful, they result in site visits and often a
flood of in-bound e-mails from shoppers who have questions. Incoming e-mail can
overwhelm a company with leads and yet it is critical that these e-mails be responded to
appropriately and quickly if shoppers are to be converted into customers. An automated
response management system can come to the rescue. Originally such systems were very
crude and simply responded immediately with an acknowledgement or thank-you for the
24
sender’s inbound e-mail query. Today, companies such as Brightware, EchoMail and
Kana (Bulkeley, 2001) provide very sophisticated systems with artificial response that
read, interpret, and assemble accurate responses. When an e-mail cannot be adequately
“understood” the system forwards the message to the most appropriate human. Often
these systems can handle up to 95% of the inbound e-mail and with such appropriate
responses that humans cannot tell that they were actually machine-created. Additionally
such systems often embed business rules that are applied in a much more consistent
manner than humans could manage. And finally, such systems produce analyses, reports,
and charts to help manage the program and learn about the customer base and better ways
to respond in the future.
Automated response management begins with building a knowledge base that
categorizes queries from customers, associates them with keywords and designing
appropriate responses for each category. The queries, categories and responses also form
the basis for the Frequently Asked Questions (FAQ’s). Once the knowledge base is built,
it is loaded into a response management system. Flags are provided to diagnose queries
that are complex, ambiguous or have multiple threads to them. An escalation path is
specified for the flags. Finally reports need to be designed to allow monitoring of email
response.
Chat
Customer support can also be delivered using chat technology. These approaches
and community chat rooms have much in common and are described in the next section.
Community
Much has been written about the concept of “community” with regard to the web
(Hagle and Armstrong 1997a). In terms of an e-marketing tool, “community” means
getting customers to interact with one another in a way that increases the benefits of
coming to the sponsor’s site. Such interaction can be moderated through the sponsoring
site, or it can be directly among the users themselves. A virtual community is also a
location on the internet where individuals interact with one another. Chat rooms where
people discuss specific stocks, automobiles, Far Eastern culture, backward compatibility
of the latest Cisco systems Router, or buy and sell goods and services through auctions
like eBay are all examples of virtual communities. Internet technologies have enabled, in
25
a very cost effective manner, the building of communities that are at the same time very
narrow in terms of their focus while geographically broad in terms of their reach.
Community activities can be categorized based on: (a) a time dimension
(asynchronous and synchronous), (b) what approaches are used to structure it and (c) the
purpose of the interaction. Chat rooms are typically used for synchronous interactions
and message and bulleting boards for asynchronous interactions. Some of the approaches
used to structure interactions include, structuring content, the use of moderators, enabling
user ratings and reviews and establishing reputation systems. In certain cases the purpose
of the interaction is to conduct a transaction as in the case of an online auction or a gift
registry.
Time Dimension: Chat Rooms and Message Boards
Chat rooms are an online analog to the old fashioned party line where multiple
neighbors could pick up the telephone and listen to whatever conversation was currently
going on. However, on the internet, it is not the neighbor’s conversation that one jumps
into, but rather the conversation of individuals who have arrived in a common “space” to
discuss a pre-specified topic defined by the title of the room.
Often these can be
technical or service chat rooms with experts from a company’s product support group.
Procter and Gamble might have a chat room, for instance, on how to remove tough stains
from delicate fabrics. Since the discussions can be real time, the help can be immediate.
In this manner, a chat room can serve as a customer service site, except that it is users
interacting with one another rather than the company.
Decisions about chat rooms include: what to title them, how many to host, how to
populate them with technical expertise, how to announce these rooms to the user
community, where to post links to these rooms, how long to retain postings, and whether
the discussion is to be moderated or direct.
User Ratings & Reviews
A common community building technique and an approach to structuring the
community is to enable ratings and reviews by users. In fact, many sites are dedicated
just to this purpose. For Example, Bizrate.com provides ratings of e-tailers and retailers
based on surveys of shoppers about specific purchase transactions that they have
completed. These services provide an aggregation of the many experiences of individual
26
customers into an organized rating system. Amazon.com allows users who have read a
book to post reviews of the book and a rating by each reviewer. Amazon then posts the
average rating of the book at a top level. Users can drill down on the over-all rating to
see all of the individual ratings along with the narrative comment left by each individual.
Other sites provide the same thing with regard to product reviews. In fact, one of the
ubiquitous features of many web sites now is the growing use of user reviews as a form
of community building and leveraging.
Decisions about user ratings involve: the type of scoring system to use, the
threshold level of rating at which a user is de-listed from the site, the aggregation
mechanism, the drilldown capability for those interested in reviewing the ratings, the
length of comment that is allowed, and the possible reporting of scores over different
time periods (most recent month, 6 months, and 2 years, for instance).
Gift Registries and Wish Lists
A very specific type of community is the guest list to a wedding or other giftbased event. In this instance a group wants to share information around a specific event,
to co-ordinate the activities of the participants. For years, store-based retailers have
provided books and more recently computer databases where the bride and groom post or
register their desired wedding gifts. This is a tremendous benefit since the method
ensures that in aggregate, over all of the invitees, duplication is eliminated. Online, the
registry becomes an even more powerful incarnation of this old mechanism. Now the
registry is continually updated and automatically posted for all to see what remains as an
“eligible” gift to purchase. Not only this, but the registry is available at any web access
point, any time anywhere.
Decisions about registry management include: whether to offer the registry
service, what to charge for the service and the user interface design.
Reputations
One of the most powerful aspects of a community is the ability it has to form
social norms for the behavior of its members. The old-world role of word-of-mouth in
marketing has long been understood as a powerful force in the success of many
marketing campaigns.
In the online world, however, automated and systematized
reputation management systems have taken this concept to a much more powerful level.
27
Some observers credit the success of eBay, in large part, to its online feedback system
wherein each party to a transaction reports back to the community on the result of the
transaction both with a numeric score and a textual comment. Thus, on eBay, it is only
possible to prosper as a trader (as a buyer or seller for that matter) by having a string of
satisfied partners.
One error in late payment or improper shipment and the whole
community will know about the injustice. This has enabled eBay to foster transactions
mostly between complete strangers who never meet one another nor see the goods that
they are transacting, which would seem to be an impossibly risky situation at first
thought. And to make matters worse, these trades take place even while the participants
remain mostly anonymous being known only by user ID’s like “BigDog236.” Yet eBay
managed to host over 250 million such auctions in the year 2000 (Business Week, 2000,
p.68). That outcome clearly demonstrates the power of community.
Decisions about reputation scoring systems are: how to encourage members to
post their ratings, what scoring mechanism to use for each feedback event, how to
aggregate the feedback scores, how to display the summary of scores, the level and ease
of drilldown to provide, and the length of textual comments to allow.
Conclusions and Future Work
During the doc-com boom many new and innovative marketing tools were
deployed by the so-called dot-com e-tailers. Most of these companies have subsequently
gone up in flames. However, there is value in the ashes in the form of new tools for all
companies to use and thus the concept of E-Marketing. However, there is yet to emerge a
general vocabulary and standardization of the new tools and their relationship to
marketing strategy in terms of what is a macro-element and what are the corresponding
micro-elements within each. Even the term, E-Marketing, raises a debate as to “What is
E-Marketing” and “How Is It Different?”
We address these two questions by
characterizing the E-Marketing Mix.
To accomplish this task, we collected information from web site audits, secondary
sources and interviews. Using this information we characterized the E-Marketing Mix
using a two stage iterative procedure. Furthermore, off-line analogies were used to help
determine to what degree the on-line version is really different from what preceded it. In
doing this we have used the classification rules of (a) Classify by analogy, (b) classify by
28
function rather than form, and (c) classify by organizational “ownership” to break the
tough boundary cases.
Our analysis suggests that the E-Marketing mix can be characterized by a 4Ps +
P2C2S2 mnemonic.
There seems to be a clear structural underlayment for the E-
Marketing Mix. At the technological level lies the relational database, which, while not
actually part of the mix is so central and important that we include it in the depiction of
the E-Marketing framework. Also of foundational importance, and within the mix, are
the constructs of (a) Personalization, (b) Privacy and ( c) Security which are heavily
intertwined and require a joint policy to adequately address.
There has been some debate as to whether Internet Marketing is really
revolutionary or just evolutionary (e.g., more of the same but now online)? The
traditionalists argue that there is nothing new here. The internet enthusiasts argue the
web-based features are all new and indeed revolutionary. Our analysis provides a
perspective on this debate. In terms of the elements, the e-Marketing mix is evolutionary
(i.e. in terms of function). Our 4P’s+ characterization supports this. However the P2C2S2
elements indicate that there is considerable innovation here. Also the underlayment of
Personalization, Privacy and security and the potential of a relational database to
integrate marketing activities are revolutionary in their own right. In terms of the subelements we find the it is mostly revolutionary (i.e., in terms of form18). We identified
about 25 new sub-elements. But whatever the degree of newness, the sheer need to move
from 4p’s to a mix of some10 elements and 25 sub elements is one indicator of the
degree of innovation that took place in the dot-com boom.
There are several implications for managers. The E-Marketing mix provides a
baseline for the scope of e-marketing activities. It provides a common vocabulary. It
identifies the key decisions for implementation and metrics for measurement of each
element.
The framework provides a strategy development tool and a structure,
particularly, for writing a marketing plan.
Hopefully, in this way, it can provide
appropriate emphasis and integration for the elements of the E-Marketing mix (although
no attempt has been made here to address this since it is highly situation specific). And
18
In an analogous way, it could be argued that the jet-air-travel was not revolutionary in terms of function
(e.g., getting from point A to point B). A jet accomplishes the function today as did the donkey cart of
ancient times. But in terms of form, jet transportation is clearly revolutionary – it is a form of
transportation that provides a quantum shift in time and cost to accomplish the same function.
29
finally, the E-Marketing Mix, and its 4P’s+P C S memory mnemonic, can serve as a
2
2 2
tool for recalling the framework and keeping it top-of-mind.
A primary limitation of this E-Marketing Mix is that it has yet to be validated as a
“good” framework. After all, others might come up with alternative frameworks or
different classifications.
So, this is only a starting point and should be viewed as
exploratory. This suggests that the first line of empirical research might be to validate
this particular framework and categorization.
Such an empirical validation of
classification could be done with experts in the form of knowledgeable E-Marketing
managers.
Future work might address: budget allocation over the e-marketing mix and
methods to identify which elements are producing the best marginal contribution to ROI
in a given situation. Research might explore normative aspects of the e-Marketing mix
and when certain components are more or less effective. The e-Marketing mix can be
used for characterizing e-Marketing strategies, (e.g, how the different elements are being
blended) and what these strategies are leading to an analysis of comparative strategies
(possibly of competitors in the same market). The issue of multi-channel marketing is
also important in a total marketing plan: Will the customer search online and then buy
offline as opposed to the reverse, or possibly everything online? Can service be a major
component of the online functionality?
What are the conditions which favor one
approach over another and for different customers or segments? Strategic questions such
as these can only be addressed with an understanding of the total marketing mix,
including the e-marketing mix.
30
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33
Table 1: The E-Marketing Mix
Sub Element
Privacy
Polciy
Personalizat
ion
Mix
Element
Implementation Decisions
A Shopkeeper who knows and
serves the customer
A Nordstrom Personal Shopper
•
•
•
•
•
A Shopkeeper who is discreet
about using customer
information
Address the following:
• What information is being collected?
• How it will be utilized?
• Whether then information will be shared or sold
to 3rd parties and if so in what context?
• Opt in or opt out policy
• What aspects of the site are secure?
• What technology is being used to secure the site?
• What is the liability for security breaches?
• What to feature on the home page
• How to relate look and feel to the brand
• What constituencies and use scenarios to support
Providing security in a place of
business
Secu
rity
Polic
y
Website Design
Off-line Analog: An Example
Home Page
Store -font window
Navigation & Search
Store directory / department
signs
Page Design & Layout
Shelf layout and visual
presentation
Site Tools: Configuration Engine,
Size matcher etc.
Sales person interaction, Dealer
modifications
Usability & Testing
Store customer flow analysis
What aspects to personalize?
How to use cookies?
Assembling user profile
Implementing content architectures
Determine rules and how to execute them
• Layout, look and feel of the Nav bar
• What categories of information to support on the
Nav bar
What keywords to support in search
• What within-site search engine to use
What color schemes, fonts, graphics, and visuals to
feature
•
•
•
•
•
•
•
Make or buy configuration technology
What attributes to configure
Interface design
What site tracking software to use
How often to do click-stream analysis
What outside analysis firm to employ
What type of analysis to pursue (lab visits,
instrumented browsers, tracking services)
Measures & Metrics
• Conversion
• Retention
• Customer satisfaction
•
•
•
•
% of customers with profiles
% of Opt in customers
%of Abandoned shopping baskets
Number of queries regarding privacy
concerns
• Number of queries regarding security
• Number of complaints regarding credit card
fraud
• Hits, Unique visitors
• Return frequency
• Follow-on count to subsequent pages
• Performance (Download time)
• Availability (Uptime)
• Number of clicks to find merchandise
• Number of clicks to buy
• Number of clicks to track order
Number of pages visited
• Key pages visited
• Hits
• Time on page
• Sales and conversion rate of each page
• Integrity of configurations
• Page load performance
• Uptime
34
Sub Element
Price
Promotion
Off-line Analog: An Example
Implementation Decisions
Merchandising & Recommendations
Retail sales associates who
answer customer questions
• Provide creative expression for merchandise
• Items recommended by experts and buttons for
consumer access
• Extent and scope of collaborative filtering
recommendations
Dynamic Pricing
Yield Management
Forward Auction
Cattle auctions
Reverse Auction
Dutch fish markets
Name Your Price
Stock exchange trader’s book
Online Ads
Traditional Advertising: Print,
TV, Radio, News Paper, Outdoor
•
•
•
•
•
•
•
•
•
•
•
Product
Mix
Element
Sponsored Links
Yellow pages
Outbound Email
Direct Mail
Viral Marketing
Opinion leadership, Word of
Mouth
E-Coupons
Coupons
•
•
•
•
•
•
•
•
•
•
•
•
•
What items are appropriate for dynamic pricing?
What types of mathematical algorithms to use?
What auction to use for what products?
What sequence to auction items
What bid increment /decrement to require
Whether to allow a reserve price
What restrictions to place
Rules of clearing, adjudication and bid retractions
Target audience and message
Select sites
Select hosting-delivery service Choice of Banner
vs. Pop ups vs pop unders
Context dependency, Scheduling and rotation
Design click thru destinations
Target audience
Select keywords & searches
Look, feel and placement of link
Design click thru destinations
Acquire and build list
Select target(s)
Compose message(s)
Test response on sample
Roll-out mail campaign
Objectives and target audience
Execution approach
•
•
•
•
Select target(s)
Choose coupon value
Distribute coupon
Measure response
Measures & Metrics
• Sale of assortment
• % of conversions through recommendations
• Overall ROI from dynamic pricing
• Total revenue received
• Number of bids
• Excess revenue over reserve
• Exposures
• % of click-thru
• % of conversions from click-thru
• Hits
• Unique visitors
•
•
•
•
•
•
•
•
•
Response rate
Purchase rate
Order size
Profitability
Exposure (GRP)
# of customers acquired
$ volume of sales
Redemption rate
ROI
35
Community
Customer Service
Place
Mix
Element
Sub Element
Off-line Analog: An Example
Remote Hosting
Distributors
Affiliates
Independent resellers, Dealers
and Distribution Partners
Inbound Email
U.S. Mail and call centers that
are reached through toll free
numbers
Chat Rooms & Message Boards
Party Line, Special Interest
Groups
User Ratings & Reviews
User Ratings and Reviews,
Expert Ratings and Reviews
Registry Management
Gift registries
Reputations
Word of Mouth Reputations
Implementation Decisions
• Choice of portal
• Upfront versus pay for performance
compensation
• Choice of in house approach or 3rd party network
• Choice of promotion program
• Implementation and integration into web site
• Analyze incoming email and create “intent”
categories
• Draft appropriate responses
• Create escalation path and review policy
• Define response metrics
• Monitor and improve customer satisfaction
• Harvest intelligence
• Focus, sub areas and titles of chat rooms
• Whom is invited and can participate
• Promoting the chat rooms
• Moderated versus direct discussion
• How long to retain the postings
•
•
•
•
•
Type of scoring system
The aggregation mechanism
Drill down capability to review ratings
The length of the comments allowed
Over what time period to retain the ratings
(Recency)?
• Whether to offer the registry?
• What is the minimum $ value of the transactions?
• The user Interface design
•
•
•
•
•
What scoring mechanism to use?
Levels of score for de-listing from the site
Whether to allow for elaboration?
How to aggregate the feedback scores?
Where and how to display the summary of scores
Measures & Metrics
•
•
•
•
•
•
•
•
•
•
•
•
$ and % of sales from Portal
New Customer Acquisition Rates
LCV of acquired customers
$ and % of sales from affiliates
New Customer Acquisition Rates
LCV of acquired customers
Distribution of revenue across affiliates
Cost per response
% of resolutions in 24 hours
% of automated resolutions
Average time to resolve escalated email
Customer satisfaction score with email
response
•
•
•
•
•
•
•
•
•
•
•
Traffic and usage
Types of information exchanged
Types of Decisions being influenced
% of purchases influenced
Product categories influenced
$ value of customer service provided
Traffic and usage
% of purchase decisions influenced
$ volume of purchase decisions influenced
Product categories influenced
$ value of customer service provided
• % of customer base using registry
• $ volume of sales
•
•
•
•
Number of auctions closing
Level of negative feedback
Fraud rates
Complaint rates
36
Figure 1:The E*Marketing Mix
•
•
•
•
•
• Chat Rooms
• User Ratings
& Reviews
• Registries &
Wish Lists
• Reputations
Home Page
Navigation & Search
Page Design & Layout
Site Tools
Usability & Testing
• Assortment
• Merchandising &
Recommendations
Site Design
Community
Product
Customer
Service
• FAQ’s & Help
Desk
• Email Response
Mgmt.
• Chat
Price
Place
Promotion
• Affiliates
• Remote Hosting
•
•
•
•
•
Online Ads
Sponsored Links
Outbound Email
E Coupons
Viral Marketing
Personalization / Privacy / Security
Relational Database
• Dynamic
Pricing
• Forward
Auctions
• Reverse
Auctions
• Name your
price
37
Figure 2: Comparing the Mixes
Site Design
Customer Service
Macro Elements
Store Design
Customer Service
Place
Promotion
Price
Product
Location
Promotion
Price
Assortment
Place
Promotion
Price
Assortment
Personalization
Privacy
Community
Marketing
Mix
Retailing
Mix
E-Marketing
Mix
38
Figure 3: Some Leading Web Sites
3A. Amazon.com
3B. HP Shopping.com
3C. Cisco.com
3D. W.W. Gringer.com
39
Figure 4: The Yahoo Shopping Site