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Marketing Strategy &
Implementation in Internet
Marketing
What is Internet Marketing?
The previous definition can be divided into five
components:
1. A Process;
2. Building and Maintaining Customer
Relationships;
3. Online;
4. Exchange; and
5. Satisfaction of Goals of Both Parties.
Seven Stages of Internet
Marketing
1. Setting Corporate and Business-Unit Strategy
2. Framing the Market Opportunity
3. Formulating the Market Strategy
4. Designing the Customer Experience
5. Designing the Marketing Program
6. Crafting the Customer Interface
7. Evaluating the Results of the Marketing Program
Stage One: Setting Corporate
and Business-Unit Strategy

Corporate strategy addresses the
interrelationship between the various
business units in a firm, including decisions
about which units should be kept, sold, or
augmented.
 Business-unit strategy focuses on how a
particular unit in the company attacks a
market to gain competitive advantage.
Stage Two: Framing the
Market Opportunity

Analysis of market opportunities
 Initial first pass of the business concept
 Go/no-go decisions about whether to add a
new business unit or develop a new product
line within existing business unit.
 Six-step methodology to evaluate
attractiveness of opportunity
Stage Two: Framing the
Market Opportunity

1.
2.
3.
4.
5.
6.
Six-step methodology to evaluate attractiveness of
opportunity:
Seeding the opportunity
Specifying unmet or undeserved customer needs
Identifying target segment
Declaring the company’s resource-based
opportunity for advantage
Assessing opportunity attractiveness
Making final go/no-go decision.
Stage Three: Formulating the
Market Strategy

The marketing strategy goals, resources, and
sequencing of actions must be tightly aligned
with the business-unit strategy.
What is Marketing Strategy?

Marketing strategy has three components:
1.
2.
3.
Segmentation, or identifying relevant market
segments with specific needs
Targeting, or choosing an attractive segment
consistent with a firm’s resources and goals; and
Positioning, or strategically communicating the
product’s benefits to the target segment.
Egghead.com Example


Initially an offline software retailer, it changed its
business strategy completely in 1998 by moving its
entire business online.
Unique assets include:

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Currently being the largest retail auction site on the Internet
A strong brand name
Strong wholesale relationship with United Stationers
Business center that provides specialty services
How does Egghead.com compete?


Targets small and medium businesses, and government and
education segments.
Positions itself on three variables: value, selection and
customer service.
Internet Marketing Scenarios
Pure-Play Scenario



Firms such as Yahoo!, eBay
and Egghead.com
Highly likely that both online
and offline marketing levers
(e.g. customer e-mails and
print ads) are going to be
used to build a customer
relationship.
Processes of segmentation,
targeting and positioning
remain largely the same as
for offline business.
Brick-and-Mortar Scenario


Firms such as The Gap with
both offline retail stores and an
online store
Since offline stores preceded
online store, Gap online must
optimize its online marketing
strategy within the context of
Gap’s broader strategy – i.e.
its offline positioning, image,
and asset base.
Internet Marketing Strategy:
Pure Play Firms

Bases for Segmentation



Demographic, geographic, psychographic,
cognitive and behavioral.
Effective segmentation is meaningful, actionable
and financially attractive.
Target Market



Segment size and growth
Segment structural attractiveness
Company objectives and resources
Internet Marketing Strategy:
Pure Play Firms

Positioning

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





Features/ services
Benefits
Specific usage occasions
User category
Against another product
Product-class
Hybrid
Positioning Plan
1.
2.
3.
4.
5.
Identify actual product positioning.
Determine ideal product positioning.
Develop alternative strategies for achieving ideal.
Select and implement the most promising alternative.
Compare new actual position with ideal.
Internet Marketing Strategy:
Brick-and-Mortar Firms

Segmentation for BAMs moving online
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No change
Market expansion
Market reclassification
Reclassified expansion
Targeting for BAMs moving online

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Blanket targeting
Beachhead targeting
Bleed-over targeting
“Be different” targeting
Internet Marketing Strategy:
Brick-and-Mortar Firms

Positioning for BAMs moving online




Blanket positioning
Beachhead positioning
Bleed-over positioning
“Be different” positioning
Marketing Strategy in the New
Economy Firm

The Internet has and will continue to affect
marketing strategy in four broad ways:
1.
2.
3.
4.
Finer gradations of segmentation
Faster cycle time of marketing strategy decisions
Increased accountability of marketing efforts
Increased integration of marketing strategy with
business strategy and operations
Stage Four: Designing the
Customer Experience

Customer experience should correlate with
the firm’s positioning and marketing strategy.
 Customer experience constitutes a bridge
between high-level marketing (step three)
and marketing program tactics (step five).
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?

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


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

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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:

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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

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
Exploration/ Expansion

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
Degree of Channel Integration
Number of Channels/ Intermediary Type
Commitment

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

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

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



Exploration/ Expansion

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

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.