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Marketing: An Introduction Marketing in the Internet Age •Chapter Three •Lecture Slides –Extended Version •Course •Professor •Date Marketing: An Introduction Looking Ahead • After studying this chapter, you should be able to: • Identify the major forces shaping the new Internet Age. • Explain how companies have responded to the Internet and other powerful new technologies with e-business strategies, and how these strategies have resulted in benefits to both buyers and sellers. • Describe the four major e-commerce domains. • Discuss how companies go about conducting e-commerce to profitably deliver more value to customers. • Overview the promise and challenges that e-commerce presents for the future. 3-2 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Opening Vignette: Canadian Tire • In business since 1922, now with 443 stores and 200 gas stations across Canada • Uses both corporate-owned stores and locally owned dealers • Slow to move their business online to avoid making the mistakes of those before them • One of the top three e-commerce sites in Canada • 2 million visitors since its inception • Includes products only available online • Special promotions such as “Item or Hot Deals of the Week” • Allows subscribers to shop directly from eFLYER and receive weekly e-mails from the company • Click-and-mortar retailing as a two-tiered system 3-3 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Forces Shaping the Internet Age • Digitalization: today’s appliances and systems run on digital information, consisting of streams of zeros and ones • Embedded systems require proprietary software to run • Provides for a refrigerator that tells you when it runs out of beer • Connectivity: telecommunications networks transport digital information • Provides for a refrigerator that re-orders for you! Digitalization & connectivity The Internet Age Customization & customerization 3-4 The explosion of the Internet ©Copyright 2004, Pearson Education Canada Inc. New types of Intermediaries Figure 3-1 Marketing: An Introduction Forces Shaping the Internet Age (continued) • Intranet: a network that connects people within a company to each other and to the company network • Extranet: a network that connects a company with its suppliers and distributors • The Internet: a vast public web of computer networks that connects users of all types all around the world to each other and to an amazingly large “information repository.” Digitalization & connectivity The Internet Age Customization & customerization 3-5 The explosion of the Internet ©Copyright 2004, Pearson Education Canada Inc. New types of Intermediaries Figure 3-1 Marketing: An Introduction Forces Shaping the Internet Age (continued) • The Internet explosion: • 400 million Internet users by the year 2000 • Internet penetration in Canada reached 69% of the population 18+ years old by early 2001 • Estimated number of Web surfers worldwide by year 2004: 1 billion • Visit the NUA website for current Internet statistics Digitalization & connectivity The explosion of the Internet The Internet Age Customization & customerization 3-6 ©Copyright 2004, Pearson Education Canada Inc. New types of Intermediaries Figure 3-1 Marketing: An Introduction Forces Shaping the Internet Age (continued) • New types of intermediaries: • Click-only companies operate on a virtual basis only, with no physical presence that customers can see • Examples: – Amazon.com – Ing Direct • Click-and-mortar companies combine an online presence with traditional stores • Examples: – Mountain Equipment CoOperative (MEC) – Canadian Tire 3-7 Digitalization & connectivity The explosion of the Internet The Internet Age Customization & customerization ©Copyright 2004, Pearson Education Canada Inc. New types of Intermediaries Figure 3-1 Marketing: An Introduction Forces Shaping the Internet Age (continued) • Customization: taking the initiative to customize the market offering for the customer • Customerization: leaving it to individual customers to design the market offering • Prosumers combine production and consumption in one process. • Example: – Reflect.com Digitalization & connectivity The explosion of the Internet The Internet Age Customization & customerization 3-8 ©Copyright 2004, Pearson Education Canada Inc. New types of Intermediaries Figure 3-1 Marketing: An Introduction “E” Terms • E-business: the use of electronic platforms to conduct a company’s business • E-commerce: buying and selling processes supported by electronic means • E-markets are marketspaces • E-marketing: efforts to communicate about, promote, and sell products and services over the Internet • E-purchasing (E-procurement): purchasing goods, services, and information from online suppliers 3-9 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Benefits to Buyers • Convenience: no traffic, parking, or limited store hours • Privacy: no human contact required • Greater product access/selection: unlimited selection is possible • Information: a wealth of available information on companies, products, and competitors • Interactive shopping: consumers can tailor the product offering to their tastes • Immediate results: consumers can order what they want when they want 3-10 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Benefits to Sellers • Customer relationship building: interaction with customers results in increased value and customer satisfaction • Cost savings: virtual space is much cheaper than physical space • Increased speed: communication moves at the speed of transmission • Increased efficiency: intermediaries are cut out • Flexibility: ongoing adjustments to product availability and pricing • Global reach: local companies can become global companies, instantly 3-11 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction E-Commerce Domains • Business to consumer (B2C): the online selling of goods and services to final consumers • Forrester Research prediction: B2C sales in Canada will reach $18m by 2004 • Products best suited to B2C: – – – – – travel services financial services music clothing computer hardware and software – flowers – gifts 3-12 Targeted to consumers Targeted to businesses Initiated by business Business B2C Consumer Business B2B Business Initiated by consumer Consumer C2C Consumer Consumer C2B Business ©Copyright 2004, Pearson Education Canada Inc. Figure 3-2 Marketing: An Introduction E-Commerce Domains • Business to business (B2B): using online resources to reach new customers, serve current customers more effectively, and obtain buying efficiencies and better prices • Gartner Group estimate: B2B will reach $3.6 trillion in 2003, compared with $107 billion in B2C • Open trading networks: huge emarketspaces for B2B buyers and sellers • Private trading networks: B2B trading networks that link a particular seller with its own trading partners 3-13 Targeted to consumers Targeted to businesses Initiated by business Business B2C Consumer Business B2B Business Initiated by consumer Consumer C2C Consumer Consumer C2B Business ©Copyright 2004, Pearson Education Canada Inc. Figure 3-2 Marketing: An Introduction E-Commerce Domains • Consumer to consumer (C2C): online exchanges of goods and information between final consumers • Example: – eBay – currently has 30 million registered users – $5 billion in trades in the past year • Types of C2C websites: – collectible and used good exchanges – forums – discussion groups – newsgroups – chat rooms 3-14 Targeted to consumers Targeted to businesses Initiated by business Business B2C Consumer Business B2B Business Initiated by consumer Consumer C2C Consumer Consumer C2B Business ©Copyright 2004, Pearson Education Canada Inc. Figure 3-2 Marketing: An Introduction E-Commerce Domains • Consumer to business (C2B): online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases • Examples: – Travelocity.com – Priceline.com 3-15 Targeted to consumers Targeted to businesses Initiated by business Business B2C Consumer Business B2B Business Initiated by consumer Consumer C2C Consumer Consumer C2B Business ©Copyright 2004, Pearson Education Canada Inc. Figure 3-2 Marketing: An Introduction Conducting E-Commerce • Click-only companies: e-tailers which operate only online without any brick-and-mortar market presence Seller Brick & mortar store channels Consumers Brick-only marketers Seller E-Commerce channels Consumers Click-only marketers Brick & mortar store channels Seller Consumers E-Commerce channels Click-and-mortar marketers 3-16 ©Copyright 2004, Pearson Education Canada Inc. Figure 3-3 Marketing: An Introduction Conducting E-Commerce (continued) • Click-and-mortar companies: traditional brick-andmortar companies that have added e-marketing to their operations. Seller Brick & mortar store channels Consumers Brick-only marketers Seller E-Commerce channels Consumers Click-only marketers Brick & mortar store channels Seller Consumers E-Commerce channels Click-and-mortar marketers 3-17 ©Copyright 2004, Pearson Education Canada Inc. Figure 3-3 Marketing: An Introduction Reasons for dot.com Failures • Lack of research and planning • Over-reliance on spin and hype rather than sound marketing strategy • Over-spending on building brand identity and attracting customers • Non-sensical business models • Poor expense control • Notable examples: – eToys.com – Pets.com – Garden.com 3-18 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Sources of E-Commerce Revenue • Product and service sales income • Advertising income • Sponsorship income • • • • • • 3-19 Alliance income Membership and subscription income Profile income Transaction commissions and fees Market research and information fees Referral income ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Types of Web Sites • Corporate web site: builds customer goodwill and supplements other sales channels, rather than selling the company’s products directly • Example: – McDonalds • Marketing web site: engages consumers in interactions that will move them closer to a direct purchase or other marketing outcome • Examples: – Toyota – Kraft Canada 3-20 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction 7 C’s of Effective Web Site Design • Context: layout and design elements • Content: text, pictures, sound and video • Community: enabling user-to-user communication • Customization: tailoring the site to different users or allowing users to personalize the site • Communication: enabling site-to-user, user-to-site, or two-way communication • Connection: linking to other sites of interest to the user • Commerce: enabling commercial transactions 3-21 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Online Advertising • Online advertising: advertising that appears while consumers are surfing the Web • Types of online advertising: – Banner ads and tickers – Skyscrapers – Rectangles – Interstitials – Browser ads – Content sponsorship – Microsites 3-22 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Online Advertising (continued) • Viral marketing: e-mail messages or other marketing events that are so infectious that customers will want to pass them along to friends • • • • 3-23 Also known as “buzz” Created by public relations Can be very inexpensive and very effective Examples: – MyPoints.com – Hotmail.com ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Web Communities • Web communities: web sites where members can congregate online and exchange opinions • Effective use of C2C properties of the Internet • Can become a home base for all of a user’s Web activities • Examples: – iVillage.com – MyFamily.com – @griculture Online 3-24 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Webcasting and E-mail • Webcasting: the automatic downloading of customized information of interest to recipients’ PCs – an attractive channel for delivering Internet advertising or other information content. – also known as “push” programming • Example – Infogate.com • In order to be effective, e-mail campaigns must be: – enriched – targeted to those who want them 3-25 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Challenges of E-Commerce • Limited consumer exposure and buying: users do more information gathering than actual buying • Skewed user demographics: users tend to be somewhat more upscale and technology oriented • Chaos and clutter: with millions of sites on the Web, it’s difficult to attract and hold attention • Security: the typical user does not trust that the Internet is a secure place to do business • Ethical concerns: tracking of usage and unauthorized use of private information remains a major concern 3-26 ©Copyright 2004, Pearson Education Canada Inc. Marketing: An Introduction Looking Back • Major changes in the marketing landscape are having an impact on marketing practices • Recent technological advances have created a new Internet age. • Marketers will have to add some Internet thinking to their strategies and tactics 3-27 ©Copyright 2004, Pearson Education Canada Inc.