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Principles of e-Marketing | © Otilia OTLACAN |
Chap ter highlights:
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This section of the course, as well as the next one, will provide you an insight upon the issues of what marketers call “the
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We will begin by discussing the core marketing mix, insisting on the special issues raised by e-marketing. The second part of the class will focus on the extended marketing mix.
The marketing mix can be synthesized in the expression of “the 4 P’s”, standing for Product, Price, Place and Promotion.
2.1. 1. Product
Product – the first element of the marketing mix – includes investigation and research on the potential customers’ needs in order to be able to develop products to satisfy these needs.
A classic definition of the “product” notion is that of Philip Kotler: a product is anything that can be offered on the marketplace, with the purpose of capturing interest, buying, usage or consumption, as long as it can satisfy a need or fulfill a wish. A product can be a physical object, service, person, place, organization or idea. The e-marketing works in many cases with non-physical products, and is situated more on the intangible, virtual side. As we already have guessed, the e-marketing opens a new dimension, a new modality to perceive and utilize virtual instruments in order to achieve real goals.
As in classic marketing, the e-marketing product is developed and analyzed after the 3-level model introduced by Kotler. The next drawing will illustrate you this concept of the 3 levels a product has:
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The core product answers the question “What do consumers buy?” and consists in the services or main advantages sought by consumers.
The actual product is built around the core product and it may have one, several, or all of the following 5: quality, characteristics, style, brand name, packaging. The strategies at this level should ensure that the product offers a differential advantage from the competitors’ products.
The augmented product: comes as the final and most sensitive layer of the total product. It complements the product with additional services and advantages such as after sales service, warranty, delivery terms. In a highly competitive market, it’s the augmented product that makes the difference and is pushing the buying decision.
Onli ne options for the core product
In 1998, Ghosh proposed to evolve the product offerings using the Internet. He introduced the notion of ‘digital value’ to customers and suggested companies to ask themselves the following questions:
1. Can I offer additional information or transaction services
to my existing customer base?
2. Can I address the needs of new customer segments by repackaging
my current information assets or by creating new business propositions
using the Internet?
3. Can I use my ability to attract customers to generate new sources
of revenue such as advertising or sales of complementary products?
4. Will my current business be significantly harmed by other companies
providing some of the value I currently offer?
Another concept related to the product issues in e-marketing is that of the ‘prosumer’. It was introduced in 1980 (!!!) by famous futurist Alvin Toffler in his book entitled “The Third Wave”. Toffler sees a future that would mix production with consumption. He imagined a world where interconnected users would collaboratively "create" products. The “prosumer” idea was further developed and has been given alternative meanings, with great application in e-marketing. Logophilia WordSpy defines “prosumer” as:
1. A consumer who is an amateur in a particular field, but
who is knowledgeable enough to require equipment that has some
professional features ("professional" + "consumer").
2. A person who helps to design or customize the products they
purchase ("producer" + "consumer").
3. A person who creates goods for their own use and also possibly
to sell ("producing" + "consumer").
4. A person who takes steps to correct difficulties with consumer
companies or markets and to anticipate future problems ("proactive"
+ "consumer").
The inner nature of a product can even be fundamentally altered. Rayport and Sviokla (1994) describe transactions where the actual product has been replaced by information about the product. In the same manner, the scope of the product offer may be changed online. For example, Tesco.com offers computers through its online presence, although it is impractical to sell such a range of products inshore.
Onli ne options for the augmented product
We started this discussion by showing how we can interfere upon the core product, by using online means. The next discussion will take a brief look upon what options the internet offers to those who want to act on the actual and augmented product.
Maybe the most important feature one can add to a product marketed online, is the interactivity and the possibility to provide extended product information. A known example is the printer manufacturer Epson, who let purchasers select the best printer for them by choosing options such as print quality and speed which then automatically reduces the number of available printer options.
Other aspects of the augmented product that can be greatly addressed online: add-on services such as gift wrapping; product or brand endorsement such as Pepsi offering video interviews with David Beckham through their e-newsletter and web site; awards, testimonials; customer lists; warranties; guarantees; money back offers; customer service.
When acting on an online market, we have great opportunities to get closer to the customer. A simple way of doing so is the “Feedback” section of any efficient website. Such feedback can provide detailed and accurate information upon the customers, such as demographics, spending habits, purchase intentions in the following period and so on.
2.1. 2. Price
Price is an extremely important element of the marketing mix, because it is the only one able to generate a turnover for the organization.
When looking more deeply into the interactions between the 4 P’s of the marketing mix, one observes that Price is a supportive element for the remaining 3 P’s, because it costs to produce and design a Product, it costs too distribute it (Place) and definitely we have costs to Promote it.
There is no single, consolidated view of how the use of internet interferes in pricing issues. We have to present two extreme viewpoints, discussed by Baker in 2001.
The first view is the inevitability of having decreased prices for products sold over the internet. Why? Because the capabilities offered by the internet significantly increase the customer knowledge: consumers have tools such as price comparison sites, at both individual and organizational level.
The second view is that although price transparency is a great theory, the actual practice of the consumers is quite different. Baker’s researches indicated that many online purchasers do no not perform much research before buying. For example, it is estimated that 89% purchase books from first site and only 10% of online shoppers are aggressive bargain hunters. Another issue is made of barriers to prevent organizational buyers to use online marketplaces. Another impediment is the preference for a human face, especially when developing long-term relationships with a supplier.
We will now review what options a marketer has, to set online pricing policies. The identified and most used options nowadays are:
Differe ntial pricing is the most common approach. It basically means that a company that goes online, would offer lower prices when selling online compared to the prices offered offline. A classic example is that of airway companies: almost all offer lower prices when you buy online than you can get from the company’s offline offices.
There are three factors to assist in online pricing:
Reverse B2B auctions are still a troubled practice, even though some business sectors use it widely (such as chemicals, engineering). It is difficult to prognose the evolution of reverse auctions since the buyers’ behavior is still confusing: half of them do not chose the lowest bidder, while over 80% prefer to stay with the current supplier.
Pricing structure: the internet technologies made possible to alter the traditional pricing structure and adapt it to the new market realities. Altering pricing structure is particularly suited for digital, downloadable products such as mp3’s, software, e-books. While in the traditional commerce you would pay just once, for continuous use, in the online world you’re offered more possibilities such as renting, pay-per-use, leasing.
Further pricing options that could be varied online include Basic Price, Discounts, Add-On’s and extra products and services, Warranties, Refunds, Order Cancellation terms.
2.1. 3. Place
Traditionally, the place element refers to how an organization will chose to distribute the product / service they are offering to the end user. Efficient distribution is highly important in order to achieve the overall marketing objectives of an organization.
If we take a closer look into the marketing mix, we should notice that the biggest impact of the internet is upon the place element, for the simple reason that the internet has a global reach. Identified major implications of the internet upon the place aspect of the mix are:
Plac e of purchase, for which McDonald and Wilson (2002) identified five options:
Seller-controlled sites: those that are the main site of the supplier company which are e-commerce enabled;
Navigation, with three key aspects proposed by Evans and Wurster (1999):
Localisation: the strategy of providing a local site, most of the times using the local language. Local sites are especially important when the culture differences are significant from one marketplace to another, and the organization finds it more appropriate to address locally.
New channel structures: some new structures were born, specific for the internet-based markets. The ones most easy to notice and analyze are:
Chan nel conflicts: the usage of the internet is not always a blessing. When deciding if an organization should introduce online distribution channels, a great thought must be given to how distribution arrangements with existing partners are affected. In some cases, the direct sales opportunities offered by the internet and the apparently increased profitability are not strong enough reasons, therefore sometimes the internet should be used solely as communication channel.
2.1. 4. Promotion
The promotion as part of the marketing mix refers to how marketing communications are used to inform the audience about an organization and its products. Whatever we intend to sell, is means nothing as long as the target market has no information about our offer.
The internet offers plenty new marketing communications channels to inform customers and assist during the purchase cycle.
We can deploy internet technologies to find new ways to improve and sustain advertising activities, sales promotions, public relations, or to proceed to direct marketing campaigns using e-mail or websites. Another typical usage of the internet can materialize in assistance of the buying process: you can present your products online and sell them through your offline force. At last, you can take advantage of the many creative communication techniques available through the internet in order to develop a better customer relationship management (acronym: CRM).
The promotion element of a marketing plan also requires taking strategic decisions about investment in the online communications mix. Example: “What is the balance between investment in site promotion compared to site creation and maintenance?” – you should have in mind that building a website is rarely (if never!) enough to ensure your company its online presence. The site must be promoted just like you promote a product, in order to make it efficient and support your business. Since there is often a fixed budget for site creation, maintenance and promotion, the e-marketing plan should specify the budget for each to ensure there is a sensible balance and the promotion of the site and e-marketing campaigns are not underfunded.
The model of the marketing mix, the 4 P’s, was introduced more than 40 years ago. As consumers and businesses were
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Therefo re, new elements, service elements, has been added to complete the marketing mix:
The service elements of the marketing mix are as important in the virtual world as they are in the physical world. The extended marketing mix is also known as “the 3 P’s”, that add to the initial 4 P’s.
Peop le
The people element of the extended marketing mix refers to the how the staff of an organization interacts with customers and other stakeholders.
The main aspect of the people element when we are active in an online market, is the degree in which we can replace the staff with automation capabilities of the internet. There are several way we can do that:
Proc ess
The process element of the marketing mix refers to the methods and procedures companies use to achieve all marketing functions such as new product development, promotion, sales and customer service. The restructuring of the organization and channel structures described for the product, price, place and promotion all require new processes to be performed.
Phys ical evidence is the element of the marketing mix that refers to the tangible expression of a product and how it is purchased and used. In an online context, physical evidence refers to customers’ experience of the company through the web site and associated support. It includes issues such as site ease of use or navigation, availability and performance (Chaffey).
Keyw ords: marketing mix, the 4P’s the 3 levels of a product, prosumer, extended marketing mix, the 3P’s, competitive advantage.
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