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Chapter 3

Marketing in the New Internet Economy

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Road Map: Previewing the ConceptsIdentify 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.

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Major Forces Shaping the Internet Age (Fig. 3-1)

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Major Forces Shaping the Internet Age

Digitalization & Connectivity

Intranets – connect people within a company. Extranets – connect a company with its suppliers.Internet – connects users all around the world.

Internet ExplosionExplosive growth forms the heart of the New Economy.Companies must adopt Internet technology or risk being left behind.

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Company Customizes

the Market Offering

Customers Design the Market Offering

Old Economy Revolved Around Manufacturing Companies. New Economy Revolves Around

Information Businesses.

Customization and Customerization

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Marketing Strategy in the New Internet Age

Conducting business in the new Internet Age will call for a new model for marketing strategy and practice.

All buying and selling may involve direct electronic connections between companies and customers.Marketing should play the lead role in shaping new company strategy.

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e-Business, e-Commerce, and e-Marketing in the Internet Age

e-Business Involves the Use of Intranets, Extranets & the Internet to Conduct a

Company’s Business

e-Commerce Involves Buying & Selling Processes

Supported by Electronic Means

E-Marketing “e-selling” side of

e-commerce

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Benefits to Buyers

Convenient Buying is Easy and Private Greater Product Access and Selection Access to Comparative Information Buying is Interactive and Immediate

e-commerce Yields the Following Benefits to Buyers

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Benefits to Sellers

Customer Relationship Building Reducing Costs & Increasing Speed and Efficiency Offers Greater Flexibility Truly Global Medium

e-commerce Yields the Following Benefits to Sellers

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Consider the following thought questions, formulate an answer, pair with the student on your right, share your thoughts with one another, and respond to questions from your instructor.

What is the new Internet Age?What are the major forces shaping this new Internet Age?What is the difference between an intranet, extranet, and Internet?

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E-Commerce Domains (Fig. 3-2)

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B2C (Business to Consumer)Sales expected to increase from $34 billion in 2001 to $130 billion by 2006.Provides e-marketers with access to consumers in all age groups.More customer-initiated and customer-controlled.

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B2B (Business to Business)

Estimates are that B2B e-commerce will reach $3.6 trillion in 2003.By 2005, more than 500,000 enterprises will participate as buyers, sellers, or both.

Much e-commerce takes place in open trading networks:

http://www.plasticsnet.com/

Some companies are also setting up private trading networks (PTNs)

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C2C (Consumer to Consumer)Occurs between people over a wide range of products and services.

EBay’s C2C transacted more than $5 billion in trades last year.Involves interchanges of information through:• Forums• Newsgroups

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C2B (Consumer to Business)Today’s consumers can contact and communicate with companies.Consumers can search out sellers on the Web, learn about their offers, and initiate purchases.Example: Using http://www.priceline.com/, consumers can bid for airline tickets, hotel rooms, etc. Then, sellers decide whether to accept their offers.

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What are your biggest fears about doing business online? How could a marketer deal with these fears and reduce them?

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Types of e-Marketers (Fig. 3-3)

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Click-OnlyCompaniesClick-OnlyCompanies

Enabler Sites

Enabler Sites

Content Sites

Content Sites

Transaction Sites

Transaction Sites

Types of Click-Only Companies

E-tailersE-tailers

Search Engines &

Portals

Search Engines &

Portals

Internet Service

Providers

Internet Service

Providers

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Reasons for Dot.com Failures

Prices and margins were often very low

Lack of good distribution delivery processes

Poorly designed Web sites

Attention on gathering new customers instead of building brand loyalty

Spending offline to establish brand identities

Spin & hype instead of marketing strategies

Failure to research or plan

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Click-and-Mortar Companies

Many resisted adding e-commerce because of potential for channel conflict and cannibalization.Many are doing better than brick or click-only operations i.e. http://staples.com. Why?

Trusted brand names & financial resources,Large customer bases,Knowledge & experience,Good relationships with key suppliers,Ability to offer customers more options,Buy online & return unwanted merchandise to store.

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Setting Up for e-Marketing (Fig. 3-4)

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Creating a Web Site

Types of Web Sites Corporate – builds customer goodwill Marketing – moves customers closer to a direct purchase

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SonyStyle.com Marketing Web Site

This marketing web site offers engages consumers in an interaction that will bring them closer to a direct purchase, all with a few clicks of the mouse button.http://sonystyle.com

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Designing Attractive Web SitesCreate value & excitement to get people:

to the site,look around (hopefully to buy)and come back again.

Value of the site’s content that will do all of the above.

7 C’s of effective Web Site Design

ContextContentCommunityCustomizationCommunicationConnectionCommerce

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Placing Ads and Promotions Online

Online advertising - used to build Internet brands or attract visitors.Forms of online advertising & promotion:

Banner ads & tickers (move across the screen)Skyscrapers (tall, skinny ads at the side of a page)Rectangles (boxes larger than banner)Interstitials (online ads that pop up between changes)Browser ads (sponsors pay viewers to watch)Content sponsorships (sponsoring content on sites)Microsites (limited areas managed by an external co.)Viral marketing (Internet word-of-mouth)

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Other e-Marketing MethodsCreating or Participating in Web Communities

Allow members to exchange views on issues of common interest.http://iVillage.comShare common interests & well-defined demographics.

E-mail or Webcasting

E-mail: mainstay for B2C & B2BWebcasting automatically downloads customized information to recipients’ PCs.

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Promise and Challenge of e-Commerce

Limited exposure and buyingSkewed demographics and psychographicsChaos and clutterSecurityEthical concerns

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Road Map: Reviewing the ConceptsIdentify 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.