E-Marketing, 3rd edition Judy Strauss, Adel I. El-Ansary, and Raymond Frost

E-Marketing, 3rd editionJudy Strauss, Adel I. El-Ansary,and Raymond Frost Chapter 9: Differentiation and Positioning Strategies © Prentice Hall 2003

Overview • Site Environment/Atmospherics • Tangibilize the intangible • Build trust • Efficient and timely order processing • Pricing • Customer Relationship Management • Other Strategies • Positioning Strategies • Bases for Positioning on the Web • Repositioning on the Web • Differentiation of Online Businesses • Channel Differentiation • Service Differentiation • Image Differentiation and the Customer Experience • Product Differentiation • Personnel Differentiation • Customer Relationship • Product-Service Differentiation Strategies • Differentiation Strategies

Differentiation of Online Businesses • Differentiation is what a company does to the product. • The keys to differentiating online businesses are: • The creation of a distinctive and superior customer experience, • The development of one-to-one relationships with consumers. • The real value added by the Internet: • Ability to differentiate according to customer relationships, • Provide a unique experience for each customer. • Kotler: • Defines “differentiation as the process of adding a set of meaningful and valued differences to distinguish the company’s offering from competitors’ offerings.” • “A company can differentiate its market offering along five dimensions: product, services, personnel, channel, and image.”

Differentiation of Online Businesses • Offline: • Differentiation emphasizes the product dimension. • Online: • Differentiation by product. • Advantages: • A greater assortment of products that companies are able to offer • The ability to customize product offerings for individual customers. • A powerful new avenue for differentiating by channel, services, and image.

Relative Importance of Online and Offline Differentiation Dimensions

Channel Differentiation • The Internet: • = a distribution channel + a communication channel + a relationship channel, • Used to forge one-to-one relationships with individual customers. • The Internet expands: • Companies’ geographic range + business hours + assortment of products available • The channel through which it can reach customers +display a diversified assortment of offerings + differentiate itself.

Channel Differentiation • There are multiple levels of online channel differentiation: • Product or service information online = advantage over companies with no Web presence, • Exploits the Internet as a communication channel. • Commercial transactions online, • Exploits the Internets as a transaction and distribution channel. • The differentiation of competitors’ Internet-related service offerings.

Service Differentiation • Customer service: • Ability to receive customer feedback through e-mail 24 hours a day, • Ability to respond more rapidly to customer concerns. • The distribution of products ordered online: • A way to differentiate services from traditional companies. • Online services, such as online banking and securities trading: • Are becoming increasingly popular, • Are differentiated both by the features they offer and the service consumption experiences. • Supplement traditional offline services, but replace the traditional offline services.

Image Differentiation and the Customer Experience Image differentiation is strongly affected by the Internet. • Experience branding: • When a company differentiates itself by creating a unique customer experience, • Increases customer loyalty & retention + produce referral business. • “firms can greatly improve their ability to retain customers, target key customer segments and enhance network profitability.”

Image Differentiation and the Customer Experience • Differentiation has to be built upon the ability to create huge perceptual differences from other aspects of brand positioning. • The Internet’s interactivity allows companies to respond more quickly to customer requests. • The ever-increasing speed of the Internet allows companies to communicate more quickly with current and potential customers • Essential to retaining current customers and attracting new ones.

Product Differentiation • Product differentiation: • Includes customization and bundling, • Offers a combination of products/services that the individual consumer needs + at attractive prices, • Supports one-to-one relationship building with each customer, critical for a company’s long-term success. • Product packaging: • Offline: packaging are design to appeal to consumers, be eye-catching, compete with other products on store shelves, and sell the product. • Online: consumers might require products with more utilitarian packaging + products will be shipped from the distributor directly to the consumer and thus never appear on retailers’ shelves.

Product Differentiation • Results: • Products don’t need the expensive, colorful packaging for store display. • Products only need a size and shape that is functional and useful for the consumer. • Packaging minimization will reduce waste and reduce packaging costs. • Lower prices, or more reinvestment in higher-quality, single-layer packaging enhancements.

Personnel Differentiation • In the past, personalized service and one-to-one relationships required the interaction of skilled personnel. • Now, the Internet allows companies to “deliver their products and services through low-cost channels that automate the process and remove the expensive human element.” • Lower transaction & marketing costs = cost leadership advantage over offline companies. • Cost reduction for the end user & higher levels of service. • BUT as more companies offer products and services online, this cost advantage between online and offline operations will gradually shrink over time.

Customer Relationship • The Internet has made pricing information widely available to suppliers, customers, and competitors. • Reduces price differences between suppliers, • Reduces the importance of price competition and increases the importance of differentiation. • Important to create brand loyalty and use the Internet to build one-to-one relationships with customers.

Customer Relationship • Data mining is used to predict customer behavior+ differentiate product and service offerings for individual customers = a way of fostering the one-to-one relationship. • BUT this can have the opposite effect of driving away customers who object to providing their personal preferences to companies online, or who unexpectedly find a completely different customized experience every time they visit a company Web site. • The solution = allow the customers the freedom to opt-out and remain anonymous, or to provide personal information for customization purposes.

Product-Service Differentiation Strategies • Differentiation strategies: • Being the first to enter the market, • Owning a product attribute or quality in the consumer’s mind, • Demonstrating product leadership, • Utilizing an impressive company history or heritage, • Supporting and demonstrating the differentiating idea, • Communicating the difference.

Product-Service Differentiation Strategies • E- marketing strategy revolves around the image and product information available on the Web. • A strong brand image helps to attain “ownership” of a product. (Amazon.com), • Customers are drawn to brands they trust, an attraction that is enhanced by a positive company history. Monster.com has essentially gained ownership of online job searches.

Differentiation Strategies • Traditional strategies still apply to e-marketing. • BUT some differentiation strategies are unique to marketing on the Web: • Site Environment/ Atmospherics • Tangibilize the Intangible • Trust • Efficiency and Timeliness • Pricing • CRM

Internet-Specific Differentiation Strategies

Overview • Site Environment/Atmospherics Tangibilize the intangible • Build trust • Efficient and timely order processing • Pricing • Customer Relationship Management • Other Strategies • Positioning Strategies • Bases for Positioning on the Web • Repositioning on the Web • Differentiation of Online Businesses • Channel Differentiation • Service Differentiation • Image Differentiation and the Customer Experience • Product Differentiation • Personnel Differentiation • Customer Relationship • Product-Service Differentiation Strategies • Differentiation Strategies

Site Environment/Atmospherics • Atmospherics = the in-store ambiance created by brick-and-mortar retailers. • Web sites can be differentiated by providing visitors with a positive environment to visit, search, purchase, and so forth. • Visitors want a site that: • Easily downloads, • Portrays accurate information, • Clearly shows the products and services offered, • Is easily navigated. • If customers like the home page, they will view additional pages and ultimately become a paying customer.

Tangibilize the intangible • An online product or service cannot be seen except by an image or description. • The goal: make offerings seem more tangible by showing them in a realistic and customer-friendly manner, using: • Virtual tours, • 3-D images, • Product image enlargements, • Trial downloads, • Customer reviews.

Build trust • Trust= a key issue on the Internet: • Customers are expected to pay online, • Their information is tracked for personalized service or supply chain management. • Trust-building should be an integral part of a Web site’s marketing strategy. • Trust may be built in as a by-product of strong brand recognition: • Company sites with lower brand recognition must project a secure environment: • Clearly define company’s privacy policy+ strictly enforced it • Use a safe and encrypted payment process for transactions. • A live person can be contacted if customers encounter problems on the Web site, require personal assistance, or need to exchange or return a purchase.

Efficient and timely order processing • One of the strongest motivators for customers who make Web-based purchases is the ease of ordering. • Organizations must market their alliances and delivery timeliness as an important benefit. • By following its promises, the company will build customer loyalty + receive referrals from satisfied customers..

Pricing • Pricing as a method of differentiation has come under scrutiny. • When products were first offered on the Web, companies tended to offer price discounts as an incentive. • Today, prices are relatively comparable on the Web. • The majority of firms are choosing to differentiate themselves using methods other than pricing. • Pricing is easy to imitate and non-price differentiation is more enduring for all but the price leaders.

Customer Relationship Management • Price is less used for differentiation + barriers to entry decrease on the Internet, • customer relationship management is becoming more predominant as a means of differentiation. • Netflix rent movies on DVD by mail: • Customers set up personal lists of the movies they want to rent. • Customers can rent three or more DVD movies at one time—with no return deadlines or late return penalties. • After viewing a movie, customers slip it into the prepaid return envelope to mail it back to Netflix; a few days later, they receive the next DVD on their list. • Netflix builds customer relationships one at a time through customer-driven personalization and convenience.

Other Strategies • “E-Marketing Opportunity Model” developed by Feeny helps companies define their customers and products in order to determine the degree of differentiation required. • 3 e-marketing opportunities: • Enhancing the selling process, • Enhancing the customer buying process, • Enhancing the customer usage experience. • Firms use perceived product differentiation and frequency of purchase to choose the best strategies.

Positioning Strategies • Positioning: • Help to create a desired image for a company and its products in the minds of a chosen user segment, • Concerns brands, the company itself, or individual products, • Help to control brand image. • The concept is simple: To be successful, a company must: • Differentiate itself and its products from all others, • Position itself among its competitors in the public's mind to carve out its own market niche. Positioning is the process of creating this image. A position is the resulting view of the firm or brand from the consumer perspective.

Bases for Positioning on the Web • Firms can position on the basis of: • Product or service attributes (“the smallest cell phone”), • High-tech image (“our cell phones handle e-mail”), • Benefits (“fits in your pocket”), • User categories (“best cell phone for college students”), • Comparison with competitors (“our phone is less expensive than the Nokia”), • Take an integrator position (“a full range of electronic products and services”).

Product or Service Attribute • Attributes = product or service features such as size, color, ingredients, speed, and so forth. • A patented product or process, such as Amazon’s one-click check-out process, is an idea basis for positioning. • iVillage allows users to build their own meal menus at its site using criteria such as ingredients and calorie counts. (www.ivillage.com) • Pillsbury adds value through ideas, recipes, an advice service on its site (www.pillsbury.com).

Technology Positioning • Positioning on the basis of technology shows that a firm is on the cutting. • At the Lands’ End Web site: • Women can build virtual models based on their physical features such as hair color, skin tone, hair style, and face shape. • Users can then see how Lands’ End apparel would look on themselves by trying virtual outfits on the model. The model can be rotated for front, side, and back views. • The American Airlines site: • Offers various tools to allow customers to manage their flight arrangements: Frequent flier account management, personalized travel planning, and personalized seat selection when booking flights. • Customers can store user-profile information on preferred destinations, seating preference, companion travelers, and frequent flier rewards status and billing.

Benefit Positioning • Benefits: • The flip side of attributes—the customers’ perspective of what the feature will do for them. • This positioning is generally a stronger basis because of its customer orientation. • The Polo Web site: • Focuses on how its products shape an entire lifestyle. • Its products are designed to help customers contemplate a dream world of adventure, style, and culture. • The Miller Lite Beer Web site: • Offers a software package that can be downloaded and used as a social organizer for arranging meetings, mostly for entertainment. • The Miller icon is then permanently present on the desktop, reminding the customer about the brand on a daily basis.

User Category • This positioning relies on customer segments. • It is successful when the segment has some unique quality that ties product benefits more closely to the group than to other segments. • Kellogg’s: • The company has set up an interactive Web site for children, • They can register online and enter code numbers found on Kellogg’s cereal packages, then use the codes as “money” on related Web sites or even earn interest in a “special” bank. • Yahoo! Geo Cities: • Hosts Web user pages that are organized into neighborhoods based on specific interests. • Consumers can connect with others who share the same interests.

Competitor positioning • Many firms position by touting specific benefits that provide advantages over competitive offerings. • Online or offline companies often position themselves: • Against an entire industry (“I Can’t Believe It’s Not Butter” margarine), • Against a particular firm (Amazon.com for toys), • According to relative industry position (AOL is the ISP connection leader and Earthlink a challenger).

E-Marketing, 3rd edition Judy Strauss, Adel I. El-Ansary, and Raymond Frost