Internet Marketing

Slide 1:Internet Marketing

E-Commerce

Slide 2:Topics

E-commerce takes off The pace of e-commerce Distribution strategies Competing against the Net

Slide 3:E-Commerce Takes Off

E-Commerce Influence = the impact of the Net on purchases made entirely offline Example: Consumer visits music web site to gather info on new releases, but visits retail store to make purchase E-Commerce Influence, Ordering and Buying

Slide 4:E-Commerce Takes Off

E-Commerce Ordering = capturing orders that are placed online but paid later via telephone or in-store Example – A consumer purchases a new car through a web site, but drives to the dealer to pick it up E-Commerce Influence, Ordering and Buying

Slide 5:E-Commerce Takes Off

E-Commerce Buying = combines ordering and paying online Example – A consumer orders an item of clothing on a web site and completes the entire transaction online. E-Commerce Influence, Ordering and Buying

Slide 6:E-Commerce Takes Off

Consumer spending online is on the rise! Fig 12.3a

Slide 7:E-Commerce Takes Off

Breakdown of 1998 Online Consumer Spending Fig 12.3b

Slide 8:E-Commerce Takes Off

E-Commerce Impact on Web Sites Adding e-commerce raises the stakes E-commerce creates incentives to improve performance and customer responsiveness E-mail response time is critical Web-server performance is important E-commerce sites are most responsive

Slide 9:E-Commerce Takes Off

E-commerce creates strong incentives for companies to enhance their online use of personalization Raises the value of users’ online experience Improves customer loyalty Allows for detailed information gathering The personalization/e-commerce link is especially strong for business-to-business marketing E-Commerce Impact on Web Sites

Slide 10:E-Commerce Takes Off

Total company purchases determines the amount of personalization Dell provides Greater personalization leads to even more purchases and a higher customer lifetime value The Personalization/E-commerce Link

Slide 11:E-Commerce Takes Off

Acquisition costs have gotten higher Pioneering sites like Amazon.com received massive amounts of PR, which lowered their costs of acquisition As competitors have entered the marketplace, acquisition costs have climbed Analysts recommend spending 70% of Year One revenues and 30% of Year Two revenues on customer acquisition High acquisition costs lead to A search for cheaper acquisition methods A premium on building customer loyalty A drive to expand the total amount of online business done with a particular customer E-Commerce Impact on Web Sites

Slide 12:E-Commerce Takes Off

The Profit Pool Concept Increasing the total amount of business done with a particular customer means that firms need to take advantage of opportunities to add products and services that fit well with current customer purchases and add profit to the firm Alliance partners can help to make this happen The profit pool is a useful tool to identify and evaluate potential online online partners A profit pool identifies the different products in an industry and calculates their industry share of revenue and their profitability

Slide 13:E-Commerce Takes Off

3 Categories of profit pools Anchor Services – Service providers that form the basis of an e-commerce Web site Extension Services – Alliance partners with an anchor service Neutral Services – Profit pool components without high profits or customer contact frequency

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This suggests that auto insurance, loans and leasing plans are highly desirable partners for both new and used car dealers Figure 12.7

Slide 15:E-Commerce Takes Off

The battle for customers takes place during: Researching and selecting the vehicle Finding a dealer and price Choosing financing, insurance, warranty Closing the deal New intermediaries complicate the split of profits between elements of the profit pool

Slide 16:E-Commerce Takes Off

Table 12.3: Steps for Online Auto Buying

Slide 17:E-Commerce Takes Off

Table 12.3 continued

Slide 18:The Pace of E-Commerce

Web sites provide customers with information that’s difficult and expensive to get any other way Customers easily obtain information about companies products services The Net has provided something new and valuable E-Commerce Buying

Slide 19:The Pace of E-Commerce

For e-commerce to continue to grow as quickly as forecasters expect, online selling must excel on the fundamentals that drive buyers

Slide 20:The Pace of E-Commerce

Regular lower prices An online site can dramatically reduce selling costs for retailers Competitive pressures keep prices low Saving Money: The Simplest Reason to Buy Online

Slide 21:The Pace of E-Commerce

Sales tax is seldom charged on online purchases Products delivered electronically - software downloads When the merchant doesn’t have a physical presence in the state where the product is delivered Shipping costs vary Consumers notice and react to the cost of shipping Shipping to home addresses is expensive Package delivery companies are optimized for delivery to commercial addresses One large delivery to a retailer is replaced by many small deliveries Saving Money: The Simplest Reason to Buy Online

Slide 22:The Pace of E-Commerce

Virtually unlimited shelf space 24/7 service Convenient for repeat purchases One-stop shopping Ability to comparison shop E-tailers Offer Assortment & Convenience

Slide 23:The Pace of E-Commerce

Less developed due to technical issues such as slow consumer access speeds Exception is adult entertainment, which earned nearly $1 billion in 1998 Other entertainment forums include auction sites chat rooms instant messaging discussion groups Entertainment

Slide 24:Distribution Strategies

Channel Structure Options Shift sales entirely to manufacturer direct (Dell, Cisco) Use existing retailers and their web sites (autos, perfume)

Slide 25:Distribution Strategies

Three sources of channel conflict Goal divergence – objectives of manufacturer or service provider differ Responsibility disputes – pertain to customer handling, territorial assignments, functions to be served and technology to be used Differing perceptions of reality – actions may be misconstrued and lead to conflict Channel Conflict Traditional distribution channels are threatened by online commerce

Slide 26:Distribution Strategies

Figure 12.14 Likelihood of Channel Conflict

Slide 27:Distribution Strategies

E-Commerce and the Proper Distribution System Disintermediation occurs when layers of a distribution channel are dropped Example – online brokerages substituting for stock brokers Reintermediation occurs when layers of a distribution channel are added Example – services such as auto-locating that combine multi-vendor information and comparison shopping

Slide 28:Distribution Strategies

E-Commerce and the Proper Distribution System Build-to-Order Direct selling enables mass customization Allows companies to manufacture unique products quickly and cost effectively Lowers the cost of holding inventory

Slide 29:Distribution Strategies

Real-Time Marketing Personally customized goods or services continuously update themselves Continuously track changing customer needs Without intervention by corporate personnel Often without conscious or overt input from the customer Requires direct sales and direct distribution

Slide 30:Distribution Strategies

However, intermediaries reduce the total number of contacts a firm has Channel Contacts and Learning Advantages of using intermediaries They know more about customers They have greater knowledge of local markets They carry a broader product line within a category They carry multiple product categories

Slide 31:Distribution Strategies

Data-Driven Intermediaries Advantages of using intermediaries They can build a profile of customer choices based on a much wider array of business than a direct seller would acquire Incentives for using intermediaries Customer coalitions – customers join intermediaries that protect their privacy while sharing appropriate knowledge to vendors Seller scope – a multi-product vendor can learn much more about customers and use this info across product categories

Slide 32:Competing Against the Net

Selective price discounts Bricks and mortar merchants can offer discounts for products that can also be bought online Concentrating attention on late adopters of technology Some consumers have a lot of fear, uncertainty and doubt about the online shopping experience This slows their defection to new online outlets Retailer Responses to the E-Commerce Challenge

Slide 33:Competing Against the Net

Creating and staging experiences Pine and Gilmore stress that the economy is evolving toward experienced-based value Retailers function less as sellers of products than as stagers of events Retailer Responses to the E-Commerce Challenge

Slide 34:Competing Against the Net

Adopt the Internet to create a hybrid system Bricks and mortar retailers can move certain parts of their retailing function online Physical locations often a superior way to Acquire customers Set up customer relationships Create a strong retail brand image The online presence Drives business to the physical locations Provides 24/7 convenience for loyal customers Adds new functionality – gift registries and shopping services Retailer Responses to the E-Commerce Challenge