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Module 3 Digital marketing strategy development

Topic 1. Introduction to digital marketing planning activities

Lesson 1. Context for digital marketing objectives
Effective planning involves devising strategies that will be successful in the future because
they are based on a reliable analysis of the changes in your trading arena.

In the dot.com boom, many companies suffered from a lack of strategic planning, which
ultimately caused their businesses to fail (Porter, 2001).

Case example: Arzoo.com.

Lesson 2. Different types of tactical digital marketing plan

 Website design and build
 Website launch or re-launch plan
 Plan for online marketing element for a traditional campaign
 Specialist online marketing communications plan

Depending on the scope and content of your plan, it might be necessary to break it down
further. For example, search marketing planning for a large e-retailer may necessitate
separate plans for search engine optimisation and pay per click, as well as continuous
marketing activities that take place all year round.

Lesson 3. Generic planning frameworks

Regardless of context, strategic development involves certain generic, sequential steps
(Jobber, 2004; McDonald, 2002; Smith, 1999).

Diagram. Generic process model for strategy development

The ‘strategy development process’ follows a generic framework that includes:

1. Environmental analysis
2. SWOT
3. Objective setting

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4. Core strategy
5. Tactical actions
6. Implementation
7. Evaluation and control

Lesson 4. Flexibility and emergent strategies

The rigidity or flexibility of your planning process is a critical issue. It impacts the process of
objective setting.

Strategic planning (Chaffey et al., 2003) can either be prescriptive or emergent.

The dynamic nature of the digital marketing trading arena means that a flexible and
responsive approach towards strategy development and objective setting is required.

Implementation
Development
Analysis

Offer
Vision
Strategy

Resources:
Required / Available

Diagram. Pathways through the strategic maze - showing the dimensions of strategic formulation and the
platforms that shape the development process.

Lesson 5. Organisation impact on choice of online objectives

Internet technology usage is influenced by:
 Maturity
 Business integration
 Marketing applications
 Category of adopter

Chaffey (2002) identified types of online presence and related business models; each with
different marketing objectives:
 Transactional e-commerce websites
 Service-orientated relationship-building websites
 Brand building websites
 Portal or media websites

Levels of internet adoption

The following organisational traits will influence the level of adoption:
 Operating in an appropriate market sector

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 Has visionary leadership

 Has an internet strategy
 Has a suitable technology infrastructure

Refer to your online course to view the ‘Levels of website development’ table describing
online development and its strategic contribution.

In order to understand the context in which to develop your planning goals and objectives,
you need to:
 Determine your approach to strategy development
 Classify your level of technology adoption

The advantages arising from digital technology adoption aren’t always clear. Tjan (2001)
proposes a matrix approach that uses metrics to assess digital enhancements in relation to
viability and fit.

Topic 2. Objectives for digital marketing plans

 The strategic context provides the environment for objective setting.
 Efficiency and effectiveness provide the focus.
 Activity level sets the parameters.
 Outcomes determine the time-frame.
 Business models define the orientation.
 Operational type sets the specifics and brings objectives to the point of becoming
operational.

Lesson 1. SMART objectives

An objective articulates what you want to achieve. It should be a clear, concise, tangible
statement of intent; i.e.:
S (pecific)
M (easurable)
A (ctionable)
R (elevant)
T (imely or time-oriented, as historical analysis)

Lesson 2. Efficiency and effectiveness objectives

Efficiency is concerned with inputs and outputs. An efficient organisation or marketer does
things economically and, in so doing, does things right.

Digital marketing plans should engender efficiency. The E-performance scorecard helps to
assess profitability by evaluating key variables for measuring attraction, conversion and

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retention (Agrawal et al., 2001) using measures such as clickthrough and conversion rates
and cost per click.

Effectiveness is about operating in the right markets, creating relevant products and services
for customers; i.e. doing the right things.

Effectiveness metrics indicate the contribution that digital marketing makes to your
organisation. Online effectiveness measures include campaign response rates, cost per
acquisition, customer satisfaction and lifetime value. If digital marketing is run as a profit-
centre, you will need to establish effectiveness measures to assess how well this centre uses
its funds. Digital marketing will have its own balance sheet to determine revenue, cost and
profitability.

Customer satisfaction and loyalty: key concerns impacting effectiveness and the ability to
achieve other objectives. You’ll also need to know the impact of digital channels on the
loyalty of your customers. Particularly for e-retailers, the conversion of first-time customers
to repeat customers is a key indicator of success. Case example: eTailQ

Wolfinbarger and Gilly (2003) used the premise that quality relates to consumer
satisfaction and retention in both product and service settings in their work to
establish the dimensions of e-tailing.

They developed a scale for measuring e-tail quality, ranking four key factors that
affect levels of online customer satisfaction: website design, fulfilment/reliability,
customer service and privacy/security.

The eight loyalty variables (Srinivasan et al, 2003) relevant to online consumer markets are:
1. Customisation
2. Contact interactivity
3. Cultivation
4. Care
5. Community
6. Choice
7. Convenience
8. Character

Lesson 3. Revenue and value

Providing value is the essence of customer centricity. There are many ways of providing
customer value, for example, information content, brokerage, incentive and entertainment.

Online revenue contribution objectives can be:

 Specified for different types of products, customer segments and geographic markets

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 Set for different digital channels such as web, mobile or interactive digital TV
 Assessed for the overall business and for specific markets or products

Lesson 4. The balanced scorecard – a holistic framework for digital business

performance
The balanced scorecard is a helpful tool for translating vision and strategy into quantifiable
objectives. The scorecard assesses whether a strategy and its implementation are successful:

Balanced scorecard Efficiency Effectiveness

Sector
Financial results  Channel costs  Online contribution (direct)
(i.e. business value)  Channel profitability  Online contribution (indirect)
 Profit contributed
Customer value  Online reach (unique visitors  Sales and sales per customer
as % of potential visitors)  New customers
 Cost of acquisition or cost per  Online market share
sale  Customer satisfaction ratings
(CPA / CPS)  Customer loyalty index
 Customer propensity to defect
Operational  Conversion rates  Fulfilment times
processes  Average order value  Support response times
 List size and quality
 Email active %
Innovation and  Novel approaches tested  Novel approaches deployed
learning  Internal e-marketing education  Performance appraisal
(i.e. people and  Internal satisfaction ratings review
knowledge)

Table. An allocation of internet marketing objectives within the balanced scorecard framework for a
transactional e-commerce site

Lesson 5. Operationalising digital marketing objectives

The operational business type defines digital marketing objectives. There are three principle
operational types that can be combined:
1. Transactional
2. Transitional
3. Communication objectives

Measurement frameworks focus on key performance indicators to improve organisational

performance throughout the customer lifecycle (Neil Mason, Applied Insights). The same
metrics can be operationalised for campaigns or over-arching annual plans.

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Metric Visitor acquisition Conversion to Conversion to sale Customer retention

opportunity and growth

Tracking  Unique visitors  Opportunity volume  Sales volume  Email list quality
metrics  New visitors  Email response quality
 Transaction churn rate
Performance  Bounce rate  Macro-conversion  Conversion rate to  Active customers %
drivers  Conversion rate: rate to opportunity sale (site and email active)
(diagnostics) new visit to start and  Email conversion rate  Repeat conversion
quote; micro-conversion rate for different
efficiency purchases
Customer  Cost per click and per  Cost per opportunity  Cost per sale  Lifetime value
centric sale (lead) (CPA)  Customer loyalty
KPIs  Brand awareness  Customer satisfaction  Customer satisfaction index
 Average order value  Products per customer
(AOV)  Advocacy (net
promoter score)
Business  Audience share  Order  Online originated  Retained sales growth
value (n, £, % of total) sales and volume
KPIs (n, £, % of total)
Strategy  Online targeted reach  Lead generation  Online sale generation  Retention and
strategy strategy strategy customer growth
 Offline targeted reach  Offline sales impact strategy
strategy strategy  Advocacy
Tactics  Continuous  Usability  Usability  Database / list quality
communications mix  Personalisation  Personalisation = opt-out/churn rate
 Campaign  Inbound contact  Inbound contact  Targeting
communications mix strategy (customer strategy (customer  Outbound contact
 Online value service) service) strategy (email)
proposition  Merchandising  Personalisation
 Triggered emails
Table. An example of an online performance management table for an e-retailer
(Adapted from Neil Mason’s acquisition, conversion, retention approach
www.applied-insights.co.uk)

Topic 3. Strategy formulation

Lesson 1. What is digital marketing strategy?
The focus of digital marketing strategy is deciding how the digital channel can be used to
support existing marketing strategies, how its strengths can be exploited and its weaknesses
managed and its intrinsic value as part of a multi-channel strategy.

Digital marketing strategy is a channel strategy that should define how to:
1. Communicate the benefits of using digital channels
2. Prioritise audiences or partners targeted for digital channel adoption
3. Prioritise products sold or purchased through digital channel

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4. Achieve digital channel targets through tactics for online customer acquisition,
conversion (engagement) and retention

Digital marketing strategy components checklist

Specific segments and target markets to prioritise for digital communications
Specific positioning and propositions
Online marketing mix, particularly place (partnerships) and service levels
Optimum media mix of tactical digital media channels
Dynamic dialogue and permission marketing contact strategies to retain and
grow customers based on an integrated customer database
User-generated content, community and social networking tactics for own
site and third-party sites.
Online brand reputation management, positive and negative, with a focus on
social networks through online PR tactics; particularly if engaging in user generated
content (whether reviews, ads, product ideas or just discussions)

Cummings (2001) has applied Tsun Tzu’s 10 military strategies to e-marketing.

Lesson 2. Alignment of digital marketing strategy with corporate plans

Some organisations restrict digital marketing to increasing the effectiveness of promotional
activities; others set online sales targets for particular target markets.

The digital marketing plan normally sits between the communications plan and detailed
campaign briefs in the planning hierarchy.

Digital communications objectives can focus on different activities and operate at different
levels of strategy and tactics, for example:

1. Online targeted reach strategy

Objective To reach relevant audiences online to achieve communications objectives such
as building brand awareness or favourability, driving online purchase,
increasing offline purchase intent, list-building or migrating existing customers
to online channels.
Focus New customer acquisition.
Strategy To communicate with selected customer segments online through media buys,
PR, email, viral campaigns and sponsorship or partnership arrangements.
Driven by objectives of online audience share and number of website visitors
in different segments. The strategy might involve:

Driving visitors to the website

Achieving brand awareness
Interactions on third-party websites.

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Building brand awareness, favourability and purchase intent on third-party

websites might be a more effective strategy for low-involvement FMCG brands
where it will be difficult to encourage visitors to the website.

2. Offline targeted reach strategy

Objective To encourage potential customers to use the online channel, i.e. visit
website and transact where appropriate.
Focus New customer acquisition and migration of existing customers online.
Strategy To communicate with selected customer segments offline through direct
mail, media buys, PR and sponsorship. Driven by the objectives of online
audience share and number of website visitors in different segments.

3. Offline sales impact strategy

Objective Use online communications to achieve sales through offline channels.

Focus Integration of the digital channel into the marketing process. Achieving
sales offline (new or existing customers) and converting interest into
sales.
Strategy Defines how online communications through the website and email can
influence sales offline, i.e. by phone, mail-order or in-store.

4. Online sales efficiency strategy

Objective To convert website visitors to buy.

Focus Achieving sales online (new or existing customers).
Strategy For transactional e-commerce websites, the strategy will be to
encourage website visitors to buy online, through merchandising,
promotions, etc.

Other types of website might aim to increase conversion rates to leads.

As part of this strategy, options to convert visitors to action, or reduce
attrition rates, are explored, e.g. first-time buyer promotions, website
design improvements, home page and landing page optimisation. Event-
triggered, automated emails also can be used to convert interest to
sales.

5. Online customer engagement / CRM strategy

Objective To engage customers online throughout their lifecycle.

Focus Developing personalised communications or contact strategies to
deliver relevant communications and experiences to new and existing
customers.
Strategy To specify a focus for digital marketing for each aspect of the online

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customer lifecycle, i.e. acquisition, retention, advocacy, reactivation and

customer insight.

Integrating digital communications objectives into wider strategic aims

The four aspects of strategic focus are all highly interdependent and must be integrated with
wider strategic aims:
1. The strategy must present a clear vision of the website’s value proposition
2. The strategy must be explicitly aligned with the corporate strategy
3. The strategy must establish the need for organisational change
4. The strategy must have an implementation focus.

(Doherty and Ellis-Chadwick 2004)

Lesson 3. Strategic orientation and formulation

Digital marketing strategy is concerned with how digital technologies can be used to achieve
competitive advantage. Business strategy is underpinned by an organisation’s strategic
orientation (Venkatraman, 1989) which is also likely to influence digital marketing plans.

Types of strategic orientation and subsequent behaviour include: aggressiveness, analysis,

defensiveness, futurity, proactiveness and riskiness.

Strategy formulation is about choices concerning alternative approaches to achieving

organisational goals.

Successful online businesses create a differential advantage using innovative features of

digital channels for communication and delivery. Other businesses cannot exploit digital
technology, or adopt a ‘do nothing’ approach that uses digital channels to replicate the
existing, offline marketing mix.

Lesson 4. Market and product development strategies

Strategy development should consider all opportunities presented by digital channels, not
just the sale of existing products to existing markets.

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Diagram. Strategic thrust options using Ansoff’s Matrix

Lesson 5. Digital marketing mix

Consider to what extent digital channels might alter the traditional elements of price,
product, place and promotion and the ways in which this can create a competitive and
differential advantage.

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Diagram. Digital marketing and the marketing mix

(After Jobber 2004)

Lesson 6. Target marketing strategy

Segmentation is the technique of identifying groups of consumers or businesses that have
similar needs or wants within a given population.

Diagram. Segmentation variables for organisational (B2B) markets

(After Jobber 2004)

Micro segmentation characteristics

 Choice: criteria used for product/service selection

 Decision making unit structure: and role and status of individual members of
buying unit
 Decision making process: duration of decision making, investment risk
 Buy class: straight re-buy, modified re-buy or new task
 Purchasing organisation: centralised or decentralised, innovation
 Organisational innovation: willingness to buy into new products and new ideas

For a list of consumer segmentation variables describing behavioural, psychographic,

profile and online characteristics, refer to your online course notes.

Selective targeting
Selective targeting is applied to an organisation’s existing segments. The segments
are sub-divided and then preferentially targeted with specific online offerings.

Examples of commonly targeted, online B2C segments include:

 Customers who are difficult to reach using other media

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 Customers who are brand loyal can be offered support services

 Customers who are not brand loyal can be offered inducements

The same principles can be applied to B2B markets:

 Larger customers could be offered preferential access through an extranet
 Smaller companies might be offered additional services to enhance buyer
supplier relationships

Online transactions, internet-based EDI and specialist portals can be used to provide
business customers with detailed information to meet their different needs and support
their buying decisions.

Positioning and differentiation

Positioning and differentiation are fundamental tenets of all marketing.

Successful positioning requires clarity, consistency, credibility and competitiveness in

relation to differential advantage (Jobber 2004).

New online characteristics that help to enhance positioning are (Chaston 2000):
 Product performance excellence
 Price performance excellence
 Transactional excellence
 Relationship excellence

Online differentiation options can be used where products are not appropriate for
sale online, such as high-value and complex products, or FMCG brands sold through
retailers.

Value can be added to the brand or product by providing online services and
different types of experience.

Re-positioning
Sometimes a product or service must be re-positioned, having failed in its current
market position or the business strategy might demand a change requiring image,
product or intangible repositioning.

Topic 4. Business and revenue models for online channels

Lesson 1. Business models and digital marketing planning
A digital business model aims to take advantage of the internet’s specific properties, and
build linkages between the organisation’s activities (the 5 Cs), its trading environment and its
business performance.

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Diagram. Internet properties: the 5-Cs and business models

(After Afuah and Tucci 2001)

Lesson 2. Taxonomy of business models

An organisation might combine several business models as part of its overall online business
strategy (Rappa, 2005) including: brokerage, advertising, infomediary, merchant,
manufacturer (direct), affiliate, community, subscription, utility.

To achieve strategic objectives, the adopted business model must address questions relating
to: customer value, scope, pricing, revenue source, connected activities, implementation,
capabilities and sustainability (After Afuah and Tucci 2001).

Online contribution to revenue

Chaffey (2003) highlights the importance of assessing the contribution of internet
revenue to the total revenue of an organisation.

Online revenue contribution is the direct contribution of the internet or other digital
media to sales, usually expressed as a percentage of overall sales revenue.

Online promotion contribution (reach) is the proportion of customers (new or

retained) who use the online resources and who are influenced as a result.

Lesson 3. Value and value creation

Customer value is “…an offer defined in terms of the target customers, the benefits offered
to these customers, and the price charged relative to the competition.”
(Knox et al. 2003)

Rayport and Jaworski (2004) suggest that online value proposition (OVP) construction
requires consideration of target segments, focal customer benefits, resources to deliver the
benefits and packaging superior to that of competitors. Branding also has the potential to
add intangible value.

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The elements of the online value proposition (OVP) (Chaffey, 2004) are:
 Content
 Customisation
 Community
 Convenience
 Choice
 Cost reduction

The online value proposition (OVP) also details informational and promotional incentives
used to encourage trial and continued purchase, for example:
 “Compare. Buy. Save” (www.kelkoo.com)
 “Earth’s biggest selection” (www.amazon.com)

Agrawal et al. (2001) suggest that the success of leading e-commerce companies is often due
to matching value propositions to segments. It is important to constantly check and refine
your OVP to ensure that it is delivering the right experience.

In developing such propositions managers should identify:

 A clear differentiation of the online proposition compared to the company’s
conventional offline proposition.
 A clear differentiation of the online proposition from competitors based on cost,
product innovation or service quality.
 Target market segment(s) that the proposition will appeal to.
 How the proposition will be communicated to website visitors and in all marketing
communications. Developing a strap line can help this.
 How the proposition is delivered across different parts of the buying process.
 How the proposition will be delivered and supported by resources – is the
proposition genuine? Will resources be internal or external?

Use a simple feedback button on the website to determine whether your customers are
happy or not with your offer.

If your online presence is highly integrated with your organisation’s wider activities you’ll
need to monitor and interpret many other KPIs.

Case example: Citibank, eBay

Topic 5. Implementation, monitoring and control

Lesson 1. Budgeting for your digital marketing plan
When investing in online communications, you are faced with three key areas of decision-
making: investment areas, balancing investment and investment tactics.

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Detailed website costs are likely to include: domain name registration, hosting, creation,
promotion, maintenance, software and applications.

To estimate the size of the required digital budget, you must understand how web-based
activities are likely to influence sales. The scale of the digital marketing budget should be
informed by market demand for online services, competitor activity and modelling returns
from digital marketing.

Of the eight methods for estimating internet marketing costs proposed in The Internet
Marketing Plan (Bayne 2000) the following four are most appropriate:
 Reallocation of marketing budget
 What competitors are spending
 A graduated plan tied into measurable results
 A combination approach

Tangible business benefits can be broken down into sources of increased (incremental)
revenue online and cost reductions and intangible business benefits such as reduced time to
market and improved customer satisfaction.

Four significant areas of cost should be considered:

 Physical
 Planning
 Implementation
 Operational.

Budgeting models
Key costs, metrics and ratios to include in – and guide – your budgeting and target
setting are:
 Website reach and visitors
 Attraction efficiency %
 Site conversion efficiency %
 Leads
 Lead conversion efficiency %
 Offline sales multiplier
 Repeat customer multiplier
 Average value per outcome
 Cost of acquisition per visitor
 Variable and fixed costs

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Content and management

When first embarking on digital marketing, an organisation will normally operate
within the existing company structure, perhaps using outsourcing.

As digital marketing’s contribution grows, new organisational structures and working

practices may need to be adopted.

The ease with which an organisation can adapt will depend on whether a prescriptive
or emergent approach is adopted.

Four growth stages are recognised for a ‘digital marketing organisation’:

1. Ad-hoc activity
2. Focusing the effort
3. Formalisation
4. Institutionalising capability

Control of website creation and maintenance

Successful control and maintenance requires clear identification of responsibilities
for different aspects of updating the website (Sterne 2001).

The questions you must answer are “Who owns the process, the content, the format
and the technology?”

A table can be created, detailing website technologies and standards that need to be
managed.

Content management systems (CMS)

Content management tools are software suites or applications for managing the
process of maintaining website content, permitting multiple authors to contribute
web content, while an administrator keeps control of the format and style of the
website and the approval process. CMS tools are used to organise, manage, retrieve
and archive information content throughout the life of the website.

For more complex websites, content management tools will help you with tasks such
as: structure authoring, link management, input and syndication, versioning,
publication, tracking and monitoring, navigation and visualisation.

Lesson 2. Monitoring and control

Monitoring involves analysing digital marketing effectiveness to establish whether your
online activities are achieving your strategic targets. Monitoring identifies drift, enabling you
to put measures in place to get things back on target. It is essential that a culture of
measurement is developed by senior managers.

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Case example: Amazon – measuring ecstasy

Performance measurement systems support four distinct tasks:

Diagram. Key questions for different stages of marketing and control

Key aspects of monitoring and control include performance measurement frameworks,

online measurement frameworks and their tools and techniques. Real-time or near real-time
analyses of performance data has the potential to change organisational behaviour and
enhance profit at an accelerated rate.

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Diagram. Linkages between performance measurement, digital marketing

and corporate strategy

To assess performance, business strategists identify and benchmark key performance

indicators (KPIs) across the organisation, including digital marketing.

Having applied the performance management framework (PMF) to actual results,

adjustments can be made. In a digital marketing context, corrective action might include
updates to website content, design and associated marketing communications. The cycle is
then repeated, with modified goals if appropriate.

Performance measures for digital marketing

Chaffey (2000) suggests organisations should define a measurement framework using
groupings of specific macro- and micro-level metrics to assess internet marketing
performance.

A PMF for digital marketing should be able to:

 Assess the impact of digital marketing on the satisfaction, loyalty and contribution of
key stakeholders (customers, investors, employees and partners).
 Assess different forms of digital marketing activities, e.g. B2C, B2B and not-for-profit
markets; transactional e-tail, CRM-oriented or brand-building; types of objectives
from transactional through to communications.
 Facilitate comparison of performance of different e-channels with other channels.
 Facilitate benchmarking practices

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Diagram. Five steps of diagnostic categories for e-marketing measurement

(From the framework by Chaffey 2012)

Analysing results
Performance diagnosis will help to ensure that your digital marketing plan is on
target. Your choice of performance management tool will vary according to three
levels of strategic planning:
 Operational
 Strategic
 Tactical

Controlling the drift

Strategies designed to pursue communication objectives can drift overtime.

It’s important to regularly review performance and act on the results in order to
maintain strategic equilibrium.

The creation of a table, setting out reviewing frequency and responsibilities for key
performance metric diagnosis and corrective action, will help to ensure that timely
reviews take place.

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