Internet Marketing – Vendor Perspective

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 Concepts
• What is unique about commercial activity on the
Internet?
– Business Model
– Online Value proposition
– Building customer loyalty
• How do companies differentiate themselves?
– Advertising
– Branding
– Pricing
• Can companies use techniques to leverage the
technology?
– Mass customisation 2
 Business Models

Timmers (1999) defines a ‘business model’ as:

An architecture for product, service and

information flows, including a description of
the various business actors and their roles;
and a description of the potential benefits
for the various business actors; and a
description of the sources of revenue.

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 Online value proposition
•A clear differentiation of the proposition from
competitors based on product features or
service quality.
•Target the market segment(s) that the
proposition will appeal to.
•How will the proposition be communicated to
site visitors and in all marketing
communications?
•Developing a tag line can help this.
•Many Internet failures can be attributed to a
lack of a valid OVP
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Alternative strategic
approaches

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 Categorising customers
according to value
-eBusiness needs to focus

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 The role of eAdvertising

• Simply put – “how to interest and retain

customers so that they become loyal and
regular purchasers”
• eAdvertising utilises digital technology to
analyse and interpret masses of data to
deliver appropriate and tailored messages to
potential customers at key stages of the
buying process

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 Customer loyalty

 Repeat purchase behavior

– One of the most significant contributors to
profitability
– Increase profits; strengthen market position;
become less sensitive to price competition; increase
cross-selling success; save cost, etc.
– Real world examples
 Amazon.com
 Federal Express (FedEx)

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Online drivers of customer
loyalty

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Online and Offline
marketing levers compared

Digital Business Management Lecture 6 10

 Comparison of conventional
and e Advertising attributes
Factor Mass Marketing Interactive
Marketing
Best outcome Volume sales Customer
relationships
Consumer behavior Passive Active
Market High volume Targeted individuals
Preferred media Television, magazines Online services
vehicle
Preferred technology Storyboards Servers, onscreen
navigators, the Web
Avoidance of Channel surfing Logoff
advertising

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Using technology to target
customers

Digital Business Management Lecture 6 12

The Internet marketing mix

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 Branding
Leslie de Chernatony and Malcolm McDonald in
their classic 1992 book, Creating Powerful
Brands, define a brand as
‘an identifiable product or service augmented
in such a way that the buyer or user perceives
relevant unique added values which match
their needs most closely. Furthermore, its
success results from being able to sustain
these added values in the face of
competition’.

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 Aaker and Joachimsthaler –
brand equity

• Brand awareness
• Perceived quality
• Brand associations
• Brand loyalty

Self Assessment task - How can these parameters be

enhanced online for the B2C Company?
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 Online Branding

• Dayal et al. (2000) say, ‘on the world wide web, the brand is the
experience and the experience is the brand’. They suggest that
to build successful online brands, organisations should consider
how their proposition can build on these possible brand promises:
• the promise of convenience – making a purchase experience
more convenient than the real-world, or for rivals;
• the promise of achievement – to assist consumers in achieving
their goals, for example supporting online investors in their decision
or supporting business people in their day-to-day work;
• the promise of fun and adventure – this is clearly more relevant
for B2C services;
• the promise of self-expression and recognition – provided by
personalization services such as Yahoo! Geocities where
consumers can build their own web site;
• the promise of belonging – provided by online communities.

…………………Plus trust and reassurance.

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 ePrice implications
• View 1 – decreased prices inevitable
– Price transparency
– Customer knowledge increases
– Price reduction and standardisation See Porter (2001)
• View 2 – decreased prices unnecessary
– 89% purchase books from first site
– Only 10% are aggressive bargain hunters
– For corporate buyers internal changes are main
benefit
– Branding! See Baker et al. (2001)
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 Differential pricing
• Options – reduce or transfer.
• Precision
– Setting prices more accurately through testing (price
indifference band) mass customisation
• Adaptability
– Rapid changes (dynamic pricing).
– e.g. Concert tickets, restaurant deals
• Segmentation
– Different charges according to profiling
– e.g. brand-loyal vs. price-sensitive vs. convenience-
oriented or image-conscious vs. economy-oriented
See Baker et al. (2001)
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 Mass Production to Mass
Customisation
• Mass Production – example: Ford
– Division of work
– Low variety of output – ‘any colour as long as it’s
black’
– Constantly rising volume sales, and lower input costs
= lower prices (economies of scale)
– OK in permanently expanding economy with
favourable demographics

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 Mass Production to Mass
Customisation
• 1970’s – Slowing Economy – Rising Oil Prices
• Need for alternative approach
• 1970’s-1980’s – Increasing competition within U.S.
market from outside countries, esp. Japan
• Late 80’s-early 90’s: Literature proposing MC
• Development of internet (esp. product configuration
systems) in mid-1990’s opens door to widespread use of
Mass Customisation

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 Types of Mass
Customisation
• The Four Faces of Mass Customisation –
– Joseph Pine and James Gilmore - (Jan.-Feb. 1997 Harvard
Business Review)
– 1. Collaborative Customisation:
• Consumer and producer engage in a dialogue to determine
customer requirements
• Computers, clothing and footwear, furniture, some services
– 2. Adaptive Customisation:
• Product is designed so that users can alter it themselves to
fit unique requirements on different occasions
• High-end office chairs, certain electronic devices

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 Types of Mass
Customisation
– 3. Cosmetic Customisation:
• Product is unique in appearance only
• Customer’s chosen text or image on T-shirts, mouse mats,
baseball caps, mugs etc.
• Also called ‘Personalisation’
– 4. Transparent Customisation:
• Producer provides customised product without consumer
being necessarily being aware that it has been customised
• Can be used when consumer’s needs are predictable or can
be easily deduced, and when customers do not want their
requirements repeated.
• Example- repeat orders for customised clothing, chemicals
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 True Mass Customisation

• True Mass Customisation requires:

– System for customer to specify requirements easily
e.g. online ordering, call centre
– Advanced manufacturing systems
• Enable economies of scope (keep cost and price low)
– Build-to-order approach
• product is not made until order is received (Book: Build to
Order and Mass Customisation – David M. Anderson)
– Minimum order quantity of one

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 Advantages of MC

– Customer has control over product

– Does not have to pay for features he/she does not want
(computers etc.)
– ‘Not in your size’ becomes a thing of the past
– Company does not have finished product inventory  better use
of working capital
– Easier for company to differentiate product
– Levels out economic fluctuations
• When slowdown occurs, less backlog of inventory
• Prices do not have to be cut as much
• Therefore, less likelihood of recession

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 Examples of Mass
Customisation
• Clothing and Footwear
– Clothing and footwear very suited to MC due to each
person being unique in size and shape (ie. NikeID,
MiAdidas, Team-Colours)
• Laptops - Dell
– Build to order computers
– Assembly, not manufacture (modular components)
• Sports equipment, industrial equipment, etc.

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 Mass Customisation of
Services
• Difficult to define when a service is mass customised rather
than just ‘customised’
• Degree of automation required
• Examples
– MyYahoo, MyMSN, iGoogle
– Personalised songs – Instasong.com
– I.T. – providing services in similar way to object oriented
software – small pre-existing components of work combined to
create overall service

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