New Chap 2

DIGITAL MARKETING
STRATEGY, IMPLEMENTATION AND PRACTICE

Seventh Edition
Part 1
Digital marketing fundamentals
Chapter 2
Online marketplace analysis:
micro-environment
Copyright © 2019, 2016, 2012 Pearson Education, Inc. All Rights Reserved
Chapter 2 - Online marketplace analysis:
micro-environment
Main Topics:
• Situation analysis for digital marketing
• Digital marketing environment
• Understanding customer in digital markets
• Consumer. Choice and digital influence
• Customer characteristics
• Competitors
• Suppliers
• New channel structures
• Digital business models for e-commerce
Situation analysis for digital marketing
Situation analysis: Collection and review of information about an
organisation’s external environment and internal resources and
processes in order to refine its strategy.
Customers. Digital marketing propositions and communications should

be based around the customer – their characteristics, technology
usage, behaviours, needs and wants.
Marketplace analysis. Including intermediaries, influencers and

potential partners.
Competitors. It is essential to understand how organisations compete

in a particular marketplace;
Wider macro-environment
Situation analysis for digital marketing
Online marketplace map
Helps understand online customer journey in more detail. It

summarizes different customer groups and how they seek
new products and services.
Main elements are:

-customer segment
-search intermediaries
-intermediaries, influencers and media or publisher
sites
-destination sites and platforms
Figure 2.3 An online marketplace map
Issues in analysing the online
marketplace
The digital marketing environment
Micro-environment
The players (actors) and their interactions, which influence
how an organisation responds in its marketplace.
Macro-environment
Broad forces affecting all organisations in the marketplace,
including social, technological, economic, political, legal
and ecological influences.
Understanding how customers interact with digital
markets
The main elements of the online marketplace map are:
Customer segments. The marketplace analysis helps identify and

outline different target segments, which have implications for digital
marketing, and helps to understand the target group’s online media
consumption, behaviour and relevant types of digital content
Search intermediaries. The main search engines are typically Google,

Yahoo!, Bing™
Intermediaries, influencers and media or publisher sites. Media sites

and other intermediaries such as individual influencers, social
networks, aggregators and affiliates are often successful in attracting
visitors via customer search or direct to their websites
Understanding customer journey
Customer journey: touchpoints, different types of paid,

owned and earned media which influence consumers
Customer journey maps model behaviour of different

audience personas
Figure 2.2 An example of a customer
journey map
Understanding customer journey
Zero Moment of Truth: retail-specific model for

understanding customer journeys (created by Google)
ZMOT describes the online and offline influences on

purchases. Consumer search, review ratings, styles,
prices, comments on social media before visiting a retailer
Zero moment of truth
Demand analysis and conversion marketing
Digital marketing managers should understand current trends and

levels of use of the Internet and different online services and how they
relate to services and products the organisation wishes to deliver
online
Demand analysis: Quantitative determination of the potential use and

business value from online customers of an organisation. Qualitative
analysis of perceptions of online channels is also assessed.
Conversion marketing
Using marketing communications to maximise conversion of potential
customers to actual customers.
Customer characteristics
Demographic variables: Key elements of a consumer’s

demographic profile that have been found to influence
online behaviour include variables such as: income,
education, race, age
Psychographic and behavioural variables: Any aspect of

a consumer’s perceptions, beliefs and attitudes that might
influence online behaviour, and in particular a consumer’s
intention to shop, can be defined as
a psychographic/behavioural variable
Factors that influence online
experience
CUSTOMERS
Evaluating demand levels
Level of Internet access
– Includes type of access – broadband and mobile
Consumers influenced by using online channel
– Includes understanding type of sites which have
influence
Transact online
– Includes different types of transactions, not just
sales, e.g. support, forum comments, etc.
Demand analysis and implications for
marketing planning
The digital marketer needs to assess the volume and share
of customers who:
• have access to the digital channel;
• use specific online services which may affect the
purchase decision,
• are influenced by using the digital channel but purchase
using another channel as part of the multichannel buyer
behavior;
• purchase or use other services using the digital channel.
Implications for marketing planning:
conversion models
Conversion marketing tactics can be used to convert as
many potential site visitors into actual visitors and then into
leads, customers and repeat customers.
The key ratios to consider are:

awareness efficiency
attractability efficiency
engagement efficiency
conversion efficiency
Conversion marketing
An example of a conversion model
Multichannel conversion models
• In reality, conversion modelling is complex, and

takes into account both online and offline
behaviour
• Must monitor cross-channel conversions at

different stages in the buying process as it can
help a business understand how it can improve
performance, in both online and offline channels
Multichannel conversion models
Consumer choice and digital influence
Internet is a vital part of the research process and is used

at every stage of the process
Consumers are more knowledgeable, and many sources

will affect purchasing decision (brand websites, social
media, review sites…)
Must understand the processes involved in customer

choice
Consumer choice and digital influence
Social media and emotions
It is also important to consider that social media is

increasingly influential for capturing and sharing consumer
experiences and is a major conduit through which
consumers share, recommend and feedback on their
product and service, choices and experiences
Consumer personas
Personas are fictional profiles that represent a particular

target audience.
Personas are a tool, which can help understand online

customer characteristics and behaviour and then create
communications more relevant to your audience.
The buying process
There are different stages in the buying process. At each

stage the purpose (from both the buyer and supplier
perspective) is a particular outcome:
Awareness;
Interest;
Evaluation;
Trial;
Adoption.
Figure 2.10 A summary of how digital media can
impact on the buying process in a new purchase
Information/experience seeking
behaviour models
Directed information-seekers: These users will be looking for product, market
or leisure information such as details of their football club’s fixtures. They are
not typically planning to buy online.
Undirected information-seekers: These are the users, usually referred to as
‘surfers’, who like to browse and change sites by following hyperlinks.
Members of this group tend to be novice users (but not exclusively so) and
they may be more likely to click on banner advertisements.
Directed buyers: These buyers are online to purchase specific products online.
For such users, brokers or cybermediaries that compare product features and
prices will be important locations to visit.
Bargain hunters: These users (sometimes known as ‘compers’) want to find
the offers available from sales promotions such as free samples or
competitions. For example, the MyOffers site (www.myoffers.co.uk) is used
by many brands to generate awareness and interest from consumers.
Entertainment seekers: These are users looking to interact with the Web for
enjoyment through entering contests such as quizzes, puzzles or interactive
multi-player games.
Competitors
Competitor analysis and benchmarking of competitor use of
digital marketing for acquisition and retention of customers is
especially important because of the dynamic nature of smart-
connected digital products
Competitor analysis: Involves identifying the companies that are

competing for our business and then reviewing what they are good
at, what are their strengths, where are their weaknesses, what are
they planning, where do they want to take the company and how do
they behave when other companies try to take their market share.
Competitor benchmarking: A structured analysis of the online

services, capabilities and performance of an organisation within the
areas of customer acquisition, conversion, retention and growth.
Porters 5 forces
Impact of the Internet on the five
competitive forces
Competitor analysis and
benchmarking
Benchmarking of services has different perspectives which
serve different purposes:
Internal capabilities
Different aspects of the customer lifecycle
Qualitative to quantitative
In-sector and out-of-sector
Financial to non-financial measures
From user experience to expert evaluation
New channel structures
Channel structures describe the way a manufacturer or

selling organisation delivers products and services to its
customers
Disintermediation: The removal of intermediaries such as

distributors or brokers that formerly linked a company to its
customers.
Reintermediation: The creation of new intermediaries

between customers and suppliers providing services such
as supplier search and product evaluation.
New channel structures
Digital revenue models
Revenue models: Describe methods of generating income for an organisation.
CPM (cost per thousand)

The cost to the advertiser (or the revenue received by the publisher) when an ad is served
1,000 times.
CPC (cost per click)

The cost to the advertiser (or the revenue received by the publisher) of each click of a link
to a third-party site.
Cost per acquisition (CPA)

The cost to the advertiser (or the revenue received by the publisher) for each outcome
such as a lead or sale generated after a click to a third-party site.
Digital rights management (DRM)

The use of different technologies to protect the distribution of digital services or content
such as software, music, movies or other digital data.
Business models for e-commerce
1. Value proposition
2. Customer segments
3. Customer relationships
4. Channels
5. Key partners
6. Activities needed to deliver value proposition
7. Resources needed to complete the activities
8. Cost structure (fixed versus variable)
9. Revenue stream
Summary
The micro-enviroment is within the reach of an organisation and therefore digital marketers
should be aware of the management implications that arise from this arena. To be successful
it is important to understand consumer and competitor behaviour and which suppliers and
intermediaries offer services that will enable a company to achieve its digital marketing goals.
We have explored each of the groups of players in the micro-environment. From a consumer
perspective we have identified variables that are likely to be the most effective foundation for
developing targeting strategies.
Competitors are an important group of players in the micro-environment and the Internet has
created major changes to the competitive environment.
We have examined techniques for competitive benchmarking and how to analyse competitor
behaviour, which has highlighted how it is important to understand the potential strengths and
weakness of the companies a company might compete with online.
Suppliers and intermediaries also have an important role to play in digital marketing. We
have explored the services provided by these players and considered the opportunities
provided.
Figure 2.4 Model Showing conversion
between the digital channel and traditional
channels during the buying process
Figure 2.9 Framework for understanding
online customer experiences
Source: Rose and Hair (2011)
Competitors
The shape and nature of online competitive markets

Competitor analysis and benchmarking
Suppliers
Digital marketing intermediaries

Online intermediary sites
Digital business model for e-commerce
Source: SmartInsights.com with permission.
Figure 2.15 Alternative perspectives on
business models
Case study; Boo hoo – learning for the
largest dot com failure
Questions
1) Discuss which strategic market assumptions and decisions led to
Boo.com’s inevitable failure?
2) Compare and contrast the marketing strategy of Boo.com with
successful online travel and leisure retailer lastminute.com. Suggest
what made the difference between success and failure
3) Use the framework of the marketing mix to appraise the marketing
strategy and tactics of Boo.com
4) In many ways the vision of Boo’s founders was ‘ideas before their
time’. Give examples of e-retail techniques adopted by boo.com that
are now common place.

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DIGITAL MARKETING

STRATEGY, IMPLEMENTATION AND PRACTICE

Customers. Digital marketing propositions and communications should

Marketplace analysis. Including intermediaries, influencers and

Competitors. It is essential to understand how organisations compete

Helps understand online customer journey in more detail. It

Main elements are:

The main elements of the online marketplace map are:

Customer segments. The marketplace analysis helps identify and

Search intermediaries. The main search engines are typically Google,

Intermediaries, influencers and media or publisher sites. Media sites

Customer journey: touchpoints, different types of paid,

Customer journey maps model behaviour of different

Zero Moment of Truth: retail-specific model for

ZMOT describes the online and offline influences on

Digital marketing managers should understand current trends and

Demand analysis: Quantitative determination of the potential use and

Demographic variables: Key elements of a consumer’s

Psychographic and behavioural variables: Any aspect of

The key ratios to consider are:

• In reality, conversion modelling is complex, and

• Must monitor cross-channel conversions at

Internet is a vital part of the research process and is used

Consumers are more knowledgeable, and many sources

Must understand the processes involved in customer

It is also important to consider that social media is

Personas are fictional profiles that represent a particular

Personas are a tool, which can help understand online

There are different stages in the buying process. At each

Competitor analysis: Involves identifying the companies that are

Competitor benchmarking: A structured analysis of the online

Channel structures describe the way a manufacturer or

Disintermediation: The removal of intermediaries such as

Reintermediation: The creation of new intermediaries

Revenue models: Describe methods of generating income for an organisation.

CPM (cost per thousand)

CPC (cost per click)

Cost per acquisition (CPA)

Digital rights management (DRM)

Source: Rose and Hair (2011)

The shape and nature of online competitive markets

Digital marketing intermediaries

Source: SmartInsights.com with permission.

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