Marketing on the Internet

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Marketing on the Internet Powered By Docstoc
					     MKTG 2334
Lecture 2 Sept 21, 2004
Today’s Agenda
   Questions from last class?
   Influence of internet on politics
   Why Bother To Plan?
   Chapter 3 – The E-Marketing Plan in the
    context of the Group Term Project

Politics and the Internet
       10.4 million unique visitors in July
       More people viewed the spot than visited both
        candidates' sites combined, according to
        comScore Media Metrix.
       Raised $7 million
       5th Largest 527 org in US
   Blogging
       National forum for ranting
Howard Dean Story
   On July 1, 2003, Dean announced that his campaign had raised
    more than $800,000 in a single day.
   Dean for America campaign raised $7.4 million online in the third
    quarter of 2003
     Half of its $14.8 million fundraising total for Q3 2003.
   Created and sent 358 online surveys that generated 388,000
   Signed up more than 500,000 people on its Web site to receive
    email communications
   Motivated thousands of people to create personal Web pages in
    support of the campaign
   More at or webct

Why Politics and the Internet?
   The Net allows rapid, wide, and deep information
   The Internet is becoming the place where people go
    first to find information.
   The Net permits any group to publish their views
    directly and cheaply.
   The Net is a tremendously effective and accessible
    distribution medium.
   E-mail is an inexpensive and nearly instantaneous
    communications vehicle.
   The Net enables communities of interest to
    assemble and advocate.
Learning Objectives
   To be able to describe the major sections of an E-
    Marketing Plan
   To be able to explain a six-step process for
    developing an E-Marketing Plan
   To understand how an E-Marketing plan differs from
    a marketing plan for the offline world
   To provide you with a common foundation for your
    Group Project

From the first class…

Why Bother with Planning?
   There are many reasons for taking the time to
    formalize strategic, business and marketing plans:
       Organizational,
       Financial/Investment,
       Shareholder/Stakeholder Relations,
       Partners/Alliances,
       Technological,
       Competitive Pressures, and
       Setting Benchmarks for Performance Evaluation.

Overview of the E-Marketing
Planning Process
        Successful firms are able to translate, through the
         marketing process, e-business objectives and
         strategies into e-marketing goals and well-
         executed strategies and tactics for achieving those

        This marketing process entails three steps:
    1.     Marketing plan creation,
    2.     Plan implementation,
    3.     Evaluation/corrective action.

Creating an E-Marketing Plan
    E-marketing plan: It is a blueprint that links the firm’s e-business
     strategy (e-business model) with technology-driven marketing
     strategies and lays out details for plan implementation through
     marketing management.
    The e-marketing plan guides the direction of the firm, allocates
     resources, and make tough decisions at critical junctures.
    There are three common types of e-marketing plans:
    1.   The Napkin plan
    2.   The Venture Capital plan
    3.   The “Going Concern” E-Marketing Plan

1. The Napkin Plan
   Dot-com entrepreneurs were known to simply jot
    their ideas on a napkin over lunch and then run off
    to find financing.
   The big company version of this is the just-do-it. An
    employee has an idea, and convinces management
    to just do it.
   These plans sometimes work and are sometimes
    even necessary but they are not recommended
    when substantial resources are involved. Sound
    planning and thoughtful implementation are needed
    for long-term success in business.
2. The Venture Capital (VC) E-
Marketing Plan
   Small to mid-sized firms and entrepreneurs with start-up ideas
    usually begin with a napkin plan without going through the entire
    traditional marketing planning process.
   BUT as the company grows and needs capital, it has to put
    together a comprehensive e-marketing plan.
   Where does an entrepreneur go for capital?
     Sometimes bank loans,
     Most of the time, it is equity financed,
     Private funds (friends and family),
     Angel investors,
     Venture capitalists.

2. The “VC” E-Marketing Plan

   Investors are looking for a well-composed business plan, and more
    importantly, a good team to implement it.
   The business plan should contain enough data and logic to prove
       The e-business idea is solid,
       The entrepreneur has some idea of how to run the business.

2. The “VC” E-Marketing Plan
        9 questions that every business plan should
    1.    Who is the new venture’s customer?
    2.    How does the customer make decisions about
          buying this product or service?
    3.    To what degree is the product or service a
          compelling purchase for the customer?
    4.    How will the product or service be priced?

2. The “VC” E-Marketing Plan
        9 questions that every business plan should
    5.    How will the venture reach all the identified
          customer segments?
    6.    How much does it cost (in time and resources) to
          acquire a customer?
    7.    How much does it cost to produce and deliver
          the product or service?
    8.    How much does it cost to support a customer?
    9.    How easy is it to retain a customer?
3. The “Going Concern” E-
Marketing Plan
   Businesses that are no longer startups looking
    for venture capital still need a plan!
   Applies to any going concern (i.e. any
    operating business, regardless of size).
   Not specifically mentioned in the text, but by
    far the most common type of E-Marketing Plan
    being produced every day.
   Most likely to be the context in which you
    will conduct your Group Term Project.
A Six-Step E-Marketing Plan
1.   Situation analysis
2.   Define Objectives
3.   Link e-business with e-marketing strategy
4.   Implementation plan
5.   Budget
6.   Evaluation plan

Step 1—Situation Analysis
   The organizational e-business plan: SWOT
    analysis => e-business strategy.
   The marketing plan: gathers information
    about the firm’s products, the markets
    currently served, and so forth.
   The distribution plan: identifies areas where
    the products are currently sold and suggests
    geographic gaps that might be receptive to e-
Step 1—Situation Analysis
   Promotion plan information: gives clues about
    how the Internet fits with the firm’s current
    advertising, sales promotion, and other
    marketing communications.
   Firm and brand positioning in the
    marketplace: Internet planners must decide
    how closely Web site content and promotion
    will follow current positioning strategies.
   The next step is strategy formulation.
Step 2 — Formulate Objectives
   In general, an objective in an e-
    marketing plan takes the following form:
       Task (what is to be accomplished),
       Measurable quantity (how much),
       Time frame (by when).

Typical E-Marketing Objectives
   Most e-marketing plans aim to accomplish
    multiple objectives such as:
       Increase market share,
       Increase sales revenue,
       Reduce costs,
       Achieve branding goals,
       Improve databases,
       Achieve customer relationship management
       Improve supply chain management.
E-Marketing Objective-Strategy Matrix
   Objective-strategy matrix presents the firm’s e-marketing strategies
   and accompanying goals.

   Online Goals                                          Online Strategies
                      Online               Database      Direct         Online Sales   Viral
                      Advertising          Marketing     E-mail                        Marketing
                         No                   No           No             No             Yes
   customer              No                   Yes          Yes            Yes            Yes
   customer              No                   Yes          Yes            Yes            No
   brand name            Yes                  Yes          Yes            Yes            Yes
   Sell goods or
                         Yes                  Yes          Yes            Yes            Yes

        Source: Adapted from Embellix eMarketing Suite

Step 3—Link E-Business with
E-Marketing Strategy
   Review the marketing and e-business plans
   Conduct strategic planning to define the firm’s e-
    business goals + potential revenue streams
   Create supporting e-marketing strategies for the e-
    business goals:
       Tier One strategy: segmentation, targeting, differentiation,
        and positioning strategies,
       Tier Two strategy: the marketing mix (4P’s) and
        relationship management are addressed by creating
        strategies around the offer (product), value (pricing),
        distribution (place), and communication (promotion),
   Further, marketers design customer and partner
    relationship strategies (CRM/PRM).
   Tier 1
                    Positioning                           Targeting

                     Offer             Strategy
   Tier 2                                                     CRM/PRM

                             Value                    Communication


Exhibit 3 - 1 Formulating E-Marketing Strategy in Two Tiers

Tier One E-Marketing Strategic
Planning: Segmenting & Targeting
   Tools:
       Traditional segmentation analysis
       Analysis of customer bases using cookies, database
        analysis, and other techniques,
       Supply analysis: forecasts segment profitability + finds
        competitive advantages,
       Study competition to find the company’s own performance
        advantages: strengths and weaknesses, e-marketing
        initiatives, …
       Identify anticipated changes in technology, customer
        requirements, competitive landscape, etc.

Tier One E-Marketing Strategic
   Identifying brand differentiation variables
    and positioning strategies
       The understanding of the competition + the
           Differentiation of the products to provide benefits
            perceived as important by the target.
   The positioning statement: the desired image
    for the brand relative to the competition.

Tier Two E-Marketing Strategic
   The 4 P’s in an e-Marketing context

The Offer: Product Strategies
   The organization can:
       Sell merchandise, services, or advertising on the Web
       Adopt a e-business model such as online auctions,
       Create new brands for the online market,
       Simply sell selected current or enhanced products in that
   A firm must decide how online product prices will
    compare with offline equivalents considering the
    differing costs of delivering products through the
    online channel as well as competitive and market

The Offer: Pricing Strategies
   A firm must decide how online product prices will
    compare with offline equivalents considering the
    differing costs of delivering products through the
    online channel as well as competitive and market
   How to handle distribution channel conflict
   Will the firm adopt traditional fixed pricing, or use a
    pricing strategy that is variable? (See next slide)

The Offer: Pricing Strategies
   There are two online pricing trends:
       Dynamic pricing —applies different price levels for
        different customers or situations. The Internet allows firms
        to price items automatically and “on the fly” while users
        view pages
         This has met with considerable resistance in the
           marketplace and may be seen as price discrimination
         Amazon tried it and abandoned the practice when
           customers discovered that they were not always getting the
           “best” price
       Online bidding —this presents a way to optimize
        inventory management. E.g.,
Distribution (Place) Strategies
   Many firms use the Internet to distribute products or
    create efficiencies among supply chain members in
    the distribution channel.

       Direct marketing —Many firms sell directly to customers,
        by-passing intermediaries in the traditional channel for
        some sales (e.g. IBM, Dell, Eddie Bauer)

       Agent e-business models —Firms such as eBay and
        E*Trade bring buyers and sellers together and earn a fee
        for the transaction.
Marketing Communication
(Promotion) Strategies
   The Internet spawned a multitude of new marketing
    communication strategies, both to draw customers to a
    Web site and to interact with brick-and-mortar customers.

   Firms use Web pages and e-mail to:
     Communicate with their target markets and business
     Build brand images,
     Create awareness of new products,
     Position products using the Web and e-mail.

Relationship Management
   E-marketing communication strategies help build
    relationships with a firm’s partners, supply chain
    members, or customers using:
       Customer relationship management (CRM) software to
        retain customers and increase average order values and
        lifetime value,
       Partner relationship management (PRM) software to
        integrate customer communication and purchase behavior
        into a comprehensive database,
       Extranets—two or more proprietary networks linked for
        better communication and more efficient transactions
        among firms (PRM).

Step 4 — Design Implementation
Plan to Meet the Objectives
   Select:
       The marketing mix (4 Ps),
       Relationship management tactics,
       Other tactics to achieve the plan objectives.

   Devise detailed plans for implementation.

   Make sure that the right marketing
    organization is in place for implementation.
Step 4 — Design Implementation
Plan to Meet the Objectives
   Information technologies are especially adept at
    automating these processes, this is why the
    information gathering and management tactics are
       Web site forms, feedback e-mail, and online surveys
       Web site log analysis software helps firms review user
        behavior at the site and make changes to better meet the
        needs of users
       Business intelligence uses the Internet for secondary
        research, assisting firms in understanding competitors and
        other market forces.

Step 5 — Budgeting
   A key part of any strategic plan is to identify the
    expected returns from an investment.

   Returns are matched against costs to develop a
    cost/benefit analysis, ROI calculation, NPV or
    internal rate of return (IRR)
       Determine whether the effort is worthwhile.

   During plan implementation, marketers will closely
    monitor actual revenues and costs
       To monitor if results are on track for accomplishing the

Revenue Forecast
   The firm uses an established sales
    forecasting method for estimating the site
    revenues in the short, intermediate, and long
   Inputs: The firm’s historical data, industry
    reports, and competitive actions.

Revenue Forecast
   Important part of forecasting is to estimate
    the level of Web site traffic over time.
       This number affects the amount of revenue a firm
        can expect to generate from its site from different
        revenue streams:
        - Web site direct sales          - Advertising sales
        - Subscription fees              - Affiliate referrals
        - Sales at partner sites         - Commissions and
                                                  other fees

   Intangible Benefits:
       Putting a financial figure on such benefits is
        challenging but essential for e-marketers.
       For example, what is the value of increased brand
        awareness from a Web site?
   Cost Savings:
       Money saved through Internet efficiencies is
        considered soft revenue for a firm.

E-Marketing Costs
   Costs for employees, hardware, software,
    programming, maintenance and more
   Some traditional marketing costs may creep
    into the e-marketing budget
   The cost of a Web site can range from $500
    to $50 million

E-Marketing Costs
   Some of the costs site developers incur:
       Technology costs: software, hardware, Internet
        access or hosting services, educational materials
        and training, and other site operation and
        maintenance costs
       Site design. Web sites need graphic designers to
        create appealing page layouts, graphics, and

E-Marketing Costs to Know
    Salaries. All personnel that work on Web site
     development and maintenance are budget items
    Other site development expenses. If not
     included in the technology or salary categories,
     any other expenses will be here (e.g. registration
     of multiple domain names, consultants …).

E-Marketing Costs to Know
    Marketing communication. All advertising,
     public relations, and promotions activities, both
     online and offline, to draw site traffic. Search
     engine fees, online directory costs, e-mail list
     rental, prizes for contests…
    Miscellaneous. Other typical project costs might
     fall here—expenses such as travel, telephone,
     stationery printing to add the new URL…

Step 6 — Evaluation Plan
   Once the e-marketing plan is implemented,
    its success depends on continuous
    evaluation. The tracking systems should be
    in place before the electronic doors open.
   What should be measured? The plan
    objectives need to be evaluated with some
    pre-determined criteria:
     Balanced scorecard for e-business
     ROI, NPV targets…

        6 step approach to e-Marketing Plan
    1.    Situation analysis
    2.    Define Objectives
    3.    Link e-business with e-marketing strategy
    4.    Implementation plan
    5.    Budget
    6.    Evaluation plan

Group Projects
   Find your company – Sept 28
       Make sure you schedule several meetings
        over the next few months
   Perform SWOT analysis – Oct 19
       With high level recommendations for
        objectives strategies
   Develop Objective, Strategies, Tactics,
    Budget, Evaluation – Nov 30

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