CAP. 7

Question 1

Introduction

Answer 1

The digital marketing plan will help define specific digital marketing objectives and develop strategies to ensure that resources are deployed to take advantage of the marketing opportunities provided by the Internet, and to counter its threats. Digital marketing is focused on how a company and its brands use its website, together with other digital platforms and media to interact with its audiences to add value to its brand and so meet its marketing goals.
3 main operational processes involved in digital marketing:
* Customer acquisition.
* Customer conversion.
* Customer retention and growth.
RACE is a similar framework developed at SmartInsights.com to help marketers manage and improve the commercial value that their organisations gain from digital marketing. The digital marketing strategy will naturally be informed by the wider business and marketing objectives and digital business strategy to ensure it supports the goals of the organisation. There’s usually a separate communications plan that details the marketing campaigns that need to be executed to achieve the marketing objectives from the marketing plan.

Question 2

Chapter structure

Answer 2

Examples of typical ways in which organisations align their digital marketing strategy with business strategy are provided by Sultan and Rohm (2004) who, based on a study of 3 organisations, identify these strategic objectives:
* Cost reduction and value chain efficiencies.
* Revenue generation.
* Channel partnership.
* Communications and branding.
Real-world Digital Business: The Country Attire interview

Question 3

What is digital marketing?

Answer 3

It has been described simply as ‘achieving marketing objectives through applying digital technologies and media’ (Chaffey and Ellis-Chadwick, 2016). This definition helps remind us that it’s the results delivered by technology that should determine investment in digital marketing, not the adoption of the technology.

Question 4

Marketing defined

Answer 4

Definition of marketing by the UK’s Chartered Institute of Marketing is: ‘Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitability’.
This definition emphasises the focus of marketing on the customer, while implying a need to link to other business operations to achieve this profitability. How digital channels can be used to achieve the processes implied by this statement:
* Identifying.
* Anticipating.
* Satisfying.
One type of crowdsourcing is crowdfunding, which is generally used for financing a project or venture by raising small amounts of money from lots of different people. However, some brands are using crowdsourcing beyond just raising money – they’re using these platforms to drive innovation and tap into the feedback and ideas of an engaged community.
Smart Insights (2010): 6 different classes of interactive online feedback tools, which digital businesses can use to understand and identify customer needs and perceptions as part of marketing:
1. Website feedback tools.
2. Site user intent-satisfaction surveys.
3. Crowdsourcing product opinion software.
4. Simple page or concept feedback tools.
5. General online survey tools.
6. Site exit-intent survey tools.
‘Internet marketing’ was used to refer to an external perspective of how Internet can be used with traditional media to acquire and deliver services. Nowadays, digital marketing is the most common term used, which refers to any use of technology to achieve marketing objectives and has an external and internal perspective. This is more consistent with the concept of digital business, which involves managing internal and external digital communications.

Question 5

Inbound marketing

Answer 5

Inbound marketing is considered powerful because adv wastage is reduced. Content and search marketing can be used to target prospects with a clearly defined need. But this is a weakness since marketers may have less control than in traditional communications where the message is pushed out to a defined audience and can help generate awareness and demand. Content, social media and search marketing do have a role to play in generating demand.

Question 6

Content marketing

Answer 6

Success in inbound marketing requires exceptional, compelling content to attract visitors to a site and engage them. Different content types can help attract visitors through search engines and, since engaging content is more likely to be shared within social media, encourage visitors to a site. To emphasise the importance of content marketing to gaining permission to communicate through email, encouraging sharing and ongoing engagement through websites and social media, the concepts of content marketing and content strategy have developed to describe best-practice approaches. Content = combination of static content forming web pages, but also dynamic rich-media content that encourages interaction. Videos, podcasts, user-generated content and interactive product selectors should be considered as content that should be refined to engage issues.
Challenge of content strategy: many different types of content delivered in different forms to different places on different access platforms yet is important to engage customers in social.
The definition suggests these elements of content management that need to be planned and managed:
1. Content engagement value
2. Content media.
3. Content syndication. Content can be syndicated to different type of sites through feeds, APIs, microformats or direct submission by email.
4. Content participation. Effective content isn’t simply delivered for static consumption, it should enable commenting, ratings and reviews. Content need to be monitored and managed.
5. Content access platform.
Mini Case Study 7.1: Firebox uses crowdfunding platform to tap into a ready-made distribution network

Question 7

Digital marketing planning

Answer 7

A digital marketing plan is needed to detail how sell-side objectives of the digital business strategy will be achieved through marketing activities such as research and communications. A digital marketing plan is based on the objectives of the marketing strategy, so there’s an overlap between the elements of each approach, particularly for environment analysis, objective setting and strategic analysis.
SOSTACtm framework by Paul Smith (1999): summarised the different stages that should be involved in a marketing strategy, from strategy development to implementation:
* Situation – where are we now?
* Objectives – where do we want to be?
* Strategy – how do we get there?
* Tactics – how do we get there?
* Action – what is our plan?
* Control – did we get there?
Measurement of the effectiveness of digital marketing is an integral part of the strategy process to assess whether objectives have been achieved. The loop is closed by using the analysis of web analytics data metrics collected as part of the control stage to improve digital marketing through making enhancements to the website and associated marketing communications.

Question 8

Is a separate digital marketing plan required?

Answer 8

If there’s a specific resource for digital marketing activities, then he will be responsible for the digital marketing plan. However, when there’s no identified responsibility for digital marketing, there’s likely to be no digital marketing plan.
Problems typical and commonplace when no clear planning or control for digital marketing:
1. Customer demand for online services will be underestimated if this hasn’t been researched and it’s under-resourced and no objectives are set to achieve online marketing share.
2. Existing and start-up competitors will gain market share if insufficient resource are devoted to digital marketing and no clear strategies are defined.
3. Duplication of resources will occur.
4. Insufficient resource will be devoted to planning and executing digital marketing and there’s likely to be a lack of specific specialist digital marketing skills.
5. Insufficient customer data are collected online as part of relationship-building and these data aren’t integrated well with existing systems.
6. Efficiencies available through online marketing will be missed.
7. Opportunities for applying online marketing tools will be missed or the execution may be inefficient if the wrong resources are used to marketers don’t have the right tools.
8. Changes required to internal IT systems by different groups won’t be prioritised accordingly.
9. The results of online marketing aren’t tracked adequately on a detailed or high-level basis.
10. Senior management support of digital marketing is inadequate to drive what often needs to be a major strategic initiative.
However, managers responsible for a substantial investment in a website and associated digital marketing communications will want to ensure that the correct amount of money is invested and used effectively.
For smaller organisations, the digital plan need not be exhaustive: set clear objectives and strategies showing how the digital presence should contribute to the sales and marketing process.
In the longer term, it’s likely that a separate digital marketing plan won’t need to be developed each year since digital channels can be considered as any other communications medium and integrated into existing communications plans.

Question 9

Situation analysis

Answer 9

The aim of situation analysis is to understand the current and future environment in which the company operates, so that strategic objectives are realistic considering what’s happening in the marketplace.
Consideration of the SLEPT or macro-environment factors and an internal audit of the capability of the resources of the company.
SWOT analysis can be used to summarise the range of analyses covered in this section.

Question 10

Customer demand analysis

Answer 10

A key factor driving digital marketing and digital business strategy objectives is the current level and future projections of customer demand for e-commerce services in different market segments. This will influence the demand for products online and this should govern the resources devoted to different online channels. Demand analysis examines current and projected customer use of each digital channel and different services within different target markets. It can be determined by asking for each market:
* What percentage of customer business have access to Internet?
* What percentage of members of the buying unit have access to Internet?
* What percentage of customers are prepared to purchase your product online?
* What percentage of customers with access to Internet aren’t prepared to purchase online, but are influenced by digital info to buy products offline?
* What’s the popularity of different online customer engagement devices?
* What are barriers to adoption of customers of different channels and how encourage adoption?
Savvy digital marketers use tools provided by search engine services to evaluate the demand for their products or services based on the volume of different search terms typed in by search engine users. Most users also narrow their searches using qualifiers like ‘free’, ‘cheap’ or ‘compare’, which give opportunities for comparison sites to attract visitors and to gain commission through affiliate marketing. Online retailers can target their messages to consumers looking for these products through adv services.
Through evaluating the volume of phrases used to search for products in a market it’s possible to calculate the total potential opportunity and the current share of search terms for a company. ‘Share of search’ can be determined from web analytics reports from the company site, which indicate the precise key phrases used by visitors to actually reach a site from different search engines.
The situation analysis as part of digital marketing planning must determine levels of access to the internet in the marketplace and propensity to be influenced by Internet to buy offline or online. In a marketing context, the propensity to buy is an aspect of buyer behaviour.
For each geographic market the company intends to serve, research need to establish:
1. Percentage of customers with Internet access;
2. Percentage of customers who access the website;
3. Percentage of customers who will be favourable influenced;
4. Percentage of customers who buy online.

Question 11

Qualitative customer research

Answer 11

Customer analysis doesn’t have to be restricted to quantitative demand analysis. Variani and Vaturi (2000): qualitative research provides insights that can be used to inform strategy; they suggest using graphic profiling, which is an attempt to capture the core characteristics of target customers.
The challenge within organisations seems to be selecting which paid-for and free services to select and ensuring sufficient time is spent reviewing and actioning the data to create value-adding insights. Often data are used only by the digital team and are under-utilised more widely across an organisation. In large organisations, staff are unaware of the existence of the data, or service provider supplying them, or there’s just too much to know what to do with (known as Big Data). There’s also the issue of privacy; organisations need to be transparent about how they collect and use these data and give customers choice.
Many online businesses are harnessing customer view-points or innovation through their own programmes.
Digitally savvy companies use platforms for marketing research, as a listening channel and use Internet and email channels to solicit feedback and suggestions, which contribute to shaping future services.

Question 12

Competitor analysis

Answer 12

Competitor analysis is important in the digital marketplace due to the dynamic nature of online media. This enables new services to be launched, and promotions changed, far more rapidly than through print communications. Implications: competitor bench marking isn’t a one-off activity while developing a strategy but rather it needs to be continuous.
Benchmarking of competitors’ online services and strategy is a key part of planning activity and should occur on an ongoing basis to respond to new marketing approaches such as price or promotions. Chaffey et al. (2009): competitor benchmarking has different perspectives that serve different purposes:
1. Review of internal capabilities.
2. From core proposition through branding to online value proposition (OVP).
3. Different aspects of the customer lifestyle.
4. Qualitative to quantitative.
5. In-sector and out-of-sector.
6. Financial to non-financial measures.
7. From user experience to expert evaluation.

Question 13

Internal marketing audit

Answer 13

An internal audit will assess the capability of the resources of the company to deliver digital marketing compared with competitors. The internal audit will also review the way in which a current website performs. The audit is likely to review the following elements of an e-commerce site:
1. Business effectiveness. Contribution of the site to revenue, profitability and an indication of the corporate mission for the site. The costs of producing and updating the site will also be reviewed.
2. Marketing effectiveness. May include:
* Leads
* Sales
* Cost of acquiring new customers
* Retention
* Market share
* Brand engagement and loyalty
* Customer service.
These measures will be assessed for each of the different product lines delivered through the website.
3. Internet effectiveness. Specific measures used to assess how the website is used, and the characteristics of the audience. Include specialist measures such as unique visitors and page impressions collected through web analytics, and also traditional research techniques such as focus groups and questionnaires to existing customers. The effectiveness of the value proposition of the site for the customer should also be assessed.

Question 14

Objective setting

Answer 14

Effective digital marketing plans are based on clearly defined objectives, since these will inform the strategies and tactics and help in communicating the strategic aims to the workforce and investors.
Strategies are most effective when they support specific business objectives. A useful technique to help align strategies and objectives is to present them together in a table with the insight developed from situation analysis, which may have informed the strategy.
The value of using metrics that combined efficiency and effectiveness and could be applied in the context of the balanced scorecard.
Importance of defining the online revenue contribution as a target to improve performance.
Case Study 7.1: The evolution of easyJet’s online revenue contribution

Question 15

Strategy

Answer 15

The strategy element of a digital marketing plan defines how digital marketing objectives will be achieved. Strategy definition has to be tightly integrated into the digital marketing planning process since digital marketing planning is an iterative process from situation analysis to objective setting to strategy definition. Chaffey: the output from the digital strategy will often be a series of strategic e-commerce initiatives in the key areas of customer acquisition, conversion or retention. These e-commerce initiatives will typically be prioritised and placed as part of a long-term e-commerce roadmap, defining required developments over a long period of 18 months to 3 years.
The amount invested on Internet should be based on the anticipated contribution the Internet will make to a business. Electronic Shopping Test: for reviewing the likely strategic importance of the Internet to a company as developed by de Kare-Silver (2000), is still relevant today since the drivers for online against offline services remain similar.
Box 7.1: The Electronic Shopping or ES Test

Question 16

Market and product positioning

Answer 16

Internet offers new opportunities for selling new products into new markets. These present strategic alternatives that can be evaluated using the options first stated by Ansoff (1957). The risks involved with the 4 options of market penetration, market development, product development and both market and product development vary.
Also options for new digital products that could include info products that can be delivered over the web. Such products may not be charged for, but will add value to existing products. Ghosh (1998): developing new products or adding digital value to customers. Still relevant today for consideration as part of digital marketing strategy, companies should ask:
1. Can I offer additional info or transaction services to my existing customer base?
2. Can I address the needs of new customer segments by repackaging my current information assets or by creating new business propositions using Internet?
3. Can I use my ability to attract customers to generate new sources of revenue such as adv or sales of complementary products?
4. Will my current business be significantly harmed by other companies providing some of the value I currently offer?
Ghosh (1998): companies should provide free digital value to help build an audience. He refers to this process as building a customer magnet; today this would be known as a portal or community. There’s good potential for customer magnets in specialised vertical markets served by b2b companies.

Question 17

Target market strategies

Answer 17

Review the options for using the digital media to reach new markets or develop existing markets and analyse the target market in more detail to understand needs and potential and develop a strategy to satisfy these markets to maximise revenuetarget marketing strategy, 4 stages:
1. Segmentation. In a digital marketing planning context, market segments will be analysed to assess:
1) their current market size or value, future projections of size and the organisation’s current and future market share within the segment;
2) competitor market shares within the segment;
3) needs of each segment, in particular unmet needs;
4) organisation and competitor offers and proposition for each segment across all aspects of the buying process.
2. Target marketing. Digital technology is that it makes it easier and more cost-effective to deliver targeted messages on a web page or in an email compared to traditional media. Targeting variable:
1) Relationship with company. Campaigns to target new contacts or existing ones or both. When visitors click through to your website from online and offline campaigns, copy should be presented that recognises the relationship or provides a range of content to recognise each different relation.
2) Demographic segmentation. Typically based on age, sex or social group.
3) Psychographic or attitudinal segmentation. The psychographic characteristics are still an important part of the brief, to help develop messages. It’s possible to collect attitudinal info on a site and add it to the customer profile.
4) Value. The higher-value customers will often warrant separate communications with different offers. Sometimes digital channels aren’t the best approach for them. It’s also worth considering reducing the frequency of emails to this audience.
5) Lifecycle stage. Very useful where customers follow a particular sequence in buying or using a service. Automated event-triggered email marketing can be developed for this audience.
6) Behavioural. It involves assessing customers’ past actions in following links, reading content, using online services or buying products, and then follows up on these with a more relevant message based on the propensity to act based on the previous action. Online options for behavioural targeting (illustrated by lastminute.com):
* Pay-per-click search engine marketing (AdWords).
* Display adv (cookies).
* Email marketing.
The variables selected for targeting should be those likely to influence the response for the campaign.
Seybold (1999): 5 questions to help develop a customer-centric strategy for digital marketing:
1. Who are our customers?
2. How are their needs changing?
3. Which do we target?
4. How can we add value?
5. How do we become first choice?
3. Positioning. Positioning: how a consumer perceives a product in terms of the elements of value. Companies that need to decide how to highlight the benefits as a differential advantage over rivals’ products. Having a clear, powerful positioning is crucial online, since it’s easy for customers to compare service providers when initially selecting a product. It’s also important to customer retention, since the first experience of a brand will determine whether the customer naturally returns to the supplier as first choice or initiates another search to find alternatives. In a digital marketing context, the differential advantage and positioning can be clarified and communicated by developing an online value proposition (OVP). This is similar to a unique selling proposition, but is developed for e-commerce services. It builds on the core proposition for the company’s services. In developing a proposition, managers should identify:
* A clear differentiation of the proposition from competitors’, based on product features or service quality.
* Target market segment(s) that the proposition will appeal to.
* How the proposition will be communicated to site visitors and in all marketing communication (developing a tagline can help).
* How the proposition is delivered across different parts of the buying process.
* How the proposition will be delivered and supported by resources.
Ideally, the e-commerce site should have an additional value proposition to further differentiate the company’s products or services. The site design will also need to communicate the core proposition of the brand or products. Benefit of having a clear online value proposition:
* It helps distinguish an e-commerce site from competitors;
* Provide a focus to marketing efforts and enables staff to be clear about purpose of site;
* If the proposition is clear, it can be used for PR and word-of-mouth recommendations;
* It can be linked to the normal product propositions of a company or its product.
Many strategic digital marketing planning decisions are based around the OVP and the quality of online customer experience delivered by a company. Interactive features can be important for transactional sites in that they may enhance the user’s experience and so encourage conversion and repeat sales.
4. Planning

Question 18

Content strategy

Answer 18

A compelling OVP demands exceptional, compelling content and a compelling experience provided for customers through the website and other online presence on blogs, social networking sites and through mobile platforms. By content we refer to the combination of static content forming web pages, and dynamic rich media content that encourages interaction.
Challenge of content strategy because there’re so many different types of content delivered in different forms to different places on different access platforms, yet it’s important to engage customers in social media.
Managing the creation of quality content is part of a broader customer engagement strategy that looks at delivering effective content across the whole customer lifecycle. It’s an integral part of the CRM strategy development.
To help deliver a compelling OVP requires a change of mindset for many companies. Think more like a publisher and invest in quality content superior to that of their competitors; this requires:
* Quality, compelling content.
* Quality writers to create quality content.
* An editorial calendar and appropriate process to schedule and deliver the content.
* Investment in software tools to facilitate.
* Investment in customer research.
* Careful tracking of which content engages.

Question 19

Characteristics of digital media communications

Answer 19

Recognising differences between the Internet and other media is important to achieving success in channel promotion and channel satisfaction and will lead in turn to positive channel outcomes and profitability.
A useful summary of the differences between the new media and traditional media by McDonald and Wilson (1999) as the ‘6 Is’ of digital marketing. These highlight factors that apply to practical aspects of Internet marketing such as personalisation, direct response and marketing research, but also strategic issues of industry restructuring and integrated channel communications. 6 Is:
1. Interactivity
Deighton (1996): interactivity is a key characteristic of Internet that enables companies to communicate with customers in a new way. Traditional media are predominantly push media, and there’s limited interaction. On Internet, it’s a pull marketing communications technique (but email is push marketing communications technique). Internet to encourage two-way communication; this may be an extension of the direct-response approach.
Hoffman and Novak (1997): interactivity was significant enough to represent a new model for marketing/a new marketing paradigm; facilities of Internet are a computer-mediated environment in which interactions aren’t between the sender and receiver of info, but with the medium.
The user-generated content customers can provide may be directly commercial, or can include comments on products or suppliers on a neutral site or a destination site.
2. Intelligence
Internet as low-cost method of collecting marketing research, particularly about customer perceptions of products and services; to create two-way feedback.
Every time a user clicks on a link this is recorded and can be analysed with web analytics tools. Companies can respond in real time to buyer behaviour.
3. Individualisation
Interactive marketing communications can be tailored to the individual. Personalisation is an important aspect of achieving CRM online, often achieved through extranets, which are set up with key accounts to manage the buying and after-sales processes.
Mass customisation: generic customer information is supplied for particular segments.
4. Integration
Internet provides further scope for integrated marketing communications. When assessing the success of a website, the role of Internet in communicating can best be considered from two perspectives: -organisation-to-customer direction; -customer-to-organisation.
5. Industry restructuring
Disintermediation, reintermediation and countermediation are key concepts of industry restructuring that should be considered by any company developing a digital marketing strategy. Defining communications strategy: consider the company’s representation on these intermediary sites by answering questions such as ‘Which intermediaries should we be represented on?’ and ‘How do our offerings compare to those of competitors in terms of features, benefits and price?’
6. Independence of location
Digital media can also help increase the reach of company communications to a global market. This gives opportunities to sell into international markets that may not have been previously accessible.

Question 20

The 6 Is of digital marketing by McDonald and Wilson

Answer 20

1. Interactivity
   Deighton (1996): interactivity is a key characteristic of Internet that enables companies to communicate with customers in a new way. Traditional media are predominantly push media, and there’s limited interaction. On Internet, it’s a pull marketing communications technique (but email is push marketing communications technique). Internet to encourage two-way communication; this may be an extension of the direct-response approach.
   Hoffman and Novak (1997): interactivity was significant enough to represent a new model for marketing/a new marketing paradigm; facilities of Internet are a computer-mediated environment in which interactions aren’t between the sender and receiver of info, but with the medium.
   The user-generated content customers can provide may be directly commercial, or can include comments on products or suppliers on a neutral site or a destination site.
2. Intelligence
   Internet as low-cost method of collecting marketing research, particularly about customer perceptions of products and services; to create two-way feedback.
   Every time a user clicks on a link this is recorded and can be analysed with web analytics tools. Companies can respond in real time to buyer behaviour.
3. Individualisation
   Interactive marketing communications can be tailored to the individual. Personalisation is an important aspect of achieving CRM online, often achieved through extranets, which are set up with key accounts to manage the buying and after-sales processes.
   Mass customisation: generic customer information is supplied for particular segments.
4. Integration
   Internet provides further scope for integrated marketing communications. When assessing the success of a website, the role of Internet in communicating can best be considered from two perspectives: -organisation-to-customer direction; -customer-to-organisation.
5. Industry restructuring
   Disintermediation, reintermediation and countermediation are key concepts of industry restructuring that should be considered by any company developing a digital marketing strategy. Defining communications strategy: consider the company’s representation on these intermediary sites by answering questions such as ‘Which intermediaries should we be represented on?’ and ‘How do our offerings compare to those of competitors in terms of features, benefits and price?’
6. Independence of location
   Digital media can also help increase the reach of company communications to a global market. This gives opportunities to sell into international markets that may not have been previously accessible

Question 21

Tactics

Answer 21

Marketing tactics to implement strategies and objectives are traditionally based around the elements of the marketing mix and models of how to engage customers throughout their lifecycle as part of CRM.
The marketing mix (product, price, place and promotion) originally proposed by McCarthy (1960) is still used as an essential part of implementing marketing strategy by many practitioners. The 4 Ps have been extended to the 7 Ps including 3 further elements: people, processes and physical evidence (Booms and Bitner, 1981), although others argue that these are subsumed within the 4 Ps. The marketing mix is applied frequently when developing marketing strategies since it provides a simple framework for varying different elements of the offering to influence the demand for products within target markets.
E-commerce provides new opportunities for the marketer to vary the marketing mix.
Some well-known criticism of applying the marketing mix as a solitary tool for marketing strategy. First, the marketing mix is symptomatic of a push approach to marketing and doesn’t explicitly acknowledge the needs of customers. As a consequence, the marketing mix tends to lead to a product rather than a customer orientation. Lautenborn (1990): 4 Cs framework, which considers the 4 Ps from a customer perspective. 4 Cs in an e-commerce context:
* Customer needs and wants (product).
* Cost to the customer (price).
* Convenience (place).
* Communication (promotion).
The selection of the marketing mix is based on detailed knowledge of buyer behaviour collected through market research. The mix is often adjusted according to different target markets or segments. An increased focus on one-to-one marketing also sits uncomfortably within the Seven Ps framework.
The long-tail concept is useful for considering the role of product, place, price and promotion online.
Box 7.2: Applying the long-tail concept

Question 22

Product

Answer 22

Many alternatives for varying the product when a company is developing its online strategy. Internet-related product decisions can be divided into decisions affecting the core product and the extended product. In some cases, the core product offering has been replaced by info about the product. In some cases, an online version of the product may be more valuable to customers in that it can be updated more regularly.
Internet also introduces options for mass customisation of products; online product co-creation has grown.
Companies can also consider how Internet can be used to change the range or combination of products offered. Bundling is a further alternative.
For many companies, using Internet to vary the extended product is most practical.
Companies such as publishers, TV companies and other media owners who can offer digital products now have great flexibility to offer a range of product purchase options at different price points, including:
* Subscription. Traditional revenue model; can be offered for different periods at different prices.
* Pay-per-view. Fee for a single download or viewing at a higher price than the subscription service.
* Bundling. Different channels or content offered as individual products or grouped at a reduced price compared to pay-per-view.
* Ad-supported content. The publisher’s main revenue source is through adverts on the site. Other options include affiliate revenue from sales on third-party sites or offering access to subscriber lists.
Internet can be used to assist in new product development by assessing product needs from website logs, testing new concepts, online surveys and focus group.
Quelch and Klein (1996): the implication of Internet and globalisation is that to remain competitive, organisations will have to roll out new products more rapidly to international market. Malcolm Gladwell (2000): WOM communication has a tremendous impact on the rate of adoption of new products and we can suggest this effect is often enhanced or facilitated through Internet.
Box 7.3: How does the tipping point apply to digital marketing?
Case Study 7.2: Dell gets closer to its customers online

Question 23

Price

Answer 23

The price variable refers to an organisation’s pricing policies, which are used to define pricing models and to set prices for products and services. Internet has dramatic implications for pricing in many sectors and there’s a lot a literature. Baker et al. (2001) and Xing et al. (2006): two approaches that have been commonly adopted for pricing on Internet. Start-up companies have tended to use low prices to gain a customer base, while many existing companies have transferred their existing prices to the web.
The main implications of Internet for the price aspect of the mix are:
1. Increased price transparency and its implications on differential pricing
Quelch and Klein (1996): 2 contradictory effects of Internet on price related to price transparency:
1) A supplier can use the technology for differential pricing. So, customer knowledge of pricing is enhanced through Internet. This is the case for standardised goods sold through online retailers. Customers can visit sites of rival suppliers and sites of price-comparison engines. It’s difficult to retain price differentials if all customers are aware of these differences. Baker et at. (2001): only around 8% of active online consumers are aggressive price shoppers; Internet price brands have remained quite broad. Two reasons for this: a) pricing is only one variable, b) consumers often display satisficing behaviours; ‘satisfice’ was coined by Herbert Simon in 1957 when he said that people are only ‘rational enough’ and that they suspend or relax their rationality if they feel it’s no longer required. This is called ‘bounded rationality’ by cognitive psychologists; although consumers may seek to minimise some variable when making a product or supplier selection, most may not try too hard. Johnson et al. (2004): by analysing panel data from over 10.000 households and three commodity-like products, the amount of online search is quite limited.
A compromise approach is to use differential pricing with lower prices or Internet offers for some of their products online. This has been the approach followed by online electrical retailers, travel companies and companies with online savings products.
2) Pricing online must take into account the concept of price elasticity of demand. This is a measure of consumer behaviour based on economic theory that indicates the change in demand for a product or service in response to changes in price. Price elasticity of demand is determined by the price of the product, availability of alternative goods from alternative suppliers and consumer income. A product is ‘elastic’ if a small change in price increases or reduces demand substantially. A product is ‘inelastic’ if a large change in price comes with a small amount of change in demand.
2. Downward pressure on price (including commoditisation)
For business commodities, auctions on b2b exchanges can have a similar effect of driving down price. The purchase of some products that haven’t been thought of as commodities may become more price sensitive. This process is known as commoditisation.
3. New pricing approaches (including dynamic pricing and auctions)
Technological developments have driven an increase in online companies implementing dynamic pricing. Business Insider: Amazon’s algorithm will tweak the prices of its products many times per hour. It offers its largest discounts on most-popular products and makes profits on less-popular items. However, care must be taken with differential pricing, since established customers will be unhappy if significant discounts are given to new customers.
A further approach is aggregated buying; it was promoted by LetsBuyit.com, but the business model didn’t prove viable: the cost of creating awareness for the brand and explaining the concept wasn’t offset by the revenue from each transaction.
Baye et al. (2007): European electronics online retailer Pixmania used price experimentation to learn about customers’ price sensitivity. Online retailers should ask the following questions when reviewing pricing online:
1. How many competitors are there at a point in time? A product’s mark-up should be increased when the number of rivals falls and decreased when the number of rivals increases. It’s important to include key online competitors.
2. What is the position in the product lifecycle? A product’s mark-up should be decreased over its lifecycle or when new versions are introduced.
3. What’s the price sensitivity or elasticity of a product? Continuously experimenting to learn changes in the price sensitivity of a product.
4. At what level is pricing set? The optimal mark-up factor should be applied at the product rather than category or firm level, based on price testing at the product level.
5. Are rivals monitoring my price? Be unpredictable if rivals are watching. Exploit blind spots if rivals aren’t watching.
6. Are we stuck in the middle? A middle pricing point is sub-optional, particularly if prices can be set to target the lowest point in the market.
4. Alternative pricing structure or policies
Different types of pricing possible on Internet, such as payment per use, rental at a fixed cost per month or a lease arrangement or bundling options. The use of SaaS providers to deliver services also gives new methods of volume pricing. Further pricing options online:
* Basic price
* Discounts
* Add-ons and extra products and services
* Guarantees and warranties
* Refund policies
* Order cancellation terms
Box 7.4: Price elasticity of demand

Question 24

Main implications of Internet for the price aspect of the mix:

Answer 24

1. Increased price transparency and its implications on differential pricing
   Quelch and Klein (1996): 2 contradictory effects of Internet on price related to price transparency:
   1) A supplier can use the technology for differential pricing. So, customer knowledge of pricing is enhanced through Internet. This is the case for standardised goods sold through online retailers. Customers can visit sites of rival suppliers and sites of price-comparison engines. It’s difficult to retain price differentials if all customers are aware of these differences. Baker et at. (2001): only around 8% of active online consumers are aggressive price shoppers; Internet price brands have remained quite broad. Two reasons for this: a) pricing is only one variable, b) consumers often display satisficing behaviours; ‘satisfice’ was coined by Herbert Simon in 1957 when he said that people are only ‘rational enough’ and that they suspend or relax their rationality if they feel it’s no longer required. This is called ‘bounded rationality’ by cognitive psychologists; although consumers may seek to minimise some variable when making a product or supplier selection, most may not try too hard. Johnson et al. (2004): by analysing panel data from over 10.000 households and three commodity-like products, the amount of online search is quite limited.
   A compromise approach is to use differential pricing with lower prices or Internet offers for some of their products online. This has been the approach followed by online electrical retailers, travel companies and companies with online savings products.
   2) Pricing online must take into account the concept of price elasticity of demand. This is a measure of consumer behaviour based on economic theory that indicates the change in demand for a product or service in response to changes in price. Price elasticity of demand is determined by the price of the product, availability of alternative goods from alternative suppliers and consumer income. A product is ‘elastic’ if a small change in price increases or reduces demand substantially. A product is ‘inelastic’ if a large change in price comes with a small amount of change in demand.
2. Downward pressure on price (including commoditisation)
   For business commodities, auctions on b2b exchanges can have a similar effect of driving down price. The purchase of some products that haven’t been thought of as commodities may become more price sensitive. This process is known as commoditisation.
3. New pricing approaches (including dynamic pricing and auctions)
   Technological developments have driven an increase in online companies implementing dynamic pricing. Business Insider: Amazon’s algorithm will tweak the prices of its products many times per hour. It offers its largest discounts on most-popular products and makes profits on less-popular items. However, care must be taken with differential pricing, since established customers will be unhappy if significant discounts are given to new customers.
   A further approach is aggregated buying; it was promoted by LetsBuyit.com, but the business model didn’t prove viable: the cost of creating awareness for the brand and explaining the concept wasn’t offset by the revenue from each transaction.
   Baye et al. (2007): European electronics online retailer Pixmania used price experimentation to learn about customers’ price sensitivity. Online retailers should ask the following questions when reviewing pricing online:
4. How many competitors are there at a point in time? A product’s mark-up should be increased when the number of rivals falls and decreased when the number of rivals increases. It’s important to include key online competitors.
5. What is the position in the product lifecycle? A product’s mark-up should be decreased over its lifecycle or when new versions are introduced.
6. What’s the price sensitivity or elasticity of a product? Continuously experimenting to learn changes in the price sensitivity of a product.
7. At what level is pricing set? The optimal mark-up factor should be applied at the product rather than category or firm level, based on price testing at the product level.
8. Are rivals monitoring my price? Be unpredictable if rivals are watching. Exploit blind spots if rivals aren’t watching.
9. Are we stuck in the middle? A middle pricing point is sub-optional, particularly if prices can be set to target the lowest point in the market.
10. Alternative pricing structure or policies
    Different types of pricing possible on Internet, such as payment per use, rental at a fixed cost per month or a lease arrangement or bundling options. The use of SaaS providers to deliver services also gives new methods of volume pricing. Further pricing options online:
    * Basic price
    * Discounts
    * Add-ons and extra products and services
    * Guarantees and warranties
    * Refund policies
    * Order cancellation terms

Question 25

Place

Answer 25

Allen and Fjermestad (2001): Internet has the greatest implications for place in the marketing mix. Due to cost and time of international fulfilment, with issues of trust in the local country and the availability of phone support, most products are still sourced locally. The exception to this is digital products, where there’s no physical limitation on fulfilment. Main implications of Internet for the place aspect of the mix:
1. Place of purchase
2. New channel structures
3. Channel conflicts
While disintermediation gives the opportunity to sell direct and increase profitability on products, it can also threaten distribution arrangements with existing partners. Frazier (1999): situations when Internet should only be used as a communications channel. This is the case where manufacturers offer an exclusive, or highly selective, distribution approach.
Further channel conflicts involve other stakeholders. Sales representatives may see Internet as a direct threat to their livelihood. Digital channels can take these forms:
* A communication channel only;
* A distribution channel to intermediaries;
* A direct sales channel to customers;
* Any combination of the above.
To avoid channel conflicts, the appropriate combination of channels must be arrived at.
For existing geographical markets in which a company already has a mechanism for distribution in the form of agents and distributors, the situation is more complex, and there’s the threat of channel conflict.

Question 26

Promotion

Answer 26

Specification of promotion is part of a communications strategy; it includes selection of target markets, positioning and integration of different communications tools. Internet offers a new marketing communications channel to inform of the benefits of a product and assist in the buying decision.
One approach for developing promotion tactics is to specify the communications techniques required for different stage of the buying. Another approach is to look at how Internet can supplement the range of promotional activities. Promotion also requires 3 important decisions about investment:
1. Investment in promotion compared to site creation and maintenance.
2. Investment in online promotion techniques in comparison to offline promotion.
Factors that will affect the proportion of online media spend in any organisation include:
* Proportion of customers in a segment reached through traditional or digital media;
* Proportion of customers in target market in researching and purchasing products online;
* Propensity of customers to purchase products using traditional channels;
* The relative cost-effectiveness of different online media in comparison with traditional.
There’s a delicate balance between driving visitors to a website where they may be less likely to convert, but the cost of sale will be lower. With any medium there’s a point of diminishing returns where more spend on that medium won’t result in improved results. It seems that many companies are following a strategy of gradually increasing their digital spend.
3. Investment in different online promotion techniques.

Question 27

People, process and physical evidence

Answer 27

People, process and physical evidence are important variables for service delivery.
Smith and Chaffey (2001): online, part of the consideration for the people element of the mix is the consideration of the tactics by which people can be replaced or their work automated. Some options:
* Autoresponders.
* Email notification.
* Call-back facility.
* Frequently asked question (FAQs).
* On-site search engines.
* Virtual assistants/chat bots.

Question 28

Digital branding

Answer 28

What comprises a successful online brand? A successful brand is dependent on a wide range of factors.
Erdem et al. (2002): a credible brand signal helps to generate customer value by:
i) Reducing perceived risk;
ii) Reducing info search costs;
iii) Creating a favourable, trustworthy perception of the organisation.
Websites must give the impression of trust and deliver a favourable experience to encourage first-time and repeat sales.
Many thinks of branding only in terms of aspects of the brand identity, but it’s much more than that. A brand is described by de Chernatony and McDonald 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’.
This definition highlights 3 essential characteristic of a successful brand to relate to the online environment:
* Brand is dependent on customer perception;
* Perception is influenced by the added-value characteristics of the product;
* The added-value characteristics need to be sustainable.
De Chernatony (2001): the main elements of brand values and brand strategy are the same in the Internet environment; however, consumers on Internet become active co-producers of value where they can contribute feedback through discussion groups to add value to a brand; he argues for a looser form of brand control where the company facilitates rather than controls customer discussion.
Jevons and Gabbot (2000): online, ‘the first-hand experience of a brand is a more powerful token of trust than the perception of the brand’. In the online environment, the customer can experience or interact with the brand more frequently and to a greater depth. Dayal et al. (2000): ‘on the www, the brand is the experience and ethe experience is the brand’; 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;
* The promise of achievement – to assist consumers in achieving their goals;
* The promise of fun and adventure – more relevant for b2c services;
* The promise of self-expression and recognition – provided by personalisation services;
* The promise of belonging – provided by online communities.
De Chernatony (2001): successful online branding requires delivering 3 aspects of a brand: rational values, emotional values and promised experience.
Aaker and Joachimsthaler (2000): brand equity: ‘a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers’.
So, brand equity indicated the value provided to a company, or its customers, through a brand. Assessing brand equity on the web needs to address the unique characteristics of computer-mediated environments. Based on expert interviews, they have identified the additional measures of brand equity that are important online. This includes attributes of the digital medium which combine to form relevance and a great online brand experience.
Mini Case Study 7.2: Hotel Chocolat Brand Identity

Question 29

Erdem: a credible brand signal helps to generate customer value by:

Answer 29

i) Reducing perceived risk;
ii) Reducing info search costs;
iii) Creating a favourable, trustworthy perception of the organisation

Question 30

3 essential characteristics of a successful brand to relate to the online environment:

Answer 30

• Brand is dependent on customer perception;
• Perception is influenced by the added-value characteristics of the product;
• The added-value characteristics need to be sustainable.

Question 31

Dayal et al. (2000): ‘on the www, the brand is the experience and ethe experience is the brand’; to build successful online brands, organisations should consider how their proposition can build on these possible brand promises:

Answer 31

• The promise of convenience – making a purchase experience more convenient;
• The promise of achievement – to assist consumers in achieving their goals;
• The promise of fun and adventure – more relevant for b2c services;
• The promise of self-expression and recognition – provided by personalisation services;
• The promise of belonging – provided by online communities

Question 32

Brand identity

Answer 32

Aaker and Joachimsthaler (2000): importance of developing a plan to communicate the key features of the brand identity and increase brand awareness. Brand identity is more than just the name; they refer to it as a set of brand associations that imply a promise to customers from an organisation.
Ries and Ries (2000): two rules for naming brands:
1. The Law of the Common Name – ‘The kiss of death for an Internet brand is a common name’.
2. The Law of Proper Name – ‘Your name stands alone on Internet, so you’d better have a good one’.
The author suggest that the best names will follow most of these 8 principles:
1. Short;
2. Simple;
3. Suggestive of the category;
4. Unique;
5. Alliterative;
6. Speakable;
7. Shocking;
8. Personalised.

Question 33

Best names follow most of these 8 principles:

Answer 33

1. Short;
2. Simple;
3. Suggestive of the category;
4. Unique;
5. Alliterative;
6. Speakable;
7. Shocking;
8. Personalised.

Question 34

The importance of brand online

Answer 34

Internet presents a ‘double-edged sword’ to existing brands. A consumer who already has knowledge of a brand is more likely to trust it, but loyalty can be decreased because Internet encourages consumers to trial other brands.
Importance of building brand awareness for an e-commerce service in a cost-effective manner at the same time as achieving good levels of service quality. Key aspects of creating a positive customer experience:
* Content quality – can the customer easily find relevant, up-to-date content and are there errors?
* Adequate performance of website infrastructure (availability and download speed).
* Ease of contacting a company for support.
* Quality of response to email enquiries and fulfilment quality.
* Acknowledgement of customer privacy.
* Reflecting and supporting the characteristics of the offline brand.

Question 35

Actions

Answer 35

The actions component of digital marketing planning refers to activities conducted by managers to execute the plan. Questions that need to be resolved when specifying actions:
* What investment in digital channel is sufficient to deliver these services? What will be the payback?
* What training of staff is required?
* What new responsibilities are required for effective digital marketing?
* Are changes in organisational structure required to deliver Internet-based services?
* What activities are involved in creating and maintaining the website?
Box 7.5: A typical digital marketing plan framework