Internet Marketing

EMPHASIS ON INTERNET TELEPHONY FOR TELECOMMUNICATION COMPANIES

Submitted By, GAUTHAM.R. 09BEI081

Introduction Internet marketing, also known as web marketing, online marketing, webvertising, or emarketing, is referred to as the marketing (generally promotion) of products or services over the Internet. Internet marketing is considered to be broad in scope because it not only refers tomarketing on the Internet, but also includes marketing done via e-mail and wireless media. Digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing. Internet marketing ties together the creative and technical aspects of the Internet, including design, development, advertising and sales.Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM),search engine optimization (SEO), banner ads on specific websites, email marketing, mobile advertising, and Web 2.0 strategies. A telephone company (also known as a telco, telecommunications operator, communications service provider, or CSP) is aservice provider of telecommunications services such as telephony and data communications access. Many were at one time nationalized or stateregulated monopolies. These monopolies are often referred to, primarily in Europe, as Postal Telegraph and Telephones (PTTs). Telephone companies are common carriers, and in the United States are also called local exchange carriers. With the advent of mobile telephony, telephone companies now include wireless carriers, or mobile network operators. Most telephone companies now also function as internet service providers (ISPs), and the distinction between a telephone company and an ISP may disappear completely over time, as the current trend for supplier convergence in the industry continues.

Primary Value Proposition Internet telephony has moved in two directions: VoIP (voice over IP protocol) and Skype peerto-peer telephony. While a number of major manufacturers have moved to offer both hardware and services, such as Verizon and Vonage in the US, the market for P2P telephony has yet to take off. Part of the reason may be that the domestic market for telephony is relatively inexpensive and saturated. The same cannot be said for international telephone calling, which can still be quite expensive. In addition, new tools which have been made available in Skype allow for videoconferencing and other phone functions which move the service beyond the athome consumer and make the service applicable for small businesses. By relying on the software and services offered by Skype, telecommunication enterprises expects to keep its development expenses at a minimum. In addition to having a current audience of 100 million worldwide Skype programs downloaded, and an estimated over 10 million in the US alone, there is a ready and built-in customer base (PC Pro 2006). telecommunication enterprisess goal is to focus on the subset within the Skype community which is interested in international calling. telecommunication enterprises believe that the combination of lower cost per telephone call plus the additional features offered by Skype, such as video conferencing, chat and conference calling will prove interesting to both small companies and individuals with a need to communicate frequently with those outside the United States.

The Products
The primary product offered by telecommunication enterprises is a simple USB telephone

which can be plugged into the USB 1.0 or 2.0 outlet of any personal computer or Macintosh, and can then be used to dial out. It has a chip which is recognized as a telephone by the computer, and automatically plugs into the Skype application, even on computers which are not habitually used by the person telephoning, such as at an internet shop on the high street.

The second product is a Skype-enabled video camera with a built-in microphone. It can be

used to support both video and telephone calls, and like the first unit, is fully Skype compatible. telecommunication enterprises believe that the combination of three functions: video camera, microphone and speaker, make for a compelling product offering as compared to what is currently available.

The third product is a USB multi-line phone. It allows for a full-time connection to the Internet through a PC or Macintosh which then makes up to 8 lines available for use at a small to medium sized enterprise. Additional 5.8GHz wireless handsets allow for the use of these phones for a distance up to 100 yards from the central unit.

Benefits of these Products These products therefore span the retail consumer to the small shop which may have as many as 10 employees, and which can service their local and international calling needs at a considerable savings over current analogue lines and local service. They differ from VoIP products in that they can use any quality of broadband line, and do not require a line filter of any kind. Since it relies on the Skype P2P backbone, there is little risk of technological obsolescence or downtime (as a P2P network Skype relies on millions of users around the world to pass messages between their computers between the two people talking).

These systems can also be used by small telephone-based businesses, such as telemarketers. The ability to inexpensively equip and monitor up to eight users makes the multi-line phone system ideal for customer service, order-taking and outward-bound marketing. These products are manufactured mostly in China,Taiwan and India and designed in the UK,Singapore and USA. They are relatively inexpensive, and cost in Indian market would be:

Simple USB phone USB videophone USB multi-line phone

Rs.1000 Rs.1500 Rs.5000

Additional multi-line handsets Rs.1000

These prices compare favourably with what is offered by standard office retailers for analogue phones, and the multi-line phone and wireless transceivers are significantly less expensive. These units are attractive, and would do well in young, hip offices where style is important.

Competition The market for USB-enabled P2P phones is much more developed in Europe than the United States. A number of major manufacturers, including Nokia, Sony-Ericsson and Phillips offer USB PC phones which can easily combine with Skype service. The new Apple iPhone will also use the ability to connect over Wi-Fi to make a Skype connection. These phones are not offered in the United States. One of the main issues with them for Skype-specific use is that the majority of such telephones are multi-use. That is, they are Skype-enabled, but are not set up in a way that makes access to Skype intuitive and instantaneous. US Robotics, a US-based company, sells its Skype phone throughout the world. Its primary product is a simple handset, which is recognised and recommended on Skypes web site. The same phone is sold in the UK under private label names, such as at Dixons electronics stores. A brief survey of websites of major retailers in the US, such as Radio Shack, indicates that the US Robotics phone is not offered in most major retail stores. The primary competitors are other USB phones and those phones offered for standard analogue services. Management does not see VoIP services as directly competitive, however, as they use a different and inferior level of service, and the costs are relatively higher than telecommunication enterprisess offerings. Other USB phones are generally designed and made in the Far East, and sold in the United States by a myriad of wholesale, internet and retail distributors. None of the large big box retailers, such as Best Buy, Office Depot or Staples offers such a phone, as they tend to concentrate at the moment on analogue and cellular phone products (also no VoIP products offered). Market for telecommunication enterprises Products There are two markets foreseen for these products in the US. The first are for consumers who may have a need to call abroad fairly often, and who are fairly computer-literate. They have broadband access (42% of American adults have a broadband access at home (Pew Internet Poll 2006)), and are likely to have family or friends abroad. According to latest census statistics, over 14% of Americans were born outside the United States, which means that there are over 42 million people who come from elsewhere (Census 1999). If one assumes that 42%

of those come from outside the US that means that nearly 18 million of these have friends and family outside the US and have the broadband access to communicate with them. When one adds over 42 million Hispanics (first or second generation) and 4 million Americans working and living abroad, the Potential Available Market is 78 million people (deducting Hispanics who are not native-born); if broadband access percentages are the same as the US average, 56 million Americans have both a reason to talk with people outside the US, and have the broadband access that would make telecommunication enterprisess products useful (InfoPlease 2007). The second market is for small to medium enterprises which do business outside the United States. It is not anticipated that larger companies would use Skype or a similar P2P network for their overseas communications, primarily because of security and control issues, and because they are likely to have low, negotiated costs with their international telephone service supplier. Although the US exports as a percent of GDP are lower than many other OECD countries (Economist 2007), it is nevertheless the largest exporter and importer in the world. Recent trends in outsourcing have depended in large part upon the dissemination of PC and communications technologies that make it possible for a consumer in Kansas City, for example, to be able to reach a customer service desk in India or Canada through a toll-free telephone number. Americans have thus become accustomed to having access to customers around the world at little or no cost. Whereas large companies have sophisticated voice over IP technologies which give them high quality, low-cost access to international calling, the same services are not available to smaller companies. The Small Business Administration estimates that there are over 225 thousand small- to medium-sized companies which are involved in exporting US goods. That is a near doubling from 1992, when 125 thousand such companies were exporting goods (ITA 2007). Small companies with less than 20 employees are responsible for 69 percent of all US exports. These small companies generally have the need for close contact with customers abroad, for orders, technical service and customer follow-up. In addition to those companies which are currently exporters, there are a large number of small enterprises which import products or subassemblies which are a key part of their production and order fulfilment process. As with American exporters, they have a need to communicate frequently with their suppliers. According to a UPS study, 33 percent of American small

enterprises (less than 20 employees) engage in imports and exports: 15 percent engage in exports and 9 percent in imports, while 9 percent engage in both activities (Belmont University 2007). There are a large number of companies which do not, at present, engage in imports or exports, but are opening up to the idea. According to a UPS survey (UPS is the United Parcel Service, a major American logistics company): A new survey released by UPS finds that most of America's small and mid-sized businesses have failed to explore the significant growth opportunities offered by an increasingly global economy. Specifically, 67 percent of the nation's small-to-mid-sized enterprises (SMEs) are still relying solely on the U.S. economy (Belmont University 2007). Both sets of customers may respond not only to the opportunity for telephony, but also for video conferencing, sharing files, and instant text messaging, all of which are offered on Skype. One can anticipate that, as Skype increases the number of (free) services which it offers on its P2P network, telecommunication enterprises can offer additional peripherals to take advantage of the added services. Marketing and Operations Plan telecommunication enterprises plans to offer its products through a series of different sources in the US. Since it is a relatively small company, it is capital-constrained, and therefore cannot afford to put a significant infrastructure into the US market. The company intends to open a 2person office on the East Coast, and to expand part of its offering from its UK base. The marketing channels and associated strategies are outlined below. Operations The company intends to set up a small drop-ship warehouse in a warehouse and servicing facility offered by a US supplier. In general, UPS and FedEx (with DHL a distant third) offer order fulfilment facilities that do most of the back-office, warehousing and shipping operations. Since telecommunication enterprises sources its phone units from China, there is no need to have the manufacturers ship first to the UK, then from the UK to the US. telecommunication enterprises will control inventory from its UK headquarters, but ask the manufacturers to ship directly to the US order fulfilment centre. By choosing a major shipper, telecommunication

enterprises can take advantage of that companys logistical capabilities and reduce the number of times the product is shipped: once from the manufacturer to the warehouse, then once to the final customer. Internet Marketing The companies intend to start its efforts through B2B marketing, and then over time expand its direct marketing to B2C . The company intends to lead with its multi-line Skype phone, which is a novel technology which lends itself to use in small organisations. At the same time, telecommunication enterprises will offer the single-line product in both a B2B and a B2C environment, aimed primarily at the sole proprietor and consumer who have a need to communicate frequently outside the US. Website Marketing The company will develop an international website which differentiates based on log-in information and cookies as to the location of the person coming on to the site. If the person logging in is an American, location-specific information will flag the customer as such and bring him/her to the American site for product presentation and order-taking. Since telecommunication enterprises will not have an official US company, just a branch sales office, the company will not have to charge Sales Tax (a form of Value Added Tax), which should result in an additional saving of 5-8 percent, depending on the state in which the customer resides. telecommunication enterprises will attract customers to its site in three ways. First, it will contract with Google, MSN and Yahoo! To offer target-specific ads. Given the Hispanic target, telecommunication enterprises may also search out Hispanic-targeted search sites, and it may look for other country affiliations as needed (to China, France and the UK, for example). Partnership Internet Marketing The company will also market its product through a specific set of internet organisations. Skype is owned by E-Bay, and a partnership with Skype in the US would be a logical partnership. telecommunication enterprises plans to offer its products on E-Bay, and to conclude a strategic agreement with Skype to co-promote products and cross-sell. That means that Skype will offer telecommunication enterprisess phones and other products on its sites,

while telecommunication enterprises will offer click-through to Skype on its sites as well. Each company will expect a commission for each sale of the other companys product. telecommunication enterprises may also choose to have a co-promotional strategy with Skype which allows for online couponing, e-mail campaigns and public relations and product placement campaigns to associate telecommunication enterprisess product with the E-Bay and Skype names, and to improve its product perception. Affiliate Internet Marketing telecommunication enterprises will seek partners with a large proportion of members or a target audience which has a particular need to communicate internationally. It will work with the large Chamber of Commerce infrastructure for key exporting/importing countries, such as the China-American Chamber of Commerce, the Mexican-American Chamber of Commerce, and the Great Britain-American Chamber of Commerce. telecommunication enterprises will buy the e-mail lists from these organisations and develop a market-specific e-mail blast campaign which speaks to particular needs for each target customer group. The message will be tailored to specific needs in each market. With the US-China export market, for example, many Chinese-speaking Americans need to have access to Notepad-like real-time visual sharing in order to communicate Chinese characters. A targeted e-mail blast campaign will feature the video and file sharing aspects of telecommunication enterprisess Skype-enabled phone systems. In the Mexican-American market, the high costs of long-distance calls to Mexico may be a particular frustration. The blast e-mail campaign will emphasize the monthly and yearly savings which come to a small enterprise using telecommunication enterprises and Skype in comparison to their current service. Note that commercial rates (i.e. for businesses as opposed to residences) is significantly more costly in the US, with few alternatives for less-expensive service for such small enterprises. Despite cuts from some second-tier international services, commercial service remains considerably more expensive than residential, single-user service (Business Wire 2000). In the US-UK market, telecommunication enterprises intends to use an e-mail blast campaign in both the UK and the US, targeted at customers which are doing business both on the import

and the export side. Because language and business customs (including high internet usage) are high in both countries, this will be a test market for US small enterprises which plan to communicate often with customers or suppliers in other European countries. Consumer Affiliate Marketing The company intends to buy direct-to-consumer e-mail lists for members of immigrant organisations. There are a large number of affiliate organisations for Latin American and Caribbean immigrants which offer mailing lists for a reasonable fee. Although many have magazines for their members, it would be better to use an e-mail blast campaign, as it would target those with some level of computer use at home. Retail Channels telecommunication enterprises needs to be sold by savvy floor salespeople in major retailers outlets. For this reason, it makes less sense for the company to offer the product through big box retailers, such as Wal-Mart and Target. It makes greater sense to offer the product through computer stores, such as CDW (Computer Discount Warehouse), and office supply stores which have a computer line, such as Office Depot and Staples. telecommunication enterprises will need to offer the products under its own brand name, and resist attempts on the part of retailers to conclude a private-label supply arrangement, as that would open telecommunication enterprises to a later danger of competitive manufacturers from China being able to displace telecommunication enterprisess franchise. Since major retailers compete for exclusive products, telecommunication enterprises will choose one exclusive office supply store, and one exclusive computer products store, for its initial roll-out. It will insist on an adequate marketing plan, and grant exclusivity (probably for 12 months) for a long-enough period of time for the retailer to reap benefit from its exclusive relationship. telecommunication enterprises intends to develop its exclusive retail channels from visits from the UK to major purchasing organisations in the US, then to use its local expertise to follow up visits and ensure adequate service of the retailer. If sales through the retail channel build as expected, telecommunication enterprises expects to add additional retailer service people in its US office.

Monitoring and Improving Internet Marketing The key control levers for internet marketing will be as follows:

SEO marketing efforts, in order to bring more people to their website and affiliates. SEO, or Search Engine Optimisation, increases telecommunication enterprisess scores on search engines, resulting in an increased hit rate when consumers and businesses are looking for products like those offered by telecommunication enterprises.

Targeted search engine marketing, for which telecommunication enterprises pays Google, Yahoo, MSN and other organisations a click-through fee. If one enters Skype international phone, for example, it would be their goal to have telecommunication enterprisess click-through site as one of the primary search results. If the IMM finds that telecommunication enterprises receive too many non-specific leads, he/she can tailor the criteria to limit the number of hits received. Given the highly focused nature of telecommunication enterprisess market, continual culling and optimisation should result in more cost-effective sales leads and conversions to sales.

Contracting, composing and continual monitoring of blast e-mail efforts. The telecommunication enterprises managers will be advised to consider multiple hits in their e-mail blast, with slight changes to the message which ensure that the prospect is approached in a number of highly productive ways. As with SEO marketing, it is important to create customer type hypotheses, create appropriate blast marketing materials, then to test and refine with smaller groups before expanding to larger ones. By monitoring the hit rate of such blast campaigns, one can assure that the best return rates in sales leads and conversions take place.

Personnel The choice of personnel for the US operation is particularly important. telecommunication enterprises has an opportunity to double its sales from its UK base in a relatively short time, provided that it attracts and retains experienced people in its new operation. For these reasons, it is important that telecommunication enterprises send its Managing Director to the US to start the effort and find the appropriate people to start the operation. As a UK-based company, it is difficult to span time zones and work with the American subsidiary without having a deep understanding of the market and building a relationship with those who will represent telecommunication enterprises in the US.

The company will hire two people initially: a general manager for the US, and an internet marketing specialist. The General Managers role is to contract outside organisations, such as advertising and direct-marketing groups, to implement telecommunication enterprisess strategies in the US. The Internet Marketing Managers role will be to contract, then tailor, telecommunication enterprisess focused marketing efforts, and to find and negotiate affiliate marketing efforts. Both will concentrate on cost-effective direct marketing through appropriate sites, with an emphasis on continual evaluation of the quality of sales leads generated. The IMM should have a background in successful e-mail blast campaigns, targeted pullthrough advertising, and use of search engine optimisation and lead generation techniques. The GM should have a background in successful marketing of electronics products, including work with online and retail sales channels. Since there will only be two people to start, both the GM and the IMM will need to rely as much as possible on outside agencies. SEO writing, for example, can be contracted through such organs as getafreelancer.com, guru.com or other such sites. These sites put SEO writing up for bid, and people from around the world compete to write hundreds of articles for placement in web sites in order to inform the customer and generate higher search scores. E-mail blasting can be handled by outside agencies as well. The GM and IMM will need to rely on the agencies to target highly-specific and productive e-mail lists, and to assist them in improving targeting and sales rates with their specific lists. A Simplified, Less Expensive and Streamlined Business Model A classical business model for entering a large market like the US would be to establish a fairly large regional HQ with personnel in most key functions. With the advent of instantaneous communication, such a large organisation is no longer necessary or desirable. By establishing a new effort, telecommunication enterprises can take advantage of new outsourcing and communications tools in order to reduce its overall business system investment. This requires telecommunication enterprises to define what it must do in-house, and what can be contracted out. Thus the business system is, for the most part, virtual (Affuah 2004). Some key functions, such as accounting, can be handled from telecommunication enterprisess UK operation. Other key operations components can be handled by outside agencies:

Figure : Business System Mix of Inside/Outside Function R&D Manufacturing Order Fulfillment Retailer sales Internet sales Inside/Outside Inside Outside Outside Inside Outside How Handled UK telecommunication enterprises China Logistics group (UPS, FedEx) GM handles directly Agencies controlled by IMM

This structure was pioneered in the 1990s by a number of forward-thinking companies planning to enter the US market. A prominent example was Nokia, which developed a subsidiary to sell computer monitors in the US with a skeleton staff; it was able to achieve sales of $350 million with only five members on its US staff (Edge 1999). The advent of internetbased marketing, logistics and customer service tools have made such a streamlined business system strategy ever more feasible. Financials The company intends to enter the US market with a very limited financial budget. The key expenses of the first 12 months are as follows: Category G&A Selling Search Engine Lead Costs Internet Ad Agencies SEO placement costs Other Total Expense (US$000) $500 $100 $500 $150 $50 $200 $1.5 million

The total investment should be recouped rather quickly, as is shown in the following revenue plan: This simplified pro-forma contribution plan demonstrates that the total revenue and cash flow contributed to the parent company can be substantial. Given the relatively fast rate of new product introduction, it can be expected that the nature of telecommunication enterprisess products will evolve over the period foreseen. The fundamental unit sales, costs of goods sold and resulting gross margins should be consistent, however, with the above plan. Whereas the start-up expenses will total only $1.5 million, one can expect that expenses will increase as sales develop. Since it is not known which of the campaigns will be most successful, it makes the most sense for telecommunication enterprises to keep its fixed expenses low and closely monitor progress, making a decision to invest more in those programs which bring the most success. The same is true for personnel: if the GM finds that retail channel sales are more successful, for example, he/she may decide to create a dedicated sales force to work exclusively with that distribution channel. Conclusion This plan offers a minimum of upfront cost and a maximum of flexibility. It is a reactive plan, in that it creates a number of marketing initiatives, and allows the GM to take decisions about the best course of action with success or failure of introductory strategies. If the strategies are properly introduced and tracked, the company has the opportunity to significantly increase its overall sales and take advantage of one of the largest markets in the world. Bibliography

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