E-Marketing, 3rd

edition

Judy Strauss, Adel I. El-Ansary, and Raymond

Frost

Chapter 1: The Big Picture

© Prentice Hall 2003

 Overview
The Emergence of E-Marketing: The Google Story
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 The Google story shows:

 Markets always welcome an innovative new

product providing customer value.

 Customers trust good brands.

 Well-crafted marketing mix strategies can be

effective in helping newcomers enter crowded
markets.
 Key questions for
corporations:
 How to use information technology profitably ?

 How to understand what technology means for

their business strategies?

 How time-tested concepts by marketers can

be enhanced by the Internet, databases,
wireless mobile devices, and other
technologies?

 What’s next after the rapid growth of the

Internet and the dot-com bubble has
marketers wondering ?
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 What is E-Marketing?
E-Marketing is the application of a broad range of
information technologies for:
 Transforming marketing strategies to create more
customer value (more effective segmentation,
targeting, differentiation, and positioning
strategies),
 More efficiently planning and executing the
conception, distribution, promotion and pricing of
goods, services, and ideas,
 Creating exchanges that satisfy individual
consumer and organizational customers’
 What is E-Marketing?
 Alternative definition:
E-marketing is the result of information
technology applied to traditional marketing.

 E-marketing affects traditional marketing in two

ways:
 Increases efficiency in traditional marketing functions,
 The technology of e-marketing transforms many
marketing strategies.

⇒ Results: new business models that add customer

value and/or increase company profitability.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 What Is E-Business?
 E-business “is the continuous optimization of a
firm’s business activities through digital
technology”

 Digital technologies = information

technology are things like computers and the
Internet, that allow the storage and transmission
of data in digital formats (1’s and 0’s)
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 The Big Picture
 Easy, inexpensive, and quick access to digital
information transforms:
- economies, - societies,
- governments, - businesses.

 Digital information enhances economies through:

 more efficient markets,
 more jobs,
 information access,
 communication globalization,
 lower barriers to foreign trade and investment, and
more.
Uneven impact of the Internet across the
globe:
 530 million users connected to the Internet worldwide =
8.5% of the global population,

 Developed nations = 15% of the world’s population

= 88% of all Internet users,

 U.S. Internet users = 182 million

= 64% of the population,

 Indigenous peoples in remote locations gaining health,

legal, and other advice, or selling native products using
the Internet.
 Undesirable changes created by a networked
world

 Societies change as global communities based

on interests form,

 Worldwide information access slowly

decreases cultural and language differences,

 Easy computer networking = work and home

boundaries are blurring = more convenient
work = encourage more workaholism and less
time with family.
 Undesirable changes created by a networked
world

 Class divisions will grow, preventing the

upward mobility of people on lower
socioeconomic levels and even entire
developing countries,

 Digital divide: Internet adoption occurs when

folks have:
 Enough money to buy a computer,
 The literacy to read what is on Web pages,
 The education to be motivated to do it.
 The digital environment is enhancing
processes and activities across the entire
organization:

 Cross-functional teams using computer networks to share

and apply knowledge for increased efficiency and
profitability,

 Financial experts communicate shareholder information

online, file required government statements, and invent
new ways to value risk, etc.,

 Human resources personnel use the Net for electronic

recruiting and training; an increasing number are
managing organizational knowledge and workflow
through corporate Web portals.
 The digital environment is enhancing
processes and activities across the entire
organization:

 Production and operation managers can adjust

manufacturing based on the Internet’s ability
to give immediate sales feedback resulting in
truly just-in-time inventory and building
products to order,

 Strategists are leveraging the Net to apply the

firm’s knowledge in building and maintaining a
competitive edge (easy access to data).
Important e-business benefits according
to U.S. top executives:

 Building better quality customer relationships,

 Finding more business partners and other

development opportunities,


Building better brand visibility.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 Tough Times

 The first generation of e-business was like a gold rush =

creation of a Web presence and experimentation.

 Results:
 Huge sales and market share,

 BUT little was brought to the bottom line and profit was

negative,
 Since January 2000, however, over 500 Internet firms

have shut down in the U.S. alone.

E.g: CDNow, Lycos, DoubleClick, E*Trade, and Amazon.com

The “trough of disillusion” is based 30% on the technology

recession and 70% on disappointment with e-business
 Tough Times

Marketers return to their traditional roots and rely on

well-grounded strategy and sound marketing
practices.

During the dot-com shakeout from 2000-2002, there

was much industry consolidation:

 Some firms, such as Levi Strauss, stopped selling

online = not efficient + created channel conflict.
 Other firms merged,
⇒ E.g. e-business firm took over a traditional firm =
AOL purchased Time-Warner.
 Benefit %
Mentioning

Better quality customer relationships 61

More business development opportunities 50
Better brand visibility 50
Drive fat from supply chain 42
Reduce time-to-market 33
Increase customer quantity 25
The Most Important Benefits of E-Business to U.S.
Executives
Source: “Key Business and Marketing...” (2002)
 What will the future be?

 Gartner Group predicts that a true e-business model will

emerge, and by 2008 the “e” will be dropped, making
electronic business just part of the way things are done.

 Some say that “E-business has become just business. E-

commerce has become just commerce. The new economy
has become just the economy (Aronica and Fingar 2001).

 ” Others say that this is far from the truth—for them, e-

business will always have its own models, concepts, and
practices.

Charles Schwab has already gone through the entire cycle

allowing e.Schwab.com to cannibalize the larger brick-and-
mortar securities firm in 1998.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
E-Marketing in Context: Where does e-marketing fit into this picture?

Visibility

Dot-com U.S.
E-Business
peak Recesssion
becomes “just
business”

Technology Peak of Trough of Slope of Plateau of

Trigger Inflated Disillusion Enlightnment Profitability
Expectation

1990-1996 1999 2000 2001 2002 2003 2004 2005 2006

Equity times Debt Times Positive Cash Flow

There is Hope After the Trough of Disillusion

Source: Adapted from Raskino and Andren of Gartner Research (2001)
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 Environment, Strategy, and
Performance (ESP)
 Business environment: legal, technological, competitive,
market-related, and other environmental factors external
to the firm = Opportunities and Threats,

 SWOT analyses = Strengths and Weaknesses,

 E-business strategies + e-business models + e-marketing

plans = Help the firm accomplish its overall goals,

 Determine the success of the strategies and plans by

measuring results.
= Performance metrics, specific measures designed to
evaluate the effectiveness and efficiency of the e-
business and e-marketing operations.
 Legal - Ethical
Technology Internet
E Competition
Other factors
Markets
SWOT

E-Marketing Plan
E-Business
S Strategy/
Model E-Marketing Implementation
Strategy Marketing Mix/CRM

P Performance Metrics

Exhibit 1 - 1 E-Marketing in Context: the ESP Model

 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 Key environmental factors
affecting e-marketing

1. Legal,

2. Technological

3. Market-related
factors
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 Legal Factors

Current and pending legislation can greatly influence e-

marketing strategies:

 Privacy: Difficult to legislate + Critical because

consumers yield personal information over the
Internet
 Opt-out e-mail: when users must uncheck a Web page
box to avoid being put on a company’s e-mail list,

 Difficult for governments to balance freedom of

expression against consumer needs,

 New technology brings new opportunities for fraud:

enforcement is difficult in a networked world.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 Technology
 Technological developments influence:
- The composition of Internet audiences,
- The quality of material that can be delivered to
them.

 E-marketing is evolving through software

advances: Technologies can target consumers
according to their online behavior to give a firm a
distinct competitive advantage.
 Technology
 Technology lowers costs: Many firms have saved
money on staff and paperwork via electronic
order processing, billing, and e-mail.

 Technology requires costly investments:

- Web page development costs millions of dollars,
- E-commerce operations require expensive
hardware and software,
- New technologies continue to emerge, which
make current investments obsolete,
- Putting technology to use entails a steep learning
curve.
 What is the Internet?

The Internet is a global network of

interconnected networks:
- Millions of corporate, government,
organizational, and private networks,
- The Internet consists of computers with data,
users who send and receive the data files, and
a technology infrastructure to move, create,
and view or listen to the content.
 What is the Internet?
Three important types of networks form part of the
Internet:
 Intranet = A network running internally in a
corporation + using Internet standards (HTML
and browsers) = a mini-Internet but only for
internal corporate consumption,
 Extranet = An intranet with value chain
partners + the access is normally only partial,
 Web = The portion of the Internet that supports
a graphical user interface for hypertext
navigation with a browser (Netscape / Internet
Explorer). The Web is what most people think
about when they think of the Internet.
It’s Bigger Than the
Internet
Electronic marketing reaches far beyond the
Web:
 Many e-marketing technologies exist

= Customer relationship management, supply

chain management, and electronic data
interchange arrangements predating the
Web,

 Non-Web Internet services such as e-mail

and newsgroups
It’s Bigger Than the
Internet
 The Internet holds more than one Web:
 The Web that most users access from

PCs,

 Subsets of the Web with content

specially formatted for the unique
display properties:

Web TV,
 Personal digital assistants,
 Cell phones,
It’s Bigger Than the
Internet
 Offline electronic data-collection
devices such as bar code scanners.

 Portion of the Web containing high-

bandwidth content for users who
have either cable modems or
digital subscriber loop (DSL)
connections.
 Internet Properties and
Marketing Implications
 Marketers who grasp what Internet technologies can do will be
better poised to capitalize on information technology.

 Internet properties:
- Create opportunities beyond those possible with the

telephone, television, postal mail, or other

communication media,
- More effective and efficient marketing strategy +

tactical implementation + change the way marketing is

conducted.

 E.g. The idea of digitizing data (bits not atoms) has

transformed media and software delivery methods + created a
new transaction channel.
Internet Properties and
Marketing Implications
Internet technologies have changed traditional
marketing in a number of critical ways:

 Power shift from sellers to buyers,

 Death of distance,
 Time compression,
 Knowledge management is key,
 Interdisciplinary focus,

Intellectual capital rules.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 E-Business Markets
 Once marketers identify appropriate markets,
information technology facilitates relationships
before and after the transaction with:
 Prospects,
 Partners,
 Customers,
Supply chain
members.

 There are three important markets that both sell

and buy to each other:
 Businesses,
 Consumers,

Governments.
 To Business To Consumer To Government
Initiated by Business-to-Business Business-to- Business-to-
Business (B2B) Consumer (B2C) Government (B2G)
FreeMarkets CDNow Western Australian
www.freemarkets.com Www.cdnow.com Government Supply
www.ssc.wa.gov.au/
Initiated by Consumer-to-Business Consumer-to- Consumer-to-
Consumer (C2B) Consumer Government
Better Business Bureau (C2C) (C2G)
site eBay GovWorks
www.bbb.org www.ebay.com www.govworks.com
Initiated by Government-to-Business Government-to- Government-to-
Government (G2B) Consumer Government
Small Business (G2C) (G2G)
Administration site California state site GovOne Solutions
www.sba.gov Www.state.ca.us http://www.govonesol
utions.com/
Exhibit 1 - 1 E-Business Markets
Source: Marian Wood (2001) with minor adaptation (p. 2)
 Business Market
- It is huge: more businesses are connected to
the internet than consumers.
- It is transparent to consumers: it involves
proprietary networks that allow information
and database sharing.

E.g. FedEx, the package delivery firm:

- Its customers can schedule a package pick-up using
the Web site,
- Track the package using a PC or handheld PalmPilot,
-
Pay the shipping bill online.
 Consumer Market
 E-marketers must understand consumers in
potential geographic segments:

 Iceland and Denmark = 2 of the most wired

countries in the world = 60% Internet
penetration,

 Consumers in many countries pay by the minute

for local phone access = determine the kind of
casual surfing practiced by Internet users.
 Consumer Market
The consumer market is huge and quite active online:

 28% of consumers said they have shopped online or

plan to shop online in the next six months,

 15% purchased offline as a direct result of online

information,

 U.S. consumers are the biggest online shoppers,

spending US$53 billion in 2001, an increase of
nearly 20% from 2000.
 Revenge of the Consumer
 The rebellion started with television channel surfing
using the remote control. Consumers did not seem to
appreciate that commercials pay for broadcast TV
programs.

 At the start of the 21st century, consumers have control

via the mouse. When television, radio, print media,
entertainment, and shopping all converge seamlessly on
a computer-like device, consumers will truly have
information on demand.

 Consumers are more demanding and more

sophisticated, and marketers will have to become better
at delivering customer value.
 Consumer Needs
What do customers want in the information economy?

 Privacy: Customers want marketers to keep their data

confidential + don’t want to be bothered by sales calls at
home during dinner,

 To safeguard children from objectionable sites,

 Want marketers to ask permission before sending commercial

e-mail messages,

 Want e-commerce to provide convenience, self-service, speed,

good customer service, personal attention, and value.
 Consumer Needs
Fortunately, e-marketing can meet all these needs:

 With mass customization individuals can contact firms

over the Internet and receive responses tailored to their
needs,

 Business can also customize and personalize products

and communications to strengthen long-term
relationships with customers.

E.g. Amazon.com presents personalized Web pages to users

Exhibit 1 - 1 Amazon.com Uses Mass Customization to Personalize Web Pages
Source: www.amazon.comAmazon.com is a registered trademark or trademark of Amazon.com, Inc. in the United
States and/or other countries. © 2000 by Amazon.com. All rights reserved.
 Government Market
 The U. S. government is the world’s largest buyer,
purchasing over $200 billion in goods and services every
year (see www.isbdcorp.org/gmag).

 Add to this the purchasing power of U.S. states,

counties, cities, and other municipal agencies, and this
makes for a huge market.

 Small and large businesses usually have an equal

chance of selling to governments + government Web
sites announce their buying needs in advance of the
bidding process.
 Government Market
 Businesses wishing to sell to governments face
challenges unique to this market:

 Follow rules regarding qualifications, paperwork,

etc.,
 Must compete to be on the government list of
approved suppliers + compete for specific
contracts through a bidding process,
 Have to conform to very particular timely
delivery of quality products at reasonable prices.
 Overview
The Emergence of E-Marketing
What is E-Marketing?
What Is E-Business?
The Big Picture
Tough Times
E-Marketing in Context
Environment, Strategy, and Performance (ESP)
E-Marketing Environment
Legal Factors
Technology
E-Business Markets
What’s Next?
 What’s Next?

 Regardless of the current disillusion with e-

business, many solid successes exist today and
exciting new growth areas will soon emerge.

 Seven trends that will help businesses move

forward into e-marketing :
 Integrating IT software,  Data security,
 Wireless is here to
 Boom in Web services,
stay,
 Collaboration software,
 Growth in portable
 Dealing with too much data, computing.
Key Terms
 Business-to-Business
 Information technology
(B2B)  Internet
 Business-to-Consumer  Intranet
(B2C)  Mass customization
 Business-to-Government  Performance metrics
(B2G)
 Web
 Consumer-to-Consumer
(C2C)
 Web services
 Digital technology
 E-business
 E-commerce
 E-marketing
Extranet
Review Questions
1.Define e-business and e-marketing.
2.What are performance metrics and why are they
important?
3.What are some of the key legal issues that affect e-
marketing?
4.How does technology both raise and lower costs for
companies?
5.As a technology, how does the Internet compare with
the telephone?
6.What are some of the marketing implications of
Internet technologies?
7.What are the three main markets of e-business, and
how do they differ?
8.In the context of e-marketing, what does “revenge of
the consumer” mean?
 Discussion Questions
1. As a marketer, do you agree with the U.S. executives who
say “better quality customer relationships” is one of the
most important e-business benefits? Why?
2. As a consumer, are you likely to benefit when e-business
becomes “just business” in the near future? Explain your
answer.
3. Some economists suggest that the increase in e-
commerce within the B2B market will lead to greater
competition and more goods and services becoming
commoditiesthat is, solely competing on price. How do
you think this is likely to affect buyers within the B2B
market? How would it affect sellers?
4. What concerns about consumer privacy are raised by the
increased use of wireless computing and handheld
devices outside the home or workplace?