E-Business Strategy Topic Seven: E-Marketing

E-Marketing in A Nutshell

History: (i) web presence and brochureware (ii) e-commerce transactional (iii) integrated e-commerce and ERP (iv) e-business, full integration, partnerships.

e-Marketing: The application of digital (especially Internet-based) technologies and processes to achieve marketing objectives, which are the identification, anticipation and satisfying of customer needs and desires—profitably.

Therefore, e-marketing is a subset of e-commerce, which is itself a subset of e-business.

e-Marketing takes advantage of cost-effective online market research through:

* Facilitating secondary research through the vast collection of data online. Companies can research competitor and other industry product developments, determine overall market trends from government and university research such as statistical data collection and analysis.

* Conducting qualitative primary market research using inexpensive technology and techniques to gain insights into factors such as key behaviour drivers, experiential analysis and attitudes, and so on.

* Having conducted qualitative research, the results may then be formulated into a structured questionnaire for quantitative analysis. This is used to determine the proportions of the market that believe or act in a certain way—or are at least, likely to.

Notice that the Internet has a mixed effect on four of the five forces: industry competition, power of suppliers, power of customers, and threat of substitutes. In only a single force— the threat of new entrants—is there a largely one-sided effect: and that's firmly against our competitive favour!

What value does e-marketing bring above and beyond traditional marketing methods? According to Sheth and Sharma (2005: 612-613):

"The primary advantages of e-marketing are reducing costs and enhancing reach. The cost of an e-marketing platform is typically lower than other marketing platforms such as face-to-face salespeople or middlemen/distributors. In addition, e-marketing allows firms to reach customers that may not be accessible
due to temporal [time-based] and locational limitations of existing distribution channels."

Online Business Models

There are a number of high-level e-business models, such as those described by Javalgi and Radulovich (2005):

1. Content-oriented, such as The Wall Street Journal (www.wsj.com), which provides customers with information services that have been collected, organised, distributed and presented in an informational, user-friendly, online format.

2. Commerce-oriented, provides an exchange place for buyers and sellers of goods and services. eBay (www.ebay.com), Amazon (www.amazon.com), Cisco(www.cisco.com) and Dell (www.dell.com) are commerce-oriented firms that provide a 'virtual store'.

3. Context-oriented, acts as an intermediary by providing structure and navigation for Internet users. Google (www.google.com), Yahoo (www.yahoo.com) and Lycos (www.lycos.com) are well-known examples.

4. Connection-oriented, provides a connection service to customers. Examples include AOL (www.aol.com), Hotmail (www.hotmail.com) and Earthlink (www.earthlink.net). This strategic model is based on two fast-growing factors:
a) growth of a customer base acquired with new features to attract and retain users.
b) Internet advertising.

Mixing the marketing Ps

The concept of the four Ps (Product, Price, Promotion and Place) as controllable variables of marketing was first described by Neil Borden in 1965. It is still widely used today, and enterprises large and small plan their marketing initiatives at least partly by this method. This is true of e-marketing as well. In recognition that the four Ps were somewhat inadequate for the management of services (compared with physical goods), three more Ps were added to the mix: People, Processes and Physical evidence.

Both services marketing and e-marketing have a number of characteristics that are not addressed well with the traditional four P-s marketing mix. The key ones are intangibility of the service or e-market offer (you can’t pick the product up and inspect it), and perishability of the offering (such as new products constantly being released online, or pricing becoming obsolete because of online competitor actions). These characteristics mean that additional marketing mix Ps are required. The traditional extra Ps for services marketing are People, Processes and Physical Evidence. People and physical evidence are difficult to apply to the online environment, so processes becomes a key part of the marketing mix.

Getting paid

Having developed the right products and offered them in a manner that is attractive to prospects and customers, the enterprise needs to be paid for the sale. There are a number of different online payment approaches, and managers need to choose the ones that make sense within the e-marketing strategy, as well as the overall business strategy. In any case, a common strategic issue is the need to assure and provide some evidence to customers that the payment method is secure—and is easy to use.

Payment usually involves two distinct steps: authorisation and settlement. Authorisation is the bank or other institution's approval for the purchase amount to be charged against the customer's account. Settlement is the actual transfer of funds from the customer's account to the seller's account.

Regular payment cards are those cards that consumers are used to using to pay for regular offline purchases. Stored-value cards contain a chip or magnetic strip that records the amount of value remaining. Many online purchases are for very small dollar amounts, certainly less than $10, the lower limit of most credit, charge and debit cards. e-Cheques are the electronic equivalent of the paper cheque. The popularity of e-cheques varies from country to country. EBPP is periodic billing (e.g. utilities, phone) in which the customer receives a bill online, can review it and pay electronically.

Risk management

Most of the usual marketing risks that apply to the physical world also apply to the e-marketing world. For example, there are risks in creating the wrong product, or producing too much or too little of it. Equally, there are risks associated with the high expenditures of advertising relative to its expected effects.

However, e-marketing carries with it a greater set of risks to do with transaction security, simply because the purchaser (and the vendor!) are not present physically and cannot be held to account directly and in person. To address the increased risk of credit card fraud and other problems, an enterprise may use any or all of the following security approaches:

* Authentication: requires a form of credentials as something unique (a signature), something possessed (e.g. a smart card) or something known (e.g. a user name and password or a credit card verification number).

* Authorisation: access privileges to data or procedures are checked by looking up privileges by resource against authentication.

* Auditing: an activity log file that helps track access and changes to information on a user-by-user basis.

* Confidentiality: the privacy of information, often to legal requirements. Encryption is often used to ensure privacy.

* Integrity: the prevention of unintended or unauthorised alterations to data during its transmission and storage. Encryption may be used here, too.

* Availability: the services and/or data can be used in a timely manner as and when required.

* Nonrepudiation: the ability to limit parties from denying that a legitimate transaction occurred. Often uses a signature as per authentication above.

* Adoption: the failure of customers to migrate to online purchasing and payments.

Implications for managers

To build an effective e-marketing strategy, managers should keep these major points in mind:

* e-Marketing is one function of e-commerce, which itself is one function of e-business.

* e-Marketing is the application of digital technologies to the identification, anticipation and satisfying of customer requirements—profitably.

An important part of e-marketing, like traditional marketing, is market research. The Internet provides a wealth of tools and processes for conducting cost-effective market research.

The Internet changes the balance of power across industries. Some changes are in our favour as a merchant, and some are against our favour. The key is to determine the specific changes that apply to your own industry sector.

Taking your enterprise global (or at least to a much wider marketplace) requires changes to marketing practices and processes as well as to customer behaviour.

There are many revenue models for generating cash inflows using e-marketing initiatives. Managers may choose more than one model, though each chosen model must meet customer expectations and organisational expertise. The organisation must have the resources to implement this model(s).

e-Marketing has a profound impact on the mix of Ps the marketer manages. To make strong headway in the online world, study, select and implement mixes of marketing Ps that deliver value, make transactions easy, and reduce operating costs.

Equally, payment options will need to be compatible with e-business operations and e-marketing initiatives. Choose the payment methods that customers are most likely to adopt.

Use appropriate security measures to minimise the amount of theft and fraud your enterprise experiences in its online transactions.