E-Marketing / Edition 4

PREFACE

Marketers have been using electronic tools for many years, but the Internet and other new technologies created a flood of interesting and innovative ways to provide customer value. New opportunities create lots of questions, however. How can firms leverage new technologies to maximum benefit? How much commitment should marketers make to electronic marketing programs? Is our market online? In this book, we attempt to answer these and many other questions—some developing even as we wrote the text!

E-marketing is traditional marketing using electronic methods. It affects traditional marketing in two ways. First, it increases efficiency in established marketing functions. Second, the technology of e-marketing transforms many marketing strategies. The transformation results in new business models that add customer value and/or increase company profitability. The Internet serves as an efficient marketing planning tool for both secondary and primary data collection. In addition, electronic technologies affect the 4 Ps:

• Product—Internet technologies spawned a variety of innovative products for creating, delivering, and reading messages as well as services such as reverse auctions, business-to-business (B2B) market exchanges, and interactive games. What's next?
• Pricing—The Net turned pricing strategies upside down. Bartering, bidding, dynamic pricing, and individualized pricing are now quite common online. Shopping agents create transparent pricing for identical product offerings at various e-tailers.
• Distribution (Place)—E-marketers use the Net for direct distribution of digital products(e.g., news stories and live radio) and for electronic retailing. But tremendous value occurs behind the scenes: supply chain management and channel integration create efficiencies that can either lower customer prices or add to company profits.
• Promotion—The Net assists with two-way communication: one-to-one Web pages, email conversation, and e-mail conferencing via newsgroups and mailing lists. The Net is also an advertising medium in its own right, with over $2.8 billion in online ad revenues in 1999. E-marketers also use the Net for promotions, and sending electronic coupons and digital product samples directly to consumers.

One of the most important applications of electronic marketing involves customer relationship management. The power is shifting away from firms to the person in control of the mouse, but fortunately companies are using technology to discover and meet the needs of these savvy and demanding customers.

The book you have in your hands is the second edition of Marketing on the Internet. We expanded the scope and renamed the book E-Marketing to reflect the idea that electronic marketing is bigger than the Web. It includes things such as data collected at the grocery store with bar code scanners and B2B data exchange. This book discusses many offline electronic marketing techniques; however, it focuses on the Internet due to its widespread and increasing use for e-marketing.

Several popular books exist to shed light on the problems, opportunities, and techniques of e-marketing, and we have used them in our classes with some success. This textbook is different in seven important ways.

1. We explain electronic marketing not as a list of ideas and techniques, but as part of a larger set of concepts and theories in the marketing discipline. In writing the book we discovered that most new terminology could be put into traditional frameworks for greater understanding. To this end, readers will find marketing concept reviews with Internet examples throughout. We strongly believe that new electronic strategies are more likely to succeed if selected using the marketing planning process, especially as the Internet grows to maturity and competition intensifies.
2. The text focuses on cutting-edge business models that generate revenue while delivering customer value. The architecture for these business models is tied to marketing theory wherever possible.
3. We highly recommend that marketers learn a bit about the technology behind the Internet, something most of us are not drawn to naturally. While it is not necessary to be able to set up e-commerce servers, knowledge of the possibilities for their use will give savvy marketers an advantage in the marketplace. This book attempts to educate marketers gently in important technology issues, showing the relevance of each concept.
4. While this book describes e-marketing practices in the United States, the text also takes a global perspective describing market developments in Europe, Japan, and developing nations.
5. This book does not cover Web site design. This is a topic we love to teach, our students enjoy learning, and one that is included in many Internet Marketing courses. Unfortunately, it is also beyond the scope of this book. However, please check out our new companion book, Building Effective Web Sites (Prentice Hall, early 2001).
6. The Web site that accompanies this text is an important part of the work. Designed as an instructor's manual, it contains important information about designing and teaching an e-marketing course. Especially important is a section on Internet exercises for student application of the concepts.
7. As teachers, we present Internet marketing in a format that we believe will enhance learning. We organize chapters to parallel principles of marketing texts and provide learning tools such as chapter objectives, summaries, and exercises. We have used this format successfully for 5 years in our Internet classes, and we hope it will work well for you too.

A MOVING TARGET

We might as well raise a flag from the start and mention that this book is a snapshot of e-marketing techniques in summer 2000. The Internet is a rapidly changing medium, enterprising entrepreneurs constantly have cool new ideas, and thus some things in this book will be out of date before it is off the press. This is especially true for the statistics and screen captures we used: several firms were completely redoing their sites as we submitted the text! Acknowledging the fluidity of the topic, we anchor concepts in classic marketing theory. We encourage readers to explore on their own; checking out the veracity of our remarks in the light of a moving target. To assist in this process, we give reference to Web sites and reference materials throughout, and we will maintain a Web site containing supplemental reading material to accompany the book. We encourage readers to contribute to its content (www.prenhall.com/frost).

AUDIENCE

We wrote this book to assist every student of electronic marketing who wants to learn this topic one step at a time. This primarily includes graduate and undergraduate university students, but the book also will aid other individuals who want to learn more about electronic marketing. Important background includes basic marketing and computer knowledge, although we provide short explanations of terminology and concepts to be sure all readers are up to speed. Various sections of the book should appeal to those with differing levels of experience. For example, the chapter body starts at the beginning of a topic and builds, eventually integrating sophisticated concepts. "Leveraging Technology" and "Ethics and Law" chapters at the end of the book are quite challenging, presenting cutting-edge topics.

BOOK ORGANIZATION

This book elaborates on e-marketing planning and marketing mix topics from a strategic perspective. Marketing plan implementation issues are incorporated throughout the book; however, chapter 8 puts it all together by demonstrating the pieces to an e-marketing plan. The following table displays the book's organization, and the next paragraphs expand on each chapter.

Part I: E-Marketing Prelude

Chapter 1: Introduction to E-Marketing
Marketers do not usually develop products and other marketing mix strategies in the absence of strategic planning. Occasionally someone has a great idea at the right time and gets lucky, but usually marketing success requires homework before investment. There are lots of questions about how to use the Internet and other electronic technologies to increase business profitability. Many e-commerce firms are growing wildly and a few are profitable, but others are still dedicating huge amounts of money in hope of future profits. Innovative new services on the Web are attracting very large audiences, but most are not yet profitable. Chapter 1 begins an exploration of e-marketing strategies by outlining many new e-business rules and by introducing lots of new terminology defining and putting it in context. Also in this chapter are explanations of current business models on which firms are banking to provide customer value and thus increase profits now and down the road.

Chapter 2: Internet User Characteristics and Behavior
Market segmentation is the cornerstone of marketing. Businesses identify and describe segments, scouring for those with the highest potential. Chapter 2 reviews segmentation bases and strategies, then seeks to answer the question, "Who is out there, all glassy-eyed behind computer terminals?" In order to initiate a solid Internet marketing plan, firms must have a good understanding of Net user characteristics and growth trends. This chapter provides current statistics, outlines growth segments, and includes a large section on Internet adoption in countries outside the United States.

Chapter 3: Marketing Knowledge
Like the library, the Internet is a tremendous source of secondary data for marketing planning. Chapter 3 reviews environmental scan factors of competition, political and legal environments, social and cultural trends, economies, technology, and resources, and it suggests ways to collect information about these factors on the Internet. Another important benefit of the Net is the ability to conduct primary market research online through Web surveys, online focus groups, experiments, and more. We discuss the strengths and limitations of these types of data, and provide ideas about evaluating the quality of online data. Also included are interesting e-marketing techniques involving databases and applications such as data mining and profiling.

Part II: E-Marketing Strategies

Chapter 4: Product and Pricing
This begins the meat and potatoes of this book: e-marketing strategies. Chapter 4 is dedicated to product and pricing: it contains information about new Web products operating behind the scenes in e-commerce transactions, and current brands that were extended into Cyberspace, explaining what works online and what does not. The context of this discussion is marketing concepts such as new product and branding strategies. Pricing discussions include pricing strategy differences between the online and offline environments and a thorough discussion of how Net affects pricing strategy.

Chapter 5: Distribution
Distribution channels have changed significantly based on Internet technology. The Net evolved as a complete distribution channel itself as well as a forum for electronic commerce. Digital products such as electronic publishing, software, and digital audio and video are delivered right over the Net. This chapter identifies many new types of brokers, agents, and retailers, as well as describing how supply chain management is enhanced by Net technology. The chapter explores many new e-business models grounded in the concepts of traditional distribution channel institutions, functions, and systems.

Chapter 6: E-Marketing Communication
This chapter focuses on marketing communication online. Chapter 6 considers the promotion mix elements and their electronic extensions. Net advertising expenditures are rapidly growing and the type of ads online is evolving. From banners and buttons to interstitials and sponsorships: which to pick? This chapter discusses the features of interactive ads as well as sales promotions such as coupons and free product samples over the Net. Public relations permeate every Web site, and PR personnel must understand which tactics are particularly well suited for use on the Net. If an organization's target stakeholders are online, the Net provides many exciting and efficient venues for communication with them, including new ideas such as viral marketing, community building, and permissions marketing. This chapter also discusses media buying. Where does the Net stack up as compared to television, radio, newspapers, and magazines for advertisers? Media buyers are unsure about how to buy online advertising because of uncertainty about the medium's effect on consumers and the uncertain information about audience size and characteristics.

Chapter 7: Customer Relationship Management
Chapter 7 is devoted to relationship marketing. This is the strategy of building long-term customer relationships—through customer satisfaction—with individuals or organizations who will buy many products over time. Relationship marketing occupies the opposite end of the continuum from mass marketing because it can involve catering marketing mixes to target markets consisting of one person each. This is the marketing concept at its finest: giving individual consumers exactly what they want at the right time and place while meeting a firm's profit objectives. Coincidental to this recent shift in marketing thinking to relationship marketing came the technology with which to achieve it efficiently: the Internet. Companies such as Expedia and Amazon are capitalizing on the Net's potential for building customer relationships, one at a time, and this discussion explains how they do it. Relationship marketing is more effective when the entire supply chain is focused on the effort. This chapter explains how it is done.

Part III: Putting It All Together

Chapter 8: The E-Marketing Plan
Here the book turns to implementation considerations. Although execution factors are scattered throughout part II, this chapter is all about creating an e-marketing program. It relies on the planning ideas from part I and the strategy information from part II. Chapter 8 discusses things such as who is the firm's market and what are the Web site objectives? It takes the business models adding information about what works and what doesn't, and talks turkey: What does it cost and how does a firm start?

Chapter 9: Leveraging Technology
These pages explain important technical concepts that are critical for building an online marketing program. For example, e-marketers often use cookie files and collaborative filtering to help marketers build relationships with customers. This chapter has the benefit of explaining technology in words marketers can understand, but more importantly, it creates a springboard for creative Internet marketing ideas. While many marketers might roll their eyes at a technology chapter, we strongly believe that those who do not know this material will be left in the dust. Read it!

Chapter 10: Ethics and Law
An attorney who is also a professor of ethics and computer science contributed this chapter. It discusses issues such as privacy, copyright, trademarks, data ownership, and freedom of expression online. For example, the entire issue of privacy as it relates to electronic databases and online marketing creates an environment in which marketers want to be careful. If consumers feel that marketers are unethical, this feeling obviously is not good for the future of Net marketing. This chapter is critical for every e-marketer who wants to stay out of trouble and do the right thing by consumers.

Important End-of-Chapter Material

Three items are included at the end of each chapter to enhance learning: practitioner perspectives, chapter summaries and key terms, and chapter questions and exercises. Some very accomplished people working in the business of Net marketing wrote Practitioner Perspective pieces. Most of these discuss issues important to those on the front line, and some take a stab at predicting the future of the Net.

PEDAGOGICAL FEATURES

We included many features in E-Marketing to enhance learning. Based on our cumulative 25 years of teaching experience, we've identified the best practices in university teaching and integrated items that work well for us.

Marketing concept focus: In each chapter we review several marketing concepts and then tell how the Internet is related to the concept. This technique provides a bridge from marketing principles that the student already knows and presents material in a framework for easier learning. In addition, as things change on the Net, students will understand the new ideas based on underlying concepts.

Learning objectives: Each chapter begins with a list of objectives that, after studying the chapter, students should be able to accomplish. Given our active learning preference, the objectives are behavioral in nature.

Cases that discuss real companies: A case history starts each chapter. Most are original Web success stories obtained through personal interviews with business founders. Students will find these to be exciting introductions to the material. Each case is the story of an entrepreneur, usually under age 30, who opened shop on the Web and made it work.

Multiple screen shots in each chapter: Wherever possible we show actual Web pages to provide an example of the concept under review. The Web site address is included so students may explore the site on their own.

Chapter summaries: Each chapter ends with a summary of its contents. While these summaries capsulate the chapter guts, they were not created so that students can read them in lieu of the chapter content.

Key terms: Also at the end of each chapter is a list of important terms in the chapter. This will assist the student in checking for understanding.

Review questions: Questions at the chapter end are aimed at both knowledge-level learning and higher levels of application, synthesis, and evaluation.

Exercises: When students become actively engaged in the material, learning is enhanced. To this end we include several activities at the end of each chapter and two comprehensive Internet exercises.

Practitioner perspectives: At the end of each chapter is a short essay written by someone in the field. We asked CEOs and top-level managers to write about cutting-edge issues in Internet marketing, and the results are quite interesting and inspirational. When joined with the chapter introductory cases and current examples throughout the text, these give the e-marketing concepts life.

Savvy sites: In addition to the numerous Web site addresses included in the chapter body, we've provided a list of important sites for further research in the appendix.

Glossary: Most people don't brag about a glossary, but we were unable to find a comprehensive glossary focusing on e-marketing, so we included one in this book. The Internet has spawned an incredible amount of new terminology, and we want to help readers understand the landscape.

INSTRUCTOR SUPPORT MATERIALS ON WEB SITE

This is the second edition of a book about a moving target. No one has quite laid out the territory the way we have in E-Marketing. Naturally there will be lots of changes and updates. Therefore, we hope to build community with the faculty who adopt this book so that together we can continually improve its value in the classroom. To that end we've designed a Web site to serve as an Instructor's Manual.

Web site location: www.prenhall.com/frost

1. Web site: The Web site serves as instructor's manual and water cooler for sharing ideas about teaching Internet marketing classes. On the site are traditional instructor's manual items as well as class assignments, links to Internet marketing syllabi, and other materials to enhance teaching from this book.
2. Test bank: A test bank is available to faculty adopting this textbook. Question items focus on chapter learning objectives and other important material. They include items at all levels of learning from knowledge through application and evaluation.
3. Chapter exhibits: The Web site holds files containing exhibits from each chapter. This is to aid those wanting to present book material in class lectures.
4. Suggested syllabus: A sample syllabus for teaching this class is on the E-Marketing Web site.
5. E-mail the authors: We encourage e-mail from faculty using this textbook. Send questions, suggestions for improving the text, and ideas about teaching the class.