Online Marketing

1.Executive Summary
Customers benefit from online marketing in many ways. It is interactive, immediate and provides access to an abundance of comparative information about products, companies and competitors. Marketers also benefits from online marketing. For them, it helps consumer relationship building, reduces costs, increases efficiency, provides more flexibility and is in the form of the Internet, a global medium that enables buyers and sellers in different countries to interact with each other in seconds. Marketers can conduct online marketing by creating an electronic storefront; placing ads online, participating in Internet forums, newsgroup or using online e-mail or webcasting. However, there remains a potential for customer abuse, ranging from irritation and unfair practices to deception and fraud. In addition, there have been growing concerns about invasion of privacy, perhaps the most difficult public policy issue currently facing the online marketing industry.
2.Conducting online Marketing
Online Marketing has evolved through three stages. In the first stage, Web sites published the same information to all customers, who received material by clicking on links. In the second stage, firms and consumers began using the Net as an outlet to actually buy and sell products and services. In the third stage, which is till evolving, it is becoming the ultimate manifestation of marketing concept through customization and personalization of products and services to satisfy individual customer needs. Marketers can conduct online marketing in four ways as follows:
a.Creating an Electronic Online Presence
A company can establish an electronic online presence through buying space on a commercial online service or establishing its own Web site. Buying a location on a commercial online service involves either renting storage space on the online service's computer or establishing a link from the company's own computer to the online service's shopping mall. JCPenney and Eddie Bauer, for example, has links to America Online, Microsoft Network and Prodigy gaining access to the millions of consumers who subscribe to these services.
Figure 1. JCPenney and Eddie Bauer has linked to America Online
The online services typically design the storefront for the company and introduce it to their subscribers. For these services, the company pays the online service an annual fee plus a small percentage of the company's online sales.
In addition to buying a location on an online service, or as an alternative, most companies have now created their own Web sites. These sites vary greatly in purpose and content. The most basic type is a corporate Web site. These sites are designed to build customer goodwill and to supplement other sales channels rather than to sell the company's products directly. For example, you can't buy ice cream at www.benjerrys.com., but you can learn all about Ben & Jerry's company philosophy, products and locations; send a free E-card to a friend or subscribe to the Chunk Mail newsletter; and while away time in the Fun Stuff area, playing "Ask Habeeni" or "The Phish Game".
Figure 2. Web site of "Ben & Jerry"
Corporate Web sites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships and generate excitement about the company. They generally provide information about the company's history, its mission and philosophy, and the products and services that it offers. They might also tell about current eve4nts, company personnel, financial performance and employment opportunities. Most corporate Web sites also provide entertainment features to attract and hold visitors. Finally, the site might also provide opportunities for customers to ask question or make comments through e-mail before leaving the site.
Other companies create a marketing Web site. These sites are designed to engage consumers in an interaction that will move them closer to a purchase or other marketing outcome. Such a site might include a catalog, shopping tips and promotional features such as coupons, sales events or contests. Companies aggressively promote their marketing Web sites in print and broadcast advertising and through "banner-to-site" ads that pop up on other Web sites. Consumers can find a Web site for buying almost anything.
Toyota operates a marketing Web site at www.toyota.com. Once a potential customer clicks in, the car marker wastes no time trying to turn the inquiry into a sale. The site offers plenty of entertainment and useful information, from cross-country trip guides and tips for driving with kinds to events such as Golf Skills Challenge and a Bike Express. But the site is also loaded with more serious selling features, such as detailed descriptions of current Toyota models and information on dealer locations and services, complete with maps and dealer Web links. Visitors who want to go further can use the Shop@Toyota feature to choose a Toyota, select equipment and price it, then contact a dealer and even apply for credit. Or they fill out an online order form for brochures and a free, interactive CD-ROM that shows off the features of Toyota models. The chances are good that before the CD-ROM arrives, a local dealer will call to invite the prospect in for a test drive. Toyota's Web site has now replaced its 800 number as the number-one source of customer leads.
Figure 3. Customer can choose a Toyota through "Shop@Toyota"
Business-to-business marketers also make good use of marketing Web sites. For example, FedEx's Web site www.fedex.com allows customers to schedule their own shipments, request a courier and track their packages in transit.
Figure 4. FedEx's Web allows customers to track packages in transit
Creating a Web site is one thing, getting people to visit the site is another. The key is to create enough value and excitement to get consumers to come to the site, stick around and come back again. This means that companies must constantly update their sites to keep them fresh and exciting. Doing so involves time and expenses, but the expense is necessary if the online marketers spend heavily on good old-fashioned advertising and other offline marketing avenues to attract visitors to their sites.
For some types of products, attracting visitors is easy. Consumers buying new cars, computers or financial services will be open to information and marketing initiatives from sellers. Marketers of lower-involvement products, however, may face a difficult challenge in attracting Web site visitors. For low-interest products, the company should create a corporate Web site to answer customer questions and build goodwill, using it only to supplement selling efforts through other channels.
b.Placing Advertisements Online
Companies can use online advertising to build their Internet brands or to attract visitors to their Web sites. Each ad has a title or subject line. Unlike with newspaper ads, readers can't see all the text of an online classified as they browse the section; your ad title must prompt them to open up your ad and read on. Online ads pop up while Internet users are surfing online services or Web sites. Such ads include banner ads, pop-up windows, banners that move across the screen and full-screen ads that users must pass through to get to other screens they wish to view.
Companies spent almost $2 million on Web advertising in 1998, and spending is expected to increase to almost $8.9 billion by 2002. Still, this represents only a tiny fraction of overall advertising media expenditures when compared with the more than $40 billion each spent for advertising in newspaper and on broadcast television. Many marketers still question the value of Internet advertising as an effective tool. Costs are reasonable compared with those of other advertising media and some Web advertising can even attract more than millions of "hits" per week. However, Web surfers can easily ignore these banner ads and often do. Moreover, the industry has yet to come up with good measures of Web advertising impact - of who clicks on Web ads and how the ads affect them. Thus, although many firms are experimenting with Web advertising, it still plays only a minor role in their promotion mixes.
c.Participating in Forums, Newsgroup and Web Communities
Companies may decide to participate in or sponsor Internet forums, newsgroups, and bulletin boards that appeal to specific special-interest groups. Such activities may be organized fro commercial or noncommercial purposes.
(i)Forums
Forums also called special interest groups or roundtables. They are discussion groups located on commercial online services. A forum may operate libraries, a "chat room" for real-time message exchanges, and even a classified ad director. Chat sessions are online conferences in which several people can be connected and exchange text messages at once. For example, America Online boasts some 14,000 chat rooms, which account for a third of its members' online time. It also provides "buddy lists", which alert members when friends are online, allowing them to exchange instant messages. Most forums are sponsored by special-interest groups. Thus, as a major musical instruments manufacturer, Yamaha might start a forum on classical music. On most forums, direct advertising is prohibited. Forum participants are asked to put their promotional messages in a library where other members can view it, rather than posting it to a discussion or message board. Forums may ban indiscriminate advertising, but they're an excellent way to build public awareness of your company and give you invaluable feedback and competitive intelligence.
(ii)Newsgroups
Newsgroups are the Internet version of forums. However, such groups are limited to people posting and reading messages on a specified topic, rather than managing libraries or conferencing. Internet users can participate in newsgroups without subscribing. There are thousands of newsgroups dealing with every imaginable topic, from healthful eating and caring for your Bonsai tree to collecting antique cars or exchanging views on the latest soap opera happenings. Participating in newsgroup is an easy way to focus on a group of people with a particular interest. The company can find out what they're saying about the subject in general, what problems or needs they have, what they're saying about the competition, and even what they're saying about the company. A market research about new products or promotions can be conducted thereon, and the company can offer information online that will help to build up reputation and will ultimately bring customers to the company.
(iii)Bulletin Boards Systems (BBS)
Compared with the Net and online services, Bulletin boards systems are very small slices of the online marketplace. BBS are specialized online services that center on a specific topic or group. There are over 60,000 BBS originating in the United States, dealing with topics such as vacations, health, computer games and real estate. Marketers might want to identify and participate in newsgroups and BBS that attract subscribers who fit their target markets. However, those users often resent commercial intrusions on their Net space, so the marketer must tread carefully, participating in subtle ways that provide real value to participants.
(iv)Web communities
The popularity of forums and newsgroups has resulted in a rash of commercially sponsored Web sites called Web communities. Such sites allow members to congregate online and exchange views on issues of common interest. They are the cyberspace equivalent to a Starbucks coffeehouse, a place where everybody knows your e-mail address.
Visitors to these Internet neighborhoods develop a strong sense of community. Such communities are attractive to advertisers because they draw consumers with common interests and well-defined demographics. For example, Parent Soup provides and ideal environment for the Web ads of Johnson & Johnson, Gerber's, Wal-Mart and other companies targeting family audiences. Moreover, cyber hood consumers visit frequently and stay online longer, increasing the chance of meaningful exposure to the advertiser's message.
Web communities can be either social or work related. One successful work related community is Agriculture Online. This site offers commodity prices, recent farm news, and chat rooms of all types. Agriculture Online has been highly successful, attracting as many as 5 million hits per month.
d.Using E-mail and Webcasting
(i)Electronic Mail (E-mail)
A company can encourage prospects and customers to send questions, suggestions and even complaints to the company via e-mail. Customer service representatives can quickly respond to such messages. The company may also develop Internet-based electronic mailing lists of customers or prospects. Such lists provide an excellent opportunity to introduce the company and its offerings to new customers and to build ongoing relationships with current ones. Using the lists, online marketers can send out customer newsletters, special product or promotion offers based on customer purchasing histories, reminders of service requirements or warranty renewals or announcements of special events.
(ii)Web-casting
Companies can also sign on with any of a number of "Webcasting" services, such as PointCast and Ifusion, which automatically download customized information to recipients' PCs. For a monthly fee, subscribers to these services can specify the channels they want, such as news, company information, entertainment and others and the topics they're interested in. Then, rather than spending hours scouring the Internet, they can sit back while the Webcaster automatically delivers information of interest to their desktops.
Webcasting, also known as "push" programming, affords an attractive channel through which online marketers can deliver their Internet advertising or other information content. The major commercial online services are also beginning to offer Webcasting to their members. For example, America Online offers a feature called Driveway that will fetch information, Web pages and e-mail based on members' preferences and automatically delivers it to their PCs.
As with other types of online marketing, companies must be careful that they don't cause resentment among Internet users who are already overloaded with "junk e-mail". Companies must beware of irritating consumers by sending unwanted e-mail to promote their products. Netiquette, the unwritten rules that guide Internet etiquette, suggests that marketers should ask customers for permission to e-mail marketing pitches, and tell recipients how to stop the flow of e-mail promotions at any time. This approach, known as permission-based marketing, is emerging as a new model for e-mail marketing.
3. Promise of Online Marketing
Online marketing offers great promise for the future. Its most enthusiastic apostles envision a time when the Internet and e-commerce will replace magazines, newspapers and even stores as sources of information and buying. Online marketing will bring changes to various sectors of economy. Consumers' ability to order direct will seriously hurt certain groups, particularly travel agents, stockbrokers, car dealers and bookstore owners. Middlemen will be disintermediated by online services in some extent, and help consumers shop more easily and obtain lower prices.
Yet despite all the publicity and promise, online marketing may be years away from realizing its full potential. Even then, it is unlikely to fulfill such sweeping predictions. To be sure, online marketing will become a full and complete business model for some companies, Internet firms such as Amazon.com, eBay, Yahoo!, and Netscape, and direct-marketing companies such as Dell Computer. Michael Dell's goal is one day "to have all customers conduct all transactions on the Internet, globally". But for most companies, online marketing will remain just one important approach to the marketplace that works alongside other approaches in a fully integrated marketing mix.
4.Challenges for the Online Marketing
While online marketers enjoy many positive indicators for sustained growth and success, it is essential to recognize and deal with several threats to the industry. Following are some of the challenges that online marketers face:
a.Limited consumer exposure and buying
Although expanding rapidly, online marketing still reaches only a limited market space. Moreover, many Web users do more window browsing than actual buying. Once source estimates that although 65% of current Internet users have used the Web to check out products and compare prices prior to a purchase decision, only 14% of Internet users have actually purchased anything online.
b.Skewed user demographics and psychographics
Although the Web audience is becoming more mainstream, online users still tend to be more upscale and technically oriented than the general population. This makes online marketing ideal for marketing computer hardware and software, consumer electronics, financial services and certain other classes of products. However, it makes online marketing less effective for selling mainstream products.
c.Chaos and Clutter
The Internet offers millions of Websites and a staggering volume of information. Thus, navigating the Internet can be frustrating, confusing and time-consuming for consumers. In this chaotic and cluttered environment, many Web ads and sites go unnoticed or unopened. Even when noticed, marketers will find it difficult to hold consumer attention.
d.Security
Consumers still worry that unprincipled snoopers will eavesdrop on their online transactions or intercept their credit card numbers and make unauthorized purchases. In turn, companies doing business online fear that others will use the Internet to invade their computer systems for the purposes of commercial espionage or even sabotage. Online marketers are developing solution to such security problems. However, there appears to be an ongoing competition between the technology of Internet security systems and the sophistication of those seeking to break them.
e.Ethical concerns
Privacy is a primary concern. Marketers can easily track Web site visitors and many consumers who participate in Web site activities provide extensive personal information. This may leave consumers open to information abuse if companies make unauthorized use of the information in marketing their products or exchanging electronic lists with other companies. There are also concerns about segmentation and discrimination. The Internet currently serves upscale consumers well. However, poorer consumers have less access to the Internet, leaving them increasingly less informed about products, services and prices.
Despite these challenges, companies large and small are quickly integrating online marketing into their marketing mixes. As it continues to grow, online marketing will prove to be a powerful tool for building customer relationships, improving sales, communicating company and product information delivering products and services more efficiently and effectively.
5.Public policy and Ethical issues on Direct marketing
Direct marketers and their customers usually enjoy mutually rewarding relationships. Occasionally, however, a darker side emerges. The aggressive and sometimes shady tactics of a few direct marketers can bother or harm consumers, giving the entire industry a black eye. Abuses range from simple excess that irritate consumers to instances of unfair practices or even outright deception and fraud. During the past few years, the direct-marketing industry has also faced growing concerns about invasion of privacy issues.
a.Irritation, unfairness, Deception and Fraud
Direct-marketing excesses sometimes annoy or offend consumers. Most of us dislike direct-response TV commercials that are too loud, too long and too insistent. Especially bothersome are dinnertime or late-night phone calls. Beyond irritating consumers, some direct marketers have been accused of taking unfair advantage of impulsive or less sophisticated buyers. TV shopping shows and program-long "infomercials" seem to be the worst culprits. They feature smooth-talking hosts, elaborately staged demonstrations, claims of drastic price reductions, "while they last" time limitations, and unequaled ease of purchase to inflame buyers who have low sales resistance.
Worse yet, so-called heat merchants design mailer and write copy intended to mislead buyers. Political fun-raisers, among the worst offenders, sometimes use gimmicks such as "look-alike" envelopes that resemble official documents, simulated newspaper clippings and fake honors and awards. Other direct marketers pretend to be conducting research surveys when they are actually asking leading questions to screen or persuade consumers. Fraudulent schemes, such as investment scrams or phony collections for charity, have also multiplied in recent years. Crooked direct marketers can be hard to catch: Direct-marketing customers often respond quickly, do not interact personally with the seller, and usually expect to wait for delivery. By the time buyers realize that they have been bilked, the thieves are usually somewhere else plotting new schemes.
In recent years, governments have considered imposing a number of restrictions on online marketing methods, and taxes on online marketing sales. Most concerned direct marketers work diligently on intelligent self-regulation in concert with the Direct Marketing Association and regional associations and clubs. In addition, these associations expend considerable effort and money in educating legislators, regulators, and consumers about the benefits of direct marketing and its positive impact on economic development.
b.Invasion of Privacy
Invasion of privacy is perhaps the toughest public issue now confronting the direct-marketing industry. These days, it seems that almost every time consumers enter a sweepstakes, apply for a credit card, take out a magazine subscription or order products by mail, telephone or the Internet, their names are entered into some company's already bulging database. Using sophisticated computer technologies, direct marketers can use these databases to "micro target" their selling efforts.
Consumers often benefit from such database marketing; they receive more offers that are closely matched to their interests. However, many critics worry that marketers may know too much about consumers' lives and that they may use this knowledge to take unfair advantage of consumers. At some point, they claim, the extensive use of databases intrudes on consumer privacy.
For example, they ask, should AT&T be allowed to sell marketers the names of customers who frequently call the 800 numbers of catalog companies? Should a company like American Express be allowed to make data on its 175 million American cardholders available to merchants who accept AmEx cards? Is it right for credit bureaus to compile and sell lists of people who have recently applied for credit cards - people who are considered prime direct-marketing targets because of their spending behavior? Or is it right for states to sell the names and addresses of driver's license holders, along with height, weight and gender information, allowing apparel retailers to target tall or overweight people with special clothing offers?
In their drives to build databases, companies sometimes get carried away. For example, when first introduced, Intel's new Pentium III chip contained an imbedded serial number that allowed the company to trace users' equipment. When privacy advocates screamed, Intel disabled the feature. Similarly, Microsoft caused substantial privacy concerns when it introduced its Windows 95 software. It used a "Registration Wizard", which allowed users to register their new software online.
However, when users went online to register, without their knowledge, Microsoft took the opportunity to 'read' the configurations of their PCs. Thus, the company gained instant knowledge of the major software products running on each customer's system. When users learned of this invasion, they protested loudly and Microsoft abandoned the practice. Such actions have spawned a quiet but determined 'privacy revolt' among consumers and public policy makers.
The direct-marketing industry is addressing issues of ethics and public policy. For example, the Direct Marketing Association, the largest association for business interested in interactive and database marketing with more than 4,600 member companies recently developed its "Privacy Promise to American Consumers". This initiative, an effort to build consumer confidence in shopping direct, requires that all members adhere to a carefully developed set of consumer privacy rules. The Privacy Promise requires that members notify customers when any personal information is rented, sold or exchanged with others. Members must also honor consumer requests not to receive mail, telephone or other solicitations again.
Figure 5. The DMA developed its "Privacy Promise to Customers"
Direct marketers know that, left untended, such problems will lead to increasingly negative consumer attitudes, lower response rates and calls for more restrictive legislation. More importantly, most direct marketers want the same things that consumer want: honest and well-designed marketing offers targeted only toward consumers who will appreciate and respond to them. Direct marketing is just too expensive to waste on consumers who don't it.
REFERENCES
Philip Kotler (2000) 'Marketing Management', The Millennium Edition, Prentice Hall, pp 651 - 673
Jay Conrad Levinson & Charles Rubin (1995) 'Guerrilla Marketing Online', Hughton Mifflin Company, pp 33 - 53
Philip Kotler & Gary Armstrong (2001) 'Principles of Marketing', 9th Edition, Prentice Hall, pp 639 - 651
Jones, Susan K. (1998) 'Creative Strategy in Direct Marketing' NTC Contemporary
Toyota http://www.toyota.com/
FedEx http://www.fedex.com/
The Direct Marketing Association http://www.the-dma.org/