Internet Marketing: A New Marketing

Paradigm?

© 2001 Ann Schlosser, University of Washington Business School

"Could you people please just forget about your Web sites?...After all, the Web is dead. Go beyond it." – Whit Andrews

                                    

Agenda• Is the Web different?

– Attributes• Typologies comparing the Web to other media• Unique characteristics

– Consequences• For the customer • For the firm

• What are the implications of these differences for marketing on the Internet?– Descriptive approach– Prescriptive approach

Characterizing the Internet vs. Other Media

• Dimensions– Dynamic vs. Static– Personal vs. Impersonal– Emotional vs. Rational– Short-term vs. Long-term objectives

Hoffman & Novak TypologyDynamic

Static

Impersonal Personal

Radio

Broadcast TVCable TVSatellite TV500 channel TV

WWW

WWW+videoCD-Interactive

Online servicesVideotex

LocalHypermedia

BillboardsNewspapersMagazinesDirect Mail

Email

Fax/Mail

WWW forms

TalkUsenet

IRCMUDs

Telephone

Voicemail

CU See MeVideophone

Face-to-face

Town meeting Face-to-face groups

Leong, Huang & Stanners Typology

Focusing Upon the Similarities Between the Internet and Other Media

#1

#4

Early Internet Marketing Practices

Online Marketing Tactics • Spam• Banner ads• Push technologies• Cybermalls• Velveeta• Brochureware• Clickstream data• Marquees, music….

Traditional Marketing Tactics• Direct mail• Billboards/Print ads• TV/radio ads• Malls• Magazine and TV ads• Print brochures/Catalogues• Scanner data

Commercial Web Site Content in 1996

Benefit of Web Site Rating

Rich product information **

Ease of use (navigational tools) **

Brand/company information **

Collect customer information **

Customized messages *

Ease of updating *

Facilitate purchase intentions *

Global Accessibility

Role playing

How is the Web Different?

Distinctive and Unique Attributes of the Web have

ConsequencesFor Firms

ConsequencesFor Customers

Attributes• Decentralized, distributed network of computers (a “network of

networks”)• Open structure

– Information can be accessed by any user.– Any user can be a provider.– Erases geographic distance between buyers and sellers.

• Mediated communication– Many-to-many communication model.– Asynchronous or synchronous communication. – Communications are persistent and enduring over time (archived).– Source of information is often unknown.

– Software agents can be developed to process content and communicate with users and other bots.

• Machine-interactivity required (consumer has primary control).– Action is required of user.

Attributes• Content is hypermedia and digital

– Web is dynamic.– Content can be easily modified.– Information is immediately accessible.– Medium (and its contents) can be accessed anytime, anywhere.– Range of content is anything that can be digitized (audio, video, text,

etc.).– Lack of physical constraints on content.– Environment approaches full information.– No limits on how much content there can be.– Unbundles form from information.

• Nonlinear presentation and access.• Logs behavioral responses

– Behavioral responses are not necessarily linked to identity.– External memory storage

One-to-One Communication Model

Medium

Firm

MessageMessage Customer

MessageMessage

One-to-Many Communication Model

MediumFirmAudience of customersMessageMessage

Many-to-Many Communication Model

Medium

Firm

MessageMessage

Firm

Firm

Customer

Customer

Customer

Customer

MessageMessage

Customer Consequences

• Enhances customer information search– Opportunities

• Customer can more easily compare prices and product offerings.

• Lower search costs.

• Memory can be augmented.

• Search can be aided.

• Decision making can be aided.

• Can satisfy information needs.

• WOM is magnified.

– Threats• Can be hard to find information. • Source credibility cannot always be evaluated by customer.

• Requires trust.

Customer Consequences

• Expands customer possibilities– Opportunities

• Facilitates trial.

• Convenient.

• Greater availability of hard to find products.

• Very large number of alternatives to consider.

• Lower prices (free at the limit).

• Instant gratification – digital products are immediately delivered.

– Threats• Information overload.

Customer Consequences

• Consumer empowerment– Opportunities

• Power has shifted from firm to customer.

• Customer may seamlessly alternate between experiential and goal-directed behavior.

• Customer information has value.

– Threats• Missed opportunities

Firm Consequences• Mediated Communication Gives Firms More Customer

Information– Opportunities

• Facilitates one-to-one and relationship marketing.• Facilitates customization of the marketing mix.• Can learn more about customers, even unobtrusively

– Build rich databases

• Can identify the origin of new customers. – Convert previously anonymous events into identified transactions.– Can determine response to advertising exposure.

• Customers can be integrated into the product development effort, reducing NPD risks.

– Threats• Because WOM is magnified online, you have to get it right the first

time.• Legal and policy consequences (privacy) become very important.• Trust becomes critical.

Firm Consequences

• Broaden Reach– Opportunities and Threats

• Can quickly obtain a global presence.

• Can reach new markets.

• Threat for sellers who are dependent on geography or customer ignorance to insulate themselves from low cost sellers.

Firm Consequences

• Cost savings– Opportunities

• Operational efficiencies to moving businesses online (transfer more of selling function to the customer).

• Channel efficiencies (electronic offerings can be created immediately).

• Reduction in marginal costs of producing and distributing information goods.

• Economies of scale for digital goods distributed online.

• Can send cheaper and more information to customers

– Threats• Price wars

• Difficult to charge for content.

Firm Consequences

• More Opportunities and Threats– Brand becomes more valuable online.

– Channel management important• New forms of intermediation.

• Enables new marketing strategies (e.g. affiliate programs).

– Business models are a challenge.

"There is nothing so practical as a good theory." – Kurt Lewin

“…without a theoretical framework to examine the issues, we are likely to make little progress in exploiting the potential of this unique medium.” – Hoffman and Novak, 1996

     

A Clash of Cultures

• Internet Culture– Shareware

– Cooperation

– Decentralized

– Open access

• Marketing Culture– Proprietary

– Competition

– Centralized

– Boundaries

The Skaggs-Robinson Surface

Positive transfer

Negative transfer

Situation (z)

Response (x)

Outcome (y)

3. Becoming a member

2. Establishing culturalcompetence

1. Coping with the new culture

Assimilation and Accommodation

Stage I: Coping

Sample Applications: Web publishing

Information requests (e-mail)

Internet as Information Resource is Used For: Dissemination

Relation Between Firm/Web site and User Web Site User

Technological sophistication Low

Stage II: Establishing Competence

Sample Applications: Database development

Online transactions

Internet as Information Resource is Used For: Interaction

Relation Between Firm/Web site and User Web Site <- - -> User

Technological sophistication Moderate

Stage III: Becoming a Member

Sample Applications: Customized (co)production

Personalized content

Internet as Information Resource is Used For: Customization

Relation Between Firm/Web site and User Web Site User

Technological sophistication High

Consumers Can (and Should) Have Primary Control

Cova• Consumer is active participant

Hoffman & Novak• Consumers should retain ownership of their own profiles• Online, there is a greater probability of well-informed consumers • The view of broadcasting messages to a passive audience is incompatible with the medium• Firms and customers approach “symmetrical power”

Locke• Networked market is well-informed• Control is not entirely in the hands of companies online

“The real promise of the Web is a once-and-for all transfer of power: Consumers and customers will get what they want – when and how they want it, and even at the price they want it.” – Jerry Gregoire, Chief Information Officer, Dell Computer

Online Markets are Conversations

Cova• Relationship marketing should be about supporting

relations/linkages between customers, not between the customer and the firm

• Decentralized triabalism

Locke• Firms should let the workers/employees speak for the firm• Consumers seek product information from other consumers, not

marketers• It is a medium of community-building rather than broadcasting• It is a virtual village market

Collaborate with Customers

Cova• Customizing consumers – they are not a target but a producer of their

own experiences• Companies should apply participatory design

Hoffman and Novak• Communication efforts should be collaborative rather than

autonomous

Locke• Companies should listen to what consumers want rather than tell

them what they should want

Cooperate with Customers

Cova• Customers are co-creators of brand/product meaning

Locke• Companies should focus on sharing and inviting rather

than owning• It is an open exchange of information

The Customer Experience is More than Information Acquisition

Cova• It is hyper-reality • It is experience-based marketing (interactivity, creativity,

connectivity)• Customers can wear different masks/identities in different groups

Hoffman and Novak• Firms should have seamless navigation to support the flow state• Firms should have open access – allowing for “test drives” of

products • Firms need VR and role-playing “informances” to support

telepresence

Case Study Questions for BET.com• Is BET.com likely to be a good investment for BET holdings and its

partners?

• Assess BET.com’s positioning strategy.

– BET management believes it should offer both general and special interest content. Do you believe this is the best way to serve their target users?

– Should they rely on the BET brand to serve both the African American and urban audiences on one website, or should they create a separate website for the urban market?

• How should BET leverage synergies between its core business and its online offspring?

Case Study Questions for CNET 2000• How would you characterize CNET’s business model?

• Do you agree with CNET’s decisions to:– Avoid entering other vertical markets?– Avoid direct participation in online retailing?– Avoid licensing CNET’s reviews and articles to portals and online retailers?– Increase ad spending to $100 million?

• Do you think the company did a good job running the CNET 200 process? Why or why not?

• If given the opportunity, should CNET acquire a “shopping bot” website such as mySimon.com given the strategy articulated by the CNET 2000 team?