ZIMBABWE OPEN UNIVERSITY Bachelor of Commerce (Marketing) Internet Marketing Module MKT 212 @ZOUYear: The Zimbabwe Open University PO. Box MPII19 Mount Pleasant Harare, ZIMBABWE The Zimbabwe Open University is a distance teaching and open learning institution. 2005 B. Pillay S. Mapfumo ‘Temur Enterprises (Pvt) Lid ‘Typeset in Times New Roman, 12 point on auto leading © Zimbabwe Open University. AU rights reserved. No part of this publication ‘may be reproduced, stored in a retrieval system, or transmitted, in any form or by amy means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Zimbabwe Open University.eS Author: Content Reviewer: Editor: Tendai Kuveya MSc in Strategic Management (University of Derby), UK Graduate Diploma in Marketing ( Graduate Diploma in Project Planning and ‘Management (CCOSA) CIM Graduate Diploma in Marketing (UK) Graduate Diploma in Communications and Journalism (ZIM) Professional Diploma in Public Relations (ZIPR) CK Katsande MBA Nottingham Trent University (UK) DMS, Noitingham Trent University (UK) DMS, CNAA (UK) L, Ndblovu MA (Religious Stadies) UNISA BA (UZ) Grade CE (UZ)Foreword ‘The demand for skills and knowledge and the requirement to adjust and change with changing technology, places on us a need to learn continually throughout life. As all people need an education of one form or another, it has been found that conventional education institutions cannot cope with the demand for education of this magnitude. It has, however, been discovered that distance ‘education and open learning, now also exploiting e-learning technology, itself an offshoot of e-commerce, has become the ‘most effective way of transmitting these appropriate skills and knowledge required for national and international development. Since attainment of independence in 1980, the Zimbabwe Government has spearheaded the development of distance education and open Tearning at tertiary level, resulting in the establishment of the Zimbabwe Open University (ZOU) on 1 March, 999. ZOU is the first, leading, and currently the only university, in. Zimbabwe entirely dedicated to teaching by distance education and open learning We are determined to maintain our leading position by both satisfying our clients maintaining high academic standards. To achieve the on, we have adopted the leading posi course team approach to producing the varied learning materials that will lly shape you, the learner to be an all-round performer in the field ofyour own choice. Our course teams comprist academics, technologists and administrators of varied backgrounds, training, skills, experiences and personal interests. The combination of all these qualitics inevitably facilitates the production of learning materials that teach successfully any student, anywhere and far removed from the tutor in space and time. We emphasize that our learning materials should enable you to solve both work- related problems and other life challenges. To avoid stereotyping and professional narrowness, our teams of learning materials producers come from different universities in and outside Zimbabwe, and from Commerce and Industry. This openness enables ZOU to produce materials that have a long shelf life and are sufficiently comprehensive to cater for the needs of all of you, our Ieamers in different walks of life. You, the learner, have a large number of optional courses to choose from so that the knowledge and skills developed suit the career path that you choose. Thus, we strive to tailor-make the learning materials so that they can suit your personal and professional needs. In developing the ZOU learning materials, we are guided by the desire to provide you, the learnes, with all the knowledge and skill that will make you a better performer all round, be this at certificate, diploma, undergraduateor postgraduate level. We aim for products that will setle comfortably in the global village and competing successfully with anyone. Our target is, therefore, to satisfy your quest for knowledge and skills through distance education and open leaming Any course or programme launched by ZOU is conceived from the cross-pollination of ideas from consumers of the product, chief among whom are you, the students and your employers. We consult you and listen to your critical analysis of the concepts and how they are presented. We also consult other academics from universities the world over and other international bodies whose reputation in distance education and open learning is of a very high calibre. We carry out pilot studies of the course outlines, the content and the programme component. We are only too glad to subject our learning materials to academic and professional criticism with the hope of improving them all the time. We are determined to continue improving by changing the learning materials to suit the idiosyncratic needs of our learners, their employers, research, economic circumstances, technological development, changing times and geographic location, in order to maintain our leading position. We aim at giving you an education that will work for you at any time anywhere and in varying circumstances and that your performance should be second to none. As a progressive university that is. forward looking and determined to be a successful part of the twenty-first century, ZOU has started o introduce elearning materials that will enable you, our students, to access any source of information, anywhere in the world through internet and to communicate, converse, discuss and collaborate synchronously and asynchronously, with peers and tutors whom you may never meet in life It is our intention to bring the computer, email, internet chat-rooms, whiteboards and other modem methods of delivering learning to all the doorsteps of our learners, wherever they may be. For all these developments and for the latest information on what is taking place at ZOU, visit the ZOU website at wwwzou.ac.cozw Having worked as best we can to prepare your learning path, hopefully like John the Bapti prepared for the coming of Jesus Christ, itis my hope as your Vice Chancellor that all of you, willexperience unimpeded success in your educational endeavours. We, on our part, shall continually strive to improve the learning materials through evaluation, transformation of delivery methodologies, adjustments and sometimes complete overhauls of both the materials and organizational structures and culture that are central to providing you with the high quality education that you deserve Note that your needs, the learner ‘s needs, occupy a central position within ZOU’s core activities. Best wishes and success in your studies. Dr. Primrose Kurasha Vice ChancellorOverview 1 Unit One: Introduction to Internet Marketing Fundamentals (Electronic Commerce) 10 Introduction, 5 i Unit Objectives 6 12 What Ie Internet Marketing/Electronic Commerce? _ 6 13 Internet Marketing And The Marketing Concept Marketing 8 ~~" 1.3.1 Media differences 10 1a Developing An Internet Business Plan (Internal Environment) 11 1.4.1 Ten Sections of an Internet Marketing Business Plan rr 15 Putting Your Business Online On The Internet 13 16 Building A Website for an Organisation 4 a7 Technical Challenges 7 1.7.1 Special Programs for Online Clearing Opti 1" 18 Strategies For Building A Better Website: 10 ‘Activity 1.1 19 19 Eight Steps In Promoting A Website 19 1.10 Business Pressures, Organisational Responses and Internet Marketing (Internet External Environment) a 1.10.1 ‘The New World Of Business 2 1.10.2 Organizational Responses 23 ia Benefits and Limitations of Internet Marketing, 23 LH.1 Benefits to Organizations 1.11.2 Benefits to Consumers. BB 1.11.3 Benefits To Society % 112 ____ The Limitations of Electronic Commerce mag, 1.12.1 Nom Techutoal Limitations 8 = Activity 1.2 7 13 Summary 28 114 References 2BUnit Two: Internet Marketing Economy (The Digital Economy) 20 Introduction. 29 24a Unit Objectives 30 22 What is the Digital Economy? 90 23 Market Spaces Versus Market Places 30 24 ‘The Components Of Digital Ecosystems 3 25 Competition In Market Spaces 33 26 Porter's Competitive Analysis In An Industry 3H 22 Iasnes And Success Factors In The Internet Marketing Economy 35 28 The Need For A Critical Mass Of Buyers and Sellers 36 29 Quality Uncertainty and Quality Assuaranee 36 2.9.1 Pricing OnTheInternet_ 8 2.9.2, Online Versus Offline Pricing 210 Contributors to Electronic Internet Marketing Success Factors __ 37 21 Impact Of Internet Marketing On Industry Structure, Intermediaries and Others 2.11.1 Industry Structure Activity 2.1 22 The Role And Value Of Intermediaries Markets 2.12.2 Syndication __ 2.12.3 Syndication Supply Chai 218 The Internet and The Value Chain, 24 Impact Of Internet Marketing Organizations 2 2.14.1 Improving Direct Marketing 6 215 Other Marketing Related Impacts Customization “4 216 Transforming Organizations = ee 5 2.16.1 ‘The Changing Nature of Wor 6 27 Redefining Organisations 46 218 Mobile Commnren [M-creuimares), a Activity 2.2 48 29 Summary ry 2.20 References. 48 Unit Three: Internet Marketing Strategy and the Elements of Electronic 30 Introduction. 49 31 Unit Objectives 50 32 The Modern Internet. 50 43.2.1 The Internet Components 50 5.2.2 The Major Uses Of The Internet. 52 ‘Activity 3.1 33 33 Business Strategy And The Internet 33 34 Strategic Implications of Information Technology and Internet Marketing 55 35 Technology 553.6 ‘The Business Environment 37 3.7.1 The Internal and External Environmental Factors of Business Organizati 58. 3.7.2 Business Capability 60 a7 ‘Existing Business 60 3.8 Strategy Formulation and Implementation Planning 61 39 Electronic Commerce Implementation 62 3.10 E-commerce Evaluation 63 Activity 3.2 63 Sa ‘The Impact OF Internet Marketing on Manufacturers? Value Chain 3.11.1 An E-Commerce Sales Medel for Manufacturers 3.11.2 E-Commerce Pre-Sales Service 3.11.3 Information and DataBase 3.11.4 Product Development 3.11.5 Offer Comparison 3.11.6 E-Commerce Transactions 3.11.7 E-Commerce After-Sales Service 3.11.8 Opportunity and Threat Analysis Activity 3.3 322 Summary 3.13 References Unit Four: E-Commerce Strategy Formulation and Implementation 40 Introduction, 2B 41 UMeURiewive see eee 4.2 ‘The Need For A Strategy (Why A Company Needs an E-commerce ene eee ee Essentials of a Business Strategy -" 4.3.1 Levels of Strategy Soret) AS/ilypeuOlStemicgy _ 16 4.3.3 The Components of Strategy a 4.3.4 Strategic Planning a 4.3.5 The Strategy Landscape 7% 44 Strategy Initiation a) 45 Information Technology (It) Strategy 8 46 Industry, Company, and Competitive Analysis 9 4.6.\Indastry Assessment 8 a Swot Analysis 80 4.8 Competitive Intelligcace On The Interact 81 49 Customised Competitive Intelligence 82 4.10 Issues In Stratesy Initiation. 82 4.1 Strategy Formulation. 84 4.11.1 Critical Success Factors for E-Commerce 85 412 Discovering E-commerce Opportunities and Deciding on A a Portfoli 85, 4.12.1 Uncovering Specific E-Commerce Opportunities and Applications 87 4.12.2. Determining an Appropriate Application Portfolio. 884.12.3 Tjan’s Portfolio Strategy 88 4.12.4 Other Approaches 39 433 Cost Benefit and Risk Analysis 89 4.13.1 The Business Care for E-Commerce. 89 4.13.2 The Content Of An E-Business Case 39 4.13.3 How to Conduct an E-Business Case 90 4.13.4 Revenue Model 90 414 Cost-benefit and Risk Analysis Application 0 4.14.1 Value Analysis and Proposition. a 4.14.2 The Return On Investment (ROI) 2 4.14.3 Options Valuation 92 4.14.4 Other Methods 2 4.14.3 Risk Analysis 3 4.14.6 E-Commerce Scenarios 4 415 Strategic Planning Framework and Its Application ~ In. ____ Ecommerce _ 4 4.15.1 Generic Competitive Strategy Versus Cooperative Strategy 95 4.15.2 Competitive Strategy 95 4.15.3 Cooperative Strategy SE 6 416 Issues In Strategy Formulation 7 417 Strategy Implementation and Project Management 99 4.17.1 Creating a Web Team 4.17.2 PilotProject _ 4.17.3 Planning for Resources 4.17.4 Project Management _____ 4.17.5. Other Implementation Issues 100 418 Issues in Strategy Implementation 100 4.19 Strategy and Project Assessment _ 101 4.19.1 Needfor Assessment. __ 101 4.19.2. Measuring results = 101 _____ 4.19.3 Finalization and Adjustments —_ = 102 420 E-commerce Metries _ 102 4.20.1 The Balance Scorceard 103 Activity 41 108 421 Summary __ 108 422 References 105 Unit Five: Retailing in Electronic Commerce (E-Tailing) 5.0 Introduction. 107 5a Unit Objectives 108 52 Characteristics of Products Leading to Higher Online Sales Volumes 108 53 Consumer Purchasing Process and the Marketing Plan 108 9.3.1 The Gonsumer Purchase Decision Process 110 5.3.2 Types Of Online Shoppers 110 5.3.3 Decision Criteria ut = 5.3.4 Marketing Plan = SoM 54 ____ Online Purchase Decision Aide 112 5.4.1 Shopping Portals 12 __ 5.4.2 Shop Robots and Agents 113 5.4.3 Trust Verification Sites 135.4.4 Other Shopper Tools 13 55 E-tailing Business Models 413 5.5.1 Direct Marketing 4 5.5.2 Pure-Play E-Tailers __ 14 5.5.3 Traditional Retailer With Web Sites. 5 56 On-demand Delivery Service 15 5.7 ____ Digital Delivery Music Software, News And More 115 38 ‘Successful Click-and-mortar Strategie 116 5.8.1 New Developments 6 ~ Activity 5.1 ui7 59 Disintermediation, Reintermediary, Channel Conflict and Personalization 118 5.9.1. Disintermediation and Reintermedi 118 5.9.2. Channel Conflict 8 5.9.3 Personalization 19 5:10 ___ Problems With E-tailing 9 ‘Activity 5.2 119 5.1 Summary 512 Refers Unit Six: Advertisement in Electronic Commerce (6 ok ert as 61 Unit Objectives 124 62 Internet Advertising Terminology 124 63 Why an Organisation Needs Internet Advertising? 126 6. r 126 6.3.2 Combining Forms of Media Advertising ‘127 6.3.3 Objectives and Growth Of Internet Advertisement 127 6.3.4 Targeted Advertisements 127 6.3.5 Advertisement Methods. 17 6 Benefits and Limitations of Banners 128 7 Banner Swapping —__ 128 8 Banner Exchange 128 6.3.9 Standard And Classified Adverdsements— 129° 6.3.10 E-Mail 129 6.3.11 Mobile Phone: 129 6.3.12 Splash Screen 129 6.3.13 Spot Leasing 130 6.3.14 Universal Resource Locators a 130 64 Improving A Company’s Ranking on The Search Engines? List___ 130 6.4.1 Chat Rooms. 131 ___ 6.4.2 Other Forms of Advertisement 131 65 Advertising Strategies 131 6.5.1 Internet-Based Advertisement De: 131 66 Implementing The Strategy and Customizing Advertisement (Personalization) __ Sumas: 67 Interactive Advertisement Strategi ee 68 Using Compa: as Medium for Advertisement 135 69 Online Events, Promotions and Attractions 2s 6.10 Push Technology And Intelligence 135 6.10.1 Intelligent Agents 137Unit Nine: Internet Consumers, E-Services and Market Research 9.0 Introduction 179 on Unit Objective: 180 92 Consumer Behaviour Online 180 9.2.1 Consumer Behaviour (A model of E-Commerce Consumer Behaviour) 180 9.2.2 Consumer Types 180 9.2.3 Purchasing Types and Experiences 181 . 181 9 Gonsemer Purchasing Daciniom © AS 95 Matching Product With Customers Personalization, 183 96 How One-to-one Relationships arePractised _____——‘18 97 Delivering Customer Service in Cyberspace and Crm 188 98 Marketing Research For E-commerce 191 Activity 9.1 SERTES 1G 99 Summary ~~ 193 9.10 Reference: 194 Unit Ten: The Regulation Environment of Electronic Commerce 10.0 Introduction eaah-comeaie 195 10.1 Unit Objectir 196 10.2 Legal And Ethical Issues in Internet Marketing: an Overview 196 10.3 Protection Of Privacy eee 104 Protecting Intellectual Propery and Domain Names 208 10.5 Free Speech, Internet Indecency, Spamming and Censorship _ 208 10.6 Contracts, and Online Gambling 209 10.7 Computer Crimes ee hetiea 1 e bg Oe 10.8 Summary 2u 10.9 References 212—_____ Activity 6.1 137 ea Effectiveness and Pricing of Advertisements. 138 6.12 Using On-line Catalogues for Advertising 139 6.12.1 Evolution of On-Line Catalogues 139 6.12.2 Comparison of Online Catalogues With Paper Catalogues 140 6.12.3 Paper Cataloge: 140 6.12.4 On-Line Catalogues 141 6.12.5 Customized Catalogues 141 6.13 ‘Special Advertisement Topics 142 6.14 Permission Advertisement __ 143 6.15 Measuring, Auditing And Analysing Web Traffic 143 6.15.1 Internet Advertisement Standards 143 6.15.2 Localization rr 6.15.3 Using Interact Radio for Localizadon 144 6.16 ‘The Major Web Advertisement Player: 14 Activity 6.2 amy 6.17 Sammary 145 6.18 References 147 Untit Seven: Service Industries, Online Publishing and Knowledge Dissemination 70 Introduction ais 7 Unit Objectives 150 72 Browser Based Services. 150 73 ____ Travel and Tourism Services 150 74 Employment Placement and the Job Market 154 13 Driving Forces Of The Electronic Job Market 154 76 Online Publishing 162 7.6.1 Publishing Modes and Methods 162 ‘7.6.2 Publishing Music, Videos and Games 163 7.6.3 Edutainment _ Fisica 163 "7.6.4 Vietual Education and Online Universities 164 etivity 7.1 164 a Summary 164 73 References 165 Unit Eight: Intrabusiness, E-Government and More 80 Introduction. 167 BL Unit Objectives 168 B82 Intranets. 169 8.2.1 Intranct Functions and Applications 169 8.2.2 Intranet Application Areas and Benciia 170 Activity 8.1 176 83 Summary 17 84 References inn AEModule Overview module for Internet Marketing was designed to help students and practising Internet marketers to understand the world of electronic commerce, Information presented in this module was drawn fiom many sources including the Internet research. Internet Marketing, in this module. is used interchangeably with electronic commerce to mean one thing. The world is now moving towards an Intemet-based society. so marketing practitioners need to understand how transactions are made using the means of electronic ‘commerce.Internet Marketing Wi Utd 2 Module M&T 212 ‘The purpose of this module isto describe and explain what Internet Marketing, Electronic Commerce is, how transactions are conducted and managed - issues andrrisks. This module has also been designed for the use of computers and the flow of information in corporations and businesses as well as other small or large organizations. ‘twas also designed to accommodate and fill the needs of the growing courses onmanagement information systems, which do not purely focus ontechnical aspects of information technology, but which seck to relate management information systems to the needs and uses of various organizations conducting, their businesses through online services. The concept, “Management Information Systems”, is defined as the effective design delivery, use and revolution of information technology in onganizations and the human society. The moduleincludes the following units: 1. Introduction to Internet Marketing Fundamentals (Electronic Commerce). . Internet Marketing Economy/Internet Marketing Economy. Zi 3. The Internet Marketing and the Elements of Electronic Commerce. ‘ommerce Strategy Formulation and Implementation. Retailing in Electronic Commerce (E-Tailing). 6. Advertisement in Electronic Commerce. 7. Service Industries, Online Publishing and Knowledge Dissemination. 8. Internet Consumers, E Service and Market Research. 9, Intrabusiness , E-Government and More. 10. The Regulatory Environmentof Electronic Commerce. ‘The development of Internet Marketing and information technology has impacted heavily on how marketing is being conducted these days, Customers have also changed their buying behaviour towards the organizations or companies marketing their products. Consumers can now buy and conduct theirtransactions using Intemet-hased facilities. Some consumersnowhave personal computers at home, whichare somehow networked. Organizations can also be able to advertise their products using the Intemet-based facilities Through database marketing, organizations can be able to profile their customers and segment their products/services ~ which are tailor-made to suit the growing and changing needs of customers. MMMM LILO Zimbabwe Open UnivesityModule Overviow dedddeeedeedldde Zimbabwe Open University Marketing Intelligence can also be realized by organizations through carrying outenvironmental scanning onthe Intemet. Competitor intelligence can now be gathered using Internet search facilities. Executives of organizations are now able to evaluate their marketing performance using Information Technology, especially through the use of Imtemet technology. The future of many organizations in terms of their operations is going to rely more on Intemet Marketing, in terms of business ‘transactions, Internet Marketing formulation and implementation has become part of high-level corporate strategy of many organizations and they can be able to realize a competitive advantage over their competitors. Organizations havenow developed an integrated marketing information system where information canbe gathered from various sources and analyzed, so that it can be used to support managerial decision-making. For many organizations, a computerized database containing information about customers has becomean essential marketing strategy. A database is simply acollection ofrelated information. Database users must be trained on howto retrieve information and how to manipulate the data using database management software. Geographic Information Systems is also essential asit assists marketers in carrying out marketing research and market segmentation. Information technology has transformed the operational activities of many organizations and the human society. Most companies have now beennetworked in terms of communication and many transactions are now being conducted online. MMOMLLCOOTLTTO LULL LOTTO 3Yous bee} LE Introduction to Internet Marketing Fundamentals (Electronic Commerce) 1.0 Introduction Se 's the manner in which transactions take place over networks, mostly the Internet technology. The Internet offers organisations a new way to market their product I services and interacts with end consumers. Intemet Marketing offers organisations new byssiness opportunities, allowirig them to quickly respond to customer needs and better- cist market demand and expectations. Many organisations today are ingmainframes, mini — or, using the Int other organisations on a local and global scale. uatersand smaller networks into company wide technology, to link their networks to those ofModule MKT 212 In this module, Internet Marketing is used interchangeably with Electronic ‘Commerce. These two words mean the same thing as they are used in the world of Internet Marketing. As we enter the third millennium, we experience cone of the most important changes in our lives —the move to an Internet. based society. Almost everything is changed athhome, in school, at wo: the government and even in ourleisure activities. ‘The purpose of this module is to describe what Internet Marketing is, how it is being conducted and managed ~ issues and risks. Internet Marketing/ Electronic Commerce isan inter-disciplinary course and, therefore, itshould be of interest to students, managers and professional people in any functional areas of the business world. Today, Internet Marketing is going through a period of consolidation where, instead of enthusiasm, carefulattention is given to proper strategy and implementation. 1.1 Unit Objectives By theend ofthis unit you should beableto. Define Internet Marketing/Electronic Commerce and describe its various categories Relate Internet Marketing to traditional marketing concepts and the marketing mix elements Describe and discuss the content and framework of Electronic Commerce/Intemet Marketing Describe the benefits of internet Marketing o organizations, consumers and society Distinguish between Electronic Markets and inter-organizational systems Explain the various forces that drive the widespread use of intemet marketing Discuss the various stages/sections of an Internet marketing business plan Build « Website for an organization. 1.2 What Is Internet Marketing/Electronic Commerce? According to Whitely (2000), Internet Marketing/Electronic Commerce isa general concept covering any form of business transaction or information. exchange executed usinginformation and communication technologies. Ittakes TULL LUCILLE LOLOL LUT 6 imbabse Open UniversityUnit 1 Introduction o Internet Marketing Fundamentals (Electronic Commerce) Mitt Zimbabwe Open University place between companies and their branches, or between companies and public administration, as wellas the organization's customers. Internet Marketing systems include commercial transactions on the Intemet, but their scope is much wider and they can be classified by application type as follows: (a). Electronic Markets: The main function ofan electronic market is to facilitate the search for the required products or service. Arline booking. systems are an example ofan electronic market, Anelectronic market isthe use of information and communication technology to presenta range of offers available in amarket segment, so that the purchaser can compare the prices and other attributes of the offers and make a purchase decision. (b). Internet Marketing Commerce: Information and communication technologies can also be used to advertise and make once-off sales of awide range products and services. This type of electronic commerce is typified by the commercial use of the Internet. The Internet, for ‘example, canbe used for the purchase of books thatare then delivered by post or the booking of tickets that can be picked up by the clients, when they arrive at the event point of collection. (©). Electronic Data Interchange (EDI) provides for the efficient transaction of recurrent irade exchanges between commercial ‘organizations. Italso provides a standardized system for coding rate transactions so that they can be communicated directly from one ‘computer system to another, without the need for printed orders and invoices and the delays anc errors implicit in paper handling. EDI is used by organisetions thatmake a large number of regular transactions, for example, banks, supermarkets and insurance companies. EDI is normally used in large supermarket chains likeOK and 1M supermarkets. Wigand (1997) defined Internet Marketing/Electronic Commerce as the seamless application of information and ‘communication, from its point of origin to its end point, along the entire value chain ofbbusiness processes conducted electronically, and designed tocnable the accomplishment ofa business goal. These processes may be partial or complete and may encompass business-to-business as well as business-to- consumerand consumer-to-business transaetions. European Union website defined Intemet Marketing/Electronic Commerce as a general concept covering any form of business transaction or information exchange executed using information “dda LMU ATLL LLU TULALOTLLTOOLULLLU TTL 7Internet Marketing Module MKT 212 technology, between companies and their customers, or between companies and public administrations. There are two major types of Internet Marketing: (@ _ Business-to-consumer ~ online transactions that are made between businesses. Gi) Individual consumers, such as when airlines sell tickets to travellers. Gi) Business-to-business transactions — businesses make online transactions with other businesses such as when businesses purchase parts, fuel or servicesonline. 1.3 Internet Marketing And The Marketing Concept Marketing id WAMU LLU ULL ttt tlle 5 Kotler and Armstrong (1996) have defined marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others Human needsare states of felt deprivationand they are complex. Wants are the form taken by human needs as they are shaped by culture and individual personality. Emphasis is placed on the need to produce products or services of high quality so that you satisfy your customers in the longrun (customer satisfaction}. Customer satisfaction is theextent (o which a product's perecived performance matches a buyer’s expectations. If the product’s services performance falls short of expectations, the customer will become dissatisfied, and if he performance matches expectations, the buyer is satisfied, Outstanding marketing organizations go autto continuously keep their customers delighted through customer-satisfaction. Satisfied customers make repeat purchases: and make referrals about their good experience of the product. Many organizations have adopted total quality management programs designed to constantly improve the quality of products, services and marketing processes. Intemet Marketing s linked to the marketing concept in the sense that marketing organizations using electronic commerce need to continuously keep their customers delighted through customer satisfaction. Their services need also tobe continuously updated in terms of information as well as the provision of tailor-made products'serviees. Profiling of customers should also be done so aso realizean elective Internet marketing segmentation, Zinbalwe Open Uriveriyunit 4 Introducton to Internet Marketing F uncamentals (Electronic Commerce) Block (1996), in his paper Leveraging Electronic Commerce for competitive advantage proposes that internet web can be used to improve, transform and redefine business value in relation to meeting customer satisfaction as well as adding value to the business organization. He proposed the following elements of business value in meeting customer satisfaction: 2 Products Promotion: The Internet website is anew vehicle which can be used to promote a company’s product or service that can escape from the fixed format of paper and the limited time short of broadcast media. Itis flexible and availableat any time, is interactive, can be changed to suit the needs of the individual customer and can be used in customer feedback processes i.e. taking inputs from individual customers, New Web Channel: intemet marketing is a new form of direct selling. Ithas many advantages such as catalogue marketing and telesales and it can extend the application of direct sales to new markets, products and services. By combining the above advantages, the organization can realize a competitive advantage as well as meet the needs and wants of its customers. Direct Savings: Marketing products online reduces the costs of installing retail premises and potentially cuts staff requirements. Using a public access network system reduces the costs of network facilities. Information dissemination such as bank statements can be made available without paperwork, postage and handlingcosts. Customers can also communicate their problems directly to their suppliers of products! services. Organizations can be able 10 quickly respond to customer suggestionsand this will add value to the business organization, as well asmeet the needs and wants of customers, ‘The company can also be able to realize a competitive advantage over its competitors. ‘Time to Market and to Inform Customers: Compeniescan easily infomn their customers of any changes that might have taken place to the organization e.g. changes in price of products/services. New products can be put online as soonas they are developed. Time can be saved on many aspects of promoting and launching the product. Customers need to be quickly informed about the launch of new products as well as promoting the already existing products. Customer Service: It differs greatly between conventional and direct retail sales. Intemet E-commerce, as information reach environment WALL LLL LLL LLL Zimbabwe Open Univerity 9Internet Marketing Module MKT 212 and creates new opportunities fordirect retailers to excel in many areas ofdisseminating customer information and customer support. =~ Brand Image Building: Thiscan beestablished through web design strategies and information dissemination. Company's products can be promoted through good Internet web design strategies. The Intemet web givesan up-to-date product’simage to customers. The aura gained from being online can create confidence and charisma in comparison to conventional operations, Customer Relations: Electronic commerce allows a company to develop and establish closer relationships with its customers. The ‘company can learn the customer’s behaviour and evolve its produc! service options to meet that requirement. New Product Capabilities: Information from customers can be used tocustomize and improve the quality of products/services towards enhancing customer focus and satisfaction. Examplescould be anew bank service, or an insurance policy, or anew model of acar with new tangible features thatthe customer selected, as opposed to accepting package the supplier had determined. 1.3.1 Media differences ‘The modem Internet with its featuresis very different in terms of epplication and organization, compared to other traditional forms or methods of ‘communication like television, radio, newspapers and magazines. The Intemet e-commerce is very much advanced compared to other traditional forms of advertising and communication, i.e. it canreach a wider global market in terms of promoting the organizations products/services. The Internet E- commerce has many applications for direct sales, an online mail order catalogue, or telesales outfit without staff. The use of thistechnology can be further expanded into many uses and applications, because of its ability to create change in the way business is done and organized. ‘The other forms of media, forexample, television are owned and controlled byother people. They reacha limited numberofcustomers for eommunication purposes. The radio is limited in the sense that it does not have interactive features compared to the use of the Internet. Newspapers, magazines, radio and television are single channels of communication media, hence communication messages are transmitted one-way, with difficulties in getting, feedback. UMMM lll 10 Zinbalowe Open UniversiyUnit 4 Introduction to Internet Marketing Fundamentals (Electronic Commerce) The Internet E-commerce is a cheaper means of transmitting messages compared to other traditional forms of communication. The Internet E- commerce can reach a wider global geographical network of consumers compared to other forms of conventional media like television, radio, newspapers which are limited in terms ofreach and capacity. 1.4 Developing An Internet Business Plan (Internal Environment) ‘The Internet business plan must give details of the proposed business venture, along with expected goals and results. Inaddition, it must take into account the unique nature of Intemet Marketing. 1.4.1 Ten Sections of an Internet Marketing Business Plan “The following are the stages that are considered when developingan Internet businessplan or establishing an online business for making business transactions: @ Executive Summary ~This section must concisely communicate the basics ofan entire Intemet Marketing business plan. It should give an analysis of plans and background information for the whole project. ‘The written plan should begin with a short summary of the main thrusts, goals and recommendations to be found in the actual plan. This permits top management to gain insight into the plan without frst having to read the whole document. Hence, it gives an overall overview/snapshot of the whole business project. (i) Business Description - In this section, you should discuss your firm's products and services along with information about the industyy: The business plan revolves around the Intemet and an explanation is needed on ll items to appear on the Website. You need also to discuss how ‘your products or services and the Internet fit together or complement each other. (ii) Marketing Plan— Withthe definition of business, next you must discuss yourtarget market, identify competitors, describe product advertising, ‘explain product pricing, and discuss delivery and payment mechanisms. (@) Customers: you must define who your customers are and how many of them exist on the Internet, There are demographic studies by organizations such as the Internet Society Foundation and the Internet UMMA Zimiraloe Open Univerity 1Internet Marketing Module MKT 212 Marketing Group that can help you determine the profile of your customers. () Competitors: Use intemet search engines to look for new competitors, orsimilar products to yours. You need to use several search engines because each uses different search techniquese.g.,Netscape Navigator, Google and Yahoo. After you have identified your competitors perform anew search every few weeks or months. Companies are continuously joining the Internet, Remember, readers of your business plan will be very interested in how you are going to beat/counter competition, (© Advertising: Describe how you are going toll the Interet community about your product/service. Designing beautiful web pages is only a first step. You must also get the message outabout your web site. @)__ Pricing: How are you setting prices for your products or services? If your product has intangible information delivered over the Intemet, you should try to create some sort of pricing model to justify your prices. Youcould start by researching what others are charging for similar products. (©) Delivery and Payment: How are you going to deliver your products and get paid? E-mail alone is not secure and on-line payment services, such as Digicash or credit card can be encouraged. (iv) Research and Development: This is where you get into the technical aspects of your project. Highlight where the project is now and the research and development efforts that will be required to bring it to completion anda forecast of how much the project wil cost. Since the Internet is continually developing, you should also address continuing plans forresearch and development. (¥) Operations and Manufacturing: In this section, discuss the major aspects of the business, including daily operations and physical location. What equipment will your business require? Will yoube having your own web server or you will be contracting with another company? Who will be your employees, will youhire knowledgeable staff or train them in-house? Be sure to include cost information of the whole project. (vi) Management: This segment must address those who will be running, the business and their expertise. The business centres around the Intemet, be sure to discuss the management team’s level of Internet expertise and where they gainedit. ME MLLLLLLLLLLILLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLIOtte. n Zimbabwe Open UniversityUnit t Introduction to Internet Marketing Fundamentals (Electronic Commerce) (vil) Risks: In this section, you must define the major risks facing the proposed business project venture. In addition to regular business risks suchas downward industry trends, eost overruns and unexpected entry of competitors, also include risks specific o the Internet. For example, be sure to address the issues of computer viruses, hacker intrusions, and unfavourable new policies orlegislation. (viii) Financial: Potential investors will pay close attention to this area, since it is forecast of profitability. Asina traditional business plan, include all pertinent financial statements. Remember also to highlight the low expenses associated with operating the Intemet ss compared to those ofother businesses. (és) Timeline: in this section, you must lay out the steps it will take to make your proposal a reality, When developing this schedule, it might be heipfil to talk to other Internet businesses to get an idea of how long their Internet presence took to establish. (iix) Bibliography and Appendices: In addition to business references, include some Internet references in case your readers would like to earn more about the Intemet as part of studying your proposal. 1.5 Putting Your Business Online On The Internet UMMUMILTLTTTTTTUIULLUTLLT Zimbabve Open Univenity ‘The Intemet is not just for those electronic commerce organizations selling bobbles and gadgets. Even if your company does not offer specific products for sale, placing your businessonline will sell you and your services. Whether youre business-to-consumer or business-to-business, the web creates a great opportunity to enhance services as well as extend your marketing reach toaglobal scale. . ‘The benefits of being on the Internet are the size of the audience and the vastness of what the potential customer can learn about your company. With the limitless power of the Internet, companies have found that placing their services online has enhanced their business plans, adding anew scope of intemational marketing that they never knew is possible. A vast audience is given an opportunity to learn about your company’shistory, service, future plans and staif and respond with e-mails or questions via message boards. MMT TUMOLULUTTOTATLIOTILLLLUTTL LTT Tt BIntemet Marketing Module MKT 212 The Internet may be expensive but your company base needs to benefit from placing the business online. Small businesses can take offthe vast quantity of vendors, with free or inexpensive software for building a website, Putting 2 business on the Internet will give the luxury of analyzing the interaction your company has with your customers through online customer commenting and also enable you to track the number of hits your site has received that may + generate new or repeat sales, customer loyalty and retention. Business should attempt to follow the three C’s when setting up their services and marketing plan onli (a) Content: What is the value to the consumer? (6) Community: Whatcan users learn througha community environment ‘on the site, based on chat rooms, message boards and forums, as well as experts offering them assistance? (©) Commerce: Do businesses nowhave the ability to engage in a purchase oftheir services online? ‘Another thing to consider when setting up yournew web site is whether viewers are able to ezsily navigate throughit. Work with a professional designer, either in-house or offsite to ensure that yoursite is user-friendly and quickly navigable. The speed with which your web pages and graphics download, determined bycompatibility of your site with multiple browsers and connection speed is also importantto the success of your site. The benefitsofinexpensive marketing coupled with a newly-found reach to a global audience will quickly prove placing your company online a wise choice. ‘This decision will open upa floodgate of opportunities for your business. 1.6 Building A Website for an Organisation With the rapid growth of the Intemet, businesses are beginning to find new ‘ways to expand and exploit their opportunities. Most business sites lack focus and functionality. Others simply fail to take advantage of their full potential. ‘The Internet is proving to be the great equalizer, allowing the smallest of businesses to access markets and present a presence that allows them to compete against the giants in the industry. There are a number of issues that are considered when building a company website/establishing an online presence: WHLMULILLLLLLLLLULLLLLLULLLLLLULLLLULLLULLLL LLL LULL 4 inoabae Open UniversityUnit t Introduction to internet Marketing Fundamentals (Electronic Commerce) Linrabwe Open University @ — Doyounced a website for your organization? (@) _Abvsiness should think about what they intend to accomplish by establishing a website, Once answered, this will lso guide ‘you through some of the options available. Thereare three main reasons why businesses establish websites: () Marketing © Customer support @ Sales. Most current sites on the web are merely a marketing presence and this may be youronly goal, Determining the purpose of your site will seta framework for your organization. Many organizations have found out that the Intemet is a wonderful resourceto offer customer service, provide product specifications and furnish online answers to thenumerous questions they receive and deal with everyday. Ifthis goal is also part of your website, then you have to make iteasy foryour customers to find the information they are efter. Many sites are set up to go beyond general marketing and to actually generate an order, often unassisted by any human interface. The simplest version of this might include instructions to print a page, fill in order detoils and fax it toa given number. More sophisticated sites have an easy access to manoeuvre ordering processes with proper order calculations done, including shipping and sales tax, The most advanced sites allow an option of accepting an order and approving the credit card information while the customer is online. Budget: Setting up and running a business web site will need a lot of resources. Having determined your reasons for creating your site, you should be better able to consider the costs. The difficulty here is that the eostscan vary substantially. This is new technology, with numerous options evailable. t would be good for a business owner to do research ineach area where dollars are to be spent. The main questions task in starting this process are: @) Will Town/run my own server? Do I need to? (b) How will mysite/server be connected to the Internet? © Who will design my site? @__ Dol want to accept orders online? © Whowill maintainmy site? Will Ineed,toor wantto interface my web page with existing databases, order systems or accounting systems? LILLIA 6Internet Merketing Module MKT 212 (ili). Set up and Design: ‘There isno shortage of experts who will help you indesign and putupa site. Site size and complexity can vary immensely. Many computer literate individuals have selected not to go to consultants atall. With the excellent web design development tools available today, such as Microsoft FrontPage, many are able to get a website designed with only a few days work. Ifyou do the work yourself, check it or both Netscape and Microsoft browsers and design fora 15 monitor. ‘Adding large graphics, animation and music may be impressive to the designer, but most users do not have the plug-ins to hear the sound. Consider establishing your own domain name if youare serious about your site. You can apply directly to InterNie (http:/Avww.internic.ret) to getan address such as www.company.com which will be perceived asmore credible than obviously hosted site. You will need to find an Internet service provider usually local and make arrangements to either host yoursite or server or provide appropriate connections. (iv) Attracting Customers: There is an endless stream of information available onthe Internet about how best to market your site. Registering your site with a few search engines is recommended. The net isan ever-changing environment and marketing should be considered more thana one-time effort atthe time you create your site. (%) Merchant Account: Merchant account is an industry term meaning a banking relationship that allows a business to accept credit cards. Most existing businesses will already have established sucha relationship and you certainly need this capacity to accept credit card orders on the web. (vi) Accepting Credit Card Orders: On he Net you will need a secure server. There is alot of concern about security on the net. Most ofthis concern is dueto misinformation and the Internet continues to improve itself as a safe medium for transactions. It is important to follow established connections in Internet security, which means utilizing a seoure server for credit card transactions. A secure serveris one running software capable of establishing a secure connection with your customer’s Internet browser using SSL (secure socket layers) technology that encrypts all transmitted information. Most net buyers, insist on this connection before entering credit card information. You should find a secure server to host the site. (if) An Order Form: When you request forcredit card information you need to be able to automatically subtotal the order, add shipping and handling and calculate sales ax, ifappropriate, based on the buyer’s AMMA MLL LLU, 16 Zimbabwe Open UnivesityUnit 1 Introduction to Internet Marketing Fundamentals (Electronic Commerce) location. You need to purchase software to try and integrate it to your ‘company’s site, or you can outsourec this function by subscribing toa service provider. (vill) Online Clearing: You need also to have the optionto consider clearing/ authorization of the credit card, while your customeris online. This feature may be required if you are delivering information orallowinga download of purchased software from your site, If your business is solely Internet-based, this option would zllaw youto avoid the expense of purchasing processing equipmentor software which can be quite expensive, Unfortunately designing online clearing capability is extremely complex and thus, this option is best undertaken through an outsourcing solution. Unlike general website design, there are not many consultants available with expertise inthis area. (x) Accounting: Younced a method of tracking your orders. This can include e-mail notification, electronic receipts, online reports, intemal database tracking, online query search capability, conversion programs ete. A lot of money can be spent trying to integrate online ordering with existing business functions, 1.7 Technical Challenges A functional site for online ordering requires expertise in four different areas: “HTML (hypermarket mark up language — standard for the Internet) basic page design. — CGl-scripting (or programming equivalent for order form functionality). ODBC (open database connectivity) interface commands for data tracking. 1.7.1 Special Programs for Online Clearing Option Outsourcing is the utilization of third party service company to provide you with those pieces of the puzzle that complete the total functionality of the ‘business process. In electronic commerce usually, the most cost-effective way ‘to meet your goals isto outsource that portion of yourneeds, that you do not have the expertise for, in-house. This can allow you to get up and running ‘much faster and concentrate on your business, rather than getting mired up in technical matters. UUM LULL ile, Zimbabwe Open University 7Internet Marketing Module MKT 212 1.8 Strategies For Building A Better Website: ‘The following are some of the things which need to be done, considered and integrate when building a better website: (@) Navigation: Keep it simple and makes sure that itis consistent from page to page. No matter where you place your menu bar, either at the top or down the side, always includca small text menu at thebottom of every page. This should be used with arrows and icons to guide the visitors, providea guided tour facility, and give them the feeling that they are goingin the right direction. () _ Privacy policy: With all of the concern over privacy policy on the web, if you collect any type of information from visitors, privacy policy should be taken care of. You need to include a privacy policy. There are many online templates that will help you to create one easily. Once ‘made, post.a link to it on every page of your site. (© Contact information: Post your contact information at the bottom of every page of your site, along with your e-mail address. (@ __ Logos and Graphies: Keep your graphics to a reasonable size. No- ‘one wants to wait two minutes while your huge, beautiful logo loads on the screen. (©) Fonts: Remember fyoustray from using the standard fonts thet everyone has installed on theircomputers (such as Arial, Verdana, Times, New Roman Times) the viewer will notsee your fonts as intended. If you must have a certain type of font used, you will have fo tum it into a graphic to maintainits look. (D Makeitsticky: Include interactive features, if possible, such as live news feeds, You should create a sense of community where people will ‘want to return: You need to compile a list of your visitors’ e-mail addresses so that you can keep in touch them. E-zines helpsto keep your site fresh in the client’s minds and help to establish trust and credibility. The successful site contains powerful relevant and useful information. Easy retum to previous pages or forwards to next pages are assets, Many web sites have links that send the visitors out as they click through links, Some successful websites provide relevantand useful information, and services to visitors for free. The site is capable of gathering information about its users, normally done through surveys, newsletters subscriptions, contests, etc. This gives you the idea about ‘who your visitors are, their preferences and their reactions. WAMU LULL LLL 18 Zinababe Open UnivesityUnit 1 Introduction to internet Marketing Fundamentals (Electronic Commerce) (g) Organization: The site must have budget and personnel support and should not be dependent onroll-outs. There should be active participation of everyone involved and everyone should know what is happening. It evokes the professional atmosphere when a visitor comes in to visit. Activity 1.1 Discuss the importance of Intemet Marketing toa business organization. ‘State and explain the various stages that are involved in developing an Internet Business plan. 1.9 Eight Steps In Promoting A Website Millions of businesses have succeeded in getting a website designed and published only to see’ languish without visitors. Except for some stray surfers, no-one will see your website unless you put as much effort into attracting traffic into its content and design ‘The followingare some ofthe eight basic steps that are considered in promoting anorgenization’s website: lL Include promotable content. So-called. A website that mimics the formatand contentofa company’s rate brochure has a legitimate but limited purpose on the web. With brochure type information posted online, people wanting to check out yourcompany canhhave instant and anonymous access to what your ‘company does and how. However, unless you normally get a flood of requests for your printed brochure, this sort of web site holds little potential for stimulating sales. A profit-making promotional web site, therefore, has, tits core, something else besides what your company does and how to get in touch; valuable information that people who belong to yourpool of ideal customers will search for, recommend and return to. This appealing information should be linked to the brochure- type data so that your bait attracts surfers. Those who are directly searching for acertain kind of company ina given location will also find your site and get in touch. The combination of both elements provides the greatest opportunities. Example: You ewn an insurance company with small businesses as your best customers; so you feature tips on liability, health insurance and computer data coverage,as well as your professional profileand contact information. WILL LLLLLLLLLLLLLLLL LLL LLU Zimbabwe Open Univerity 1Internet Marketing Whi UMMM 20 3. 4 Module MKT 212 Prepare your site for registration and register with search engines. Have your web designer insert coding for the title of each page andall the key words youcan think of by which people might search. For instance, the insurance company needs keywords like these and more: liability, food. disability, data loss, computer employer, information, protection, advice and so on. With the title, keywords and a brief description of the site prepared, submit your site by visiting the search engines and looking for a button that says something like “submit URL” or “submit site”. Some of the popular search engines have been changing ownership and new ones pop up all the time. People who already know and trust your company are an excellent source of website traffic. Use announcement, postcards, voice-mail and on-hold announcements, a visit-our-website invitation on invoices and cash register receipts and include your URLon your stationary, business cards, menus, cataiogues, etc. Investigate free linking opportunities with useful content. Indicated in step | and you will be ina position to request free | inks from non-commercial sites that serve as gateways to information on your industry. Distribute media releases to relevant media outlets. Launching a website is not newsworthy, but magazines, newspapers and newsletters may want to refer theirreaders to the useful content referred in step 1. Compose aheadiine for yourpress release highlighting who would benefit from your information and how. Buy targeted banner ads, e-mail newsletter ads or site sponsorships. Banner ads, those mini-billboards at commercial websites that are sometimes blinking with animation have been declining in popularity amongadvertisers, but they do produce traffic if youare very strategic about where to buy them. If you sell maternity clothes online, for instance, buy banner eds only at sites devoted to pregnaney, not at more general ‘women sites. Ifyou can find ahigh content discussion list or e-mail newsletter for subscribers in your target market, an advert there may produce a better response than a banner advert at a website at lower cost. An equally well-iargeted site sponsorship might mean that you get aneditorial-type description of your company on their home page and MULL LULL LULL Zimbabwe Open UsiversiyUnit Introduction to intermet Marketing Fundamentals (Electronic Commerce) prominently placed links to your site from theirs. With all these types of online advertising you will have to get started by zeroing in on sites that are already attracting the kinds of visitors you want. 7. Execute targeted off-line promotion to new customers. With the previous steps taken care of, it will be time to implement promotion to people who do not already do business with youand are not entering key words into search engines. You can attract traffic by placingads for your website in appropriate magazines and newspapers. 8. Add more promotable features to your site and repeat the above steps. ‘Tomake sure this gets done, decide ahead of time ona schedule for reconsidering, updating and expanding your web site. 1.10 Business Pressures, Organisational Responses and Internet Marketing (Internet Extenral Environment) ‘To understand the popularity of Intemet Marketing, itis worthwhile to examine today’s environment, the pressures it creates on organisations, the organisational responses to those pressures and the potential role of Internet marketing, 1.10.1 The New World Of Business Market, economic, societal and technological factors have created a highly competitive business environment in which customers are becoming more powerful. These factors can change quickly, sometimes, in an unpredictable manner. Companies need to react quickly to both the problems and the ‘opportunities resulting fiom this new business environment. The pace of change and the degree of uncertainty in future is unknown, and it is expected to accelerate, and organizations will be operating under increasing pressures to produce more products faster and with fewer resources, Critical response activities can take place in some or all organisational processes, from the daily processing of payroll and order entry to strategic activities such as the acquisition ofa company. Responses can also occur in what is known as the extended supply chain, that is the interactions among a TULTTULILUTUILLTLUTTOLTLXLLULLLTLLULOLLOLLT LOCOCO Zimbabwe Open University 21Internet Marketing Module MKT 212 ‘company and its suppliers, customers and other parties. A response can be a reaction toa pressure already in existence or it can be an initiative that will defend an organisation against future pressures. It can also bean activity that exploits an opportunity created by changing conditions. Many response activities can be greatly facilitated by Intemet marketing. Organizations respond to business pressures with activities supported by information technology in ‘general and electronic commerce strategies. ‘To understand the role of electronic commerce in today’s organisations, it is useful to review the major factors that give pressure to the business environment. ‘The business environment refers to the social, economic, legal, technological and political actions that affect business activities. Business pressures are divided into the following catcgories: Market and Economic Pressures strong competition global economy regional trade agreement extremely low labour costs in some countries frequent and significant changes in markets increased powerof consumers Soe Societal and Environmental Pressures + changing nature of work force — govemmentderegulation + shrinking govemmentsubsidies incieased importance ofethical and legal issues increased social responsibility of organizations rapid political changes technological pressures rapid technological obsolescence increased innovations and new teclmologies information innovationsand new technologies ‘ — informationoverioad WULMULUUILULLLLLLLULLLUL LLL 2 Zimbabwe Open UsiveryUnit 4 Introduction to internet Marketing Fundamentals (Electronic Commerce) 1.11 Benefit ‘rapid decline in technology cost versus performance ratio. 1.10.2 Organizational Responses (Organizations can take proactive positions. Mejor organizational responses can be divided into four categories: (a) _ Strategic systems. These systems provide organizations with strategic advantages and enable them to increase their market share, better negotiate with their suppliers, or prevent competitors from entering into their territory. (b) Continuous Improvement Efforts. Many companies continuously ‘conduct programs to improve their productivity, quality and customer service. Examples of such programs include customer relationship management andtotal quality management, (© Business Process Re-engineering (BPR). Business process re- engineering occurs when a company makes major innovations in the ‘organization’s structure and the way it conducts business. Technological, humanand organizational dimensions ofa firm may all be changed in business process re-engineering, @ Business Alliances. Many companies realize that strategic alliances with other companies, even competitors, can be beneficial. There are several types ofbusinessalliances,suchasresourve sharing partnerships, permanent supplier-company relationships, and joint research efforts. ‘A more permanenttype of business alliance that links manufacturers, suppliers and finance corporation is knownas Keiretsu (a Japanese ‘term meaning a permanent businessalliance), (© Electronic Markets. Mos electronic markets require the cooperation of different companies including competitors. Thereare many vertical electronic markets and they include companies in the same industry thatusually compete with each other. and Limitations of Internet Marketing Few innovations in human history encompass.as many potential benefits as electronic commerce does. The global nature of technology, the opportunity to reach hundreds of millions of people, its interactive nature, the variety of possibilities forits use, as well asthe resourcefulness and rapid growth ofits supporting infrastructures, especially the web, will result in many potential benefits to organizations, individuals and society. CMU LOLI LLLLLLIL Zimbaboe Open Unvenity 2Internat Marketing Module MicT 24: 1.11.1 Benefits to Organizations ‘The benefits to organizations areas follows: * ° * Electronic Commerce expands the market place to national and international. With minimal capital outlay, a company can easily and quickly locate customer's best suppliers and the mostsuitable business partners worldwide. Electronic Commerce decreases the cost of creating, processing, istributing, storing and retrieving paper-based information. Forexample, by introducing an electronic procurement system, companies can cut purchasing administrative costs by as much as 70%. Supply chain inefficiencies such as excessive and delivery delays ean beminimized with electronic commerce. Pull-type processing allows forinexpensive customization of products and services nd provides a competitive advantage for companies who implement this strategy. Electronic Commerceallows for many innovative business models that provide strategic advantages and/or increase profits. Group purchasing combined with reverse auctions is anexample of such an innovative business model. Electronic Commerce allows fora high degree of specialization that is not economically feasible in the physical world. Electronic Commerce reduces the time between the outlay of capital and the receipt of products and services. Electronic Commerce supports business process re-engineering efforts. By changing processes the productivity of salespeople, knowledge, workers, and administrators can increase by 100% or more. Electronic Commerce lowers telecommunications costs —the Intemet ismuchcheaper than any othermeans of telecommunication. Electronic Commerce enablesefficientelectronic procurement thus reducesadministrative costs by 80% or more, reduce purchasing prices by 5%to 15% and reduces cycle time by more than 50%. Electronic Commerce enables companies to interact more closely with customers even through intermediaries. UWL ULL LULL 4 Zimbabwe Open UnivesityUnit Introduction to Internet Marketing Fundamentals (Electronic Commerce) % Other benefits include improved corporate image, improved customer service, new business partners, simplified processes, compressed time- to-market, increased productivity, reduced paper and paper work, increased access to information, reduced transportation costs and increased flexibil 1.11.2 Benefits to Consumers ‘The benefits of Internet marketing to customers are as follows: % Electronic Commerce allows consumers to shop or perform other transactions year-round, 24 hours aday, from almost any location. 4 Electronic Commerce provides consumers with more choices. They can select from many vendors and from more products. 4 Electronic Commerve frequently provides consumers withless expensive products and services by allowing them to shop in many placesand ‘conduct quick comparisons, 4 Insome cases. especially with digitized products electronie commerce allows for quick delivery. ‘Consumers can locate relevant and detailed product information in seconds, rather than days or weeks. 4 Flectronic Commerce allows consumersto interact with other customers in electronic communities and exchange ideas as well as compare experiences. 4 Electronic Commerce facilitates competition that results in substantially lower prices for consumers. 1.11.3 Benefits To Society The benefitsof electronic commerce to society are as follows: More individuals work at home and do less travelling for work or shopping, resulting in less traffic on the roads and reduced air pollution. 4 Somemerchandise can he sold at lower prices, allowing less affluent people to buy more and increase theit standard of living, 4 People in Third World countries and rural areas are now able to enjoy products and services that otherwise are unavailable. This includes leaming in killed professions or earning a college degree. CULULLITLTTOOTLLLLLUULLLLOLLLT LOOT LTTLU LILLIE OD Linbasrwe Open Univesity aInteretMarketing Module MKT 212 + Public services such as health-care, education and distribution of government social services can be delivered ata reduced cost and /or improved quality. For example, electronic commerce provides rural doctors access to information and technologies with which they can better treat their patients. 1.12 The Limitations Of Electronic Commerce ‘Thereare both technical and non-technical limitations of Electronic Commerce. Technical Limitations of Electronic Commerce ‘The major technical limitations of Internet Marketing are: ‘System security, reliability, standards and some communication protocols are stillevolving. ‘? Inmany, areas telecommunications bandwidths are insufficient. “Software development toolsare still evolvingand changing rapidly. Itis difficult to integrate Internet and Electronic Commerce software. with some existing applications and databases. Vendors may need special web servers, network servers and other infrastructure developments. + Some electronic commerce software mightnot fit with some hardware, orit may be incompatible with certain operating systems orcomponents. ‘With the passage of time these limitations will lessen or will be overcome. 1.12.1 Non-Technical Limitations ‘The following are the major limitations that slow the spread of Intemet, Marketing: + The cost of developing electronic commerce in-house can be very high and mistakes made due to lack of experience may result in delays, ‘There are many opportunities for outsourcing, but where and how to do itare not simple issues. Furthermore, to justify the system one must deal with some intangible benefits (such as improved customer service and the value of advertisements), which are difficult to quantify MMII ITLL TOOTIO OLLIE TTL 26 Zimbabwe Open UniversityUnit + Introduction to internet Marketing Fundamentals (Electronic Commerce) + Security and privacy are important: Privacy protection measures are constantly being improved. The Electronic Commerce industry hasa very long and difficult task of convincing customers that online transactions and privacy are very secure. — Inmany cases, customers do not trust an unknown, faceless seller, paperless transactions and electronic money —because ofthis switching, consumer preferences from physical to virtual stores may be difficult. + Some customerslike to touch items such as clothes so they know exactly ‘what they are buying, Many legal issues are as yet unresolved and in many circumstances government regulations and standards are not yet refined enough to deal with the intricacies of Electronic Commerce. + Asadiscipline, Intemet Marketing is still evolving and changing rapidly. Many people are waiting for itto stabilize before they enter into it. *% Electronic Commerce does not have enough support services. For example, at copyright clearance centers, Electronic Commerce transactions are just storting to appear and quslified Electronic Commerce tax experts are rare, * Inmany areas, there is not enoughritical mass for electronic commerce tobe successful. In most applications, there are not yet enough sellers and buyers for profitable Electronic Commerce operations. Some people fear that Electronic Commeree reduces face-to-face social interactions, and that there could be a breakdownin humantelationships. + Internet access is still expensive or inconvenient for many potential customers, Despite the above limitations, Electronic Commerce is expanding rapidly. Discuss the various benefits and limitalions of Intemet Marketing, inthe following areas: Business organization * Consumers * Society. How can Internet Marketing facilitate customization of product and services? WLLL LULL LLL Zimsabow Open Univerty 2Intemet Marketing Module MKT 212 1.13 Summary ‘The majorconcem of many organizations today ishow totransform themselves in orderto take partinthe digital world, where Intemet Marketinghas become thenonm ofmodem life, Internet Marketing and Electronic Commerce are two words that are used interchangeably to mean one thing in the world of lobal internet. The application of Intemet Marketing is based on infrastructures and is supported by people, public policies, and technical standards advertising logistics and business partners, all bonded by management. Management of organizations needs to know that Internet Marketing is real, which Internet Marketing strategies to be used, how to learn about Intemet Marketing and howtoavoid failure. 1.14 References Block, G.(1996), Presentation: Leveraging Electronic Commerce for Competitive Advantage. Online Publishing. Kuratko, D. Richardson, M. and Hodgetts (1992), Entrepreneurship: A Contemporary Approach. Prentice Hall Intemational. Turban, E. King, D. Lee, J. Warkentin M. and Chung, M. H. (2002), Electronic Commerce: A Managerial Perspective. Pearson Educational. Intemational. Whitely, D.(2000), E-Commerce, Strategy, Technologies and Applications. McGraw-Hill International UK Lid. Wigand, R.T, (1997), Electronic Commerce: Definition, Theory and Context: The Information Society. Online Intemet Publishing. WU MLM ULL 28 Zimbabwe Open UnivesityMO. Bee) Internet Marketing Economy (The Digital Economy) 2.0 Introduction ccording to Turban et al 22000), the digital economy, also known as the Internet economy, new economy or web economy, refers to the economy that is based largely on digital technologies, including digital communication networks (Internet, intranct, ct) computers, software and other related information technologies, Digital networking and communication infrastructures provide a global platform to interact, communicate, collaborate and search forinformation, For example, airlines, hotels and other service providersare attempting to bypass travel agents by moving aggressively to direct electronic Intemet distribution systems, forinstance, electronictticketing viaonline booking, asinmost airlines.Internet Marketing Module MKT 212 Large numbers of new online companies e.g. Expedia.com provide diversified travel services at bargain prices in an effort to attract individual travellers. These online services are now penetrating the corporate travel market. 2.1 Unit Objectives By the end of this unit you should be ableto: Describe the main characteristics of the digital economy Describe some economic rules of the digital economy. Explain the impactof the digital economy on trading and intermediaries * _ Explain the impact of the digital econoniy on business, 2.2 What is the Digital Economy? According to Turban et al (2002), the term digital economy refers to the convergence of computing and communication technologies through the Internet and the resulting flow of information and technology that isstimulating electronic commerceand spurting vast organizational changes. The digital economy has created an economic revolution as evidenced by the economic growth of western countries and the longest period of uninterrupted economic. expansion in history. Computer-based information systems of all kinds have enhanced competitiveness and created strategicadvantages of their own rin conjunction with Internet marketing applications for many organisations, considering their operational activities. 2.3. Market Spaces Versus Market Places The digital economy is characterised by many examples of companies that created new products, services and business models, for various organisations” operational activities. Markets play a major role in the economy, facilitating the exchange of information, goods, services and payments. In the process, they create economic valve for buyers, market intermediaries and for society at large. Accordingto Turban etal (2002), electronic markets have three main functions: _eeleeedeeee eed eee 20 Zimbabwe Open UniversityUnit Internet Marketing Economy (The Digital Economy) @ (b) _ Facilitating theexchange of information, goods, services and payments, associated with market transactions, (©) Providing an institutional infrastructure such asa legal and regulatory framework that enables the efficient operation of the market. The emergency of electronic market places called market spaces, especially Intemet based market spaces, have changed several of the processes used in tradingand in supply chains. These changes, which were driven by Information Technologies, resulted in greater economic efficiencies. 2.4 The Components Of Digital Ecosystems Inthe market spaces, sellers and buyers exchange goods and services for money or for other goods and services, and this is done electronically. The market space includes actions that bring about anew distribution of goods and services. The major componentsand players of a market space are: Digital products ina pure market space Consumers Sellers > Infrastructure > — Organization/companies Intermediaries Support services and > Content creators. Digital Products ‘The major difference between the marketplace and spaces is the possible Explain what Digitalizable products are and providea few examples, e + Whyisthe digital economy considered a revolution? * a. Use Porter’s five-forces model to analyze the impact of e-commerce con the airline and hotel industry. +. Find the impact of e-commerce on each factor and then analyze the proposed defense strategies. 2.12 The Role And Value Of Intermediaries in Electronic Internet Markets Producers and consumers interact directly in a market place. Producers provide information to customers, who then have to select from the available products. In general terms, producers set prices, but sometimes they are negotiated. Intermediaries in electronic markets, whether human or electronic can address the following five important limitations of privately negotiated transactions. 1. Search Costs Itmay be expensive for providers and consumers to find eachother. In the bazaar on the information superhighway, thousands of products are exchanged among millions of customers. Brokers can maintain databases of customer preferences and reduce search costs by selecting routing information from providers to consumers and by matching customers with products. Brokers with access to customer preference data can forecast and predict demand of their products and services. 2. Lack of Privacy Either the buyer or seller may wish to remain anonymousand protect some information relevant totrade. Brokers ean disseminate messages and make pricing and allocation decisions without revealing the identity of both parties. 3. Incomplete Information ‘The buyer may need information that the marketers able or willing to provides. Such information is about product quality and functional performance of the product/service. Abroker can gather information framsources other than the produet provider, including independent evaluators and other customers. Examples include online uavel agents, real estate agencies, and tourism industry, VME, Zinbsove Opes University 3”Internet Marketing Module MKT 212 4, Contracting Risk A consumermay refuse to pay after receiving a product, ora manufacturer may provide inferior products or give an inadequate post purchase service. Brokers use a number of strategies to reduce risks such as: @)__ Thebrokercan disseminate information aboutthe behaviour of providers and consumers. (©) [publicity is insufficient the broker may accept responsibility forthe behaviour of partiesin transactions it arranges and act as a policemen on its own. (© Thebrokercan provide insurance against bad behaviour. 5. Pricing Inefficiencies By jockeying to secure a desirable price for a product, providers and consumers may miss opportunities for intended trades, Bbrokers’ pricing mechanisms that induce appropriate trades, for example, dealing with an imbalance of buy and sell orders in stock markets. 2.12.1 Disintermediation and Reintermediation Intermediaries provide two types of services: 1. Matching and providing information. 2. Value added services such as consulting. Matching and providing information can be fully automated and itis likely 10 be assumed by electronic Intemet market places and portals that provide free services. Value added services such as consulting require expertise and itcan ‘only be partially automated. The firsttype of service in matching and providing information may be eliminated and is a phenomenoncalled dis-intermediation. On the other hand, the brokers who provide consulting services or who manage electronic intermediation are also known as re-intermediation. ‘The Web offers new opportunities for reintermediation: (a) Brokers are valuable when the number of participantsis enormous, as with the stock market or when complex information products are exchanged. WULULLLLLLLLLLLLLILLLLLLLLLLLLLLLLLLULLLLLLLLLLULLLLLLLLLILLLLLLLLLLLLLLLLLLL LULL tle 4 Zimbabwe Open UniversityUnit2 Internet Marketing Economy (The Digital Economy) (®) Many brokering servives require information processing. Electronic versions ofthese services can offer more sophisticated features at lower cost than is possible with human labour. (©) Fordelicate negotiations, a computer mediator may be more predictable and hence more trustworthy than human, 2.12.2 Syndication A new electronic commerce model isthe syndication of goods and services. Syndication involvesthe sale of the same good to many customers who then integrate it with other offerings and re-distribute it. It is extremely popular in the worldofentertainment. The digitalization of products and services and the ease with which information flows, makes syndication a popular business model. 2.12.3 Syndication Supply Chain Syndication of information is critical to the success of electronic imemet commerce. Distributors f information (content) try distinguish themselves from their competitors by providing free information to the consumers, while at the same time packaging and pricing the information. The syndicatesact as intermediaries in the chain, and the distributors usually pay the bills. 2.13 The Internet and The Value Chain. Zinbabwe Open University The value chain is a framework that identifies the activities that an organisation performs in order to create its products or services. These activities are interconnected and sequenced and can be shown graphically for each product. The value chain is used to analyze the activities by looking at the cost ofthese activitiesas well as the value delivered. The value chain can be drawn for each participant ofa supply chain and the value provided to business partners and customers canalso be analyzed. Michael Porter, the creator of the value chain concept, analyzed the impact ofthe Intemet, He outlined that the Intemet can be integrated into every type of activity inthe value chain. The magnitude and the nature of integration depends on the type and background of anindustry and organisation, He views this impact asa step of an evolutionary process in ‘which information technologies penetrate the value chain. The Internet enables the integration of the value chain and entire value systems thatisa setof value chains in anindustry. tiittlltititt a Le leeeedldelee Mitititdiittitttitittt 41Intemet Marketing Module MKT 212 ‘Anexample of prominent application ofthe intemetis shown by the following, ‘VALUE CHAIN CONCEPT ‘The Analysis Framework Source: Turban E et al 2002 2.14impact Of Internet Marketing on Business Processes and Organizations ‘The fieldofelecironic Internet marketing is relatively new and little statistical data and empirical researchisavailable. The: following model or diagram divides the impact of electronic commerce into three major categories:- (a) Electronic commerce improves direct marketing (b) Electronic commerce: ‘uansforms organizations (c) Electronic commerce: redefines organizations. UUM ULL LL lt 42 Zimbabwe Open Universityunit2 Internet Marketing Economy (The Digital Economy) WMI Zimbabwe Open Univertty Characteristics of M-Commerce Source: Turban E et al 2002 2.14.1. Improving Direct Marketing ‘Traditional direct marketing was done by mail order and telemarketing ‘The following information applies to the use of electronic Intemet marketing with regard to direct marketing. — Productpromotion, Electronic intemet marketing enhances promotion of prodticts and services through direct marketing, information-rich and interactive contact with customers. New Sales Channels. Intemet marketing createsa new distributorchannel for existing products. “This is dueto the directreach to customers andthe bi-directional nature ‘ofcommunications. ULL B MULL LLLInternet Marketing Module MKT 242 % Direct Savings. “The cost of delivering information to customers over the Intemet results in substantial savings to senders. Major savings are also realized in delivering digitalized products versus delivery of physical products. Reduced Cycle Time The delivery of digitalized products and services can be reduced to some seconds. The administrative work related to physical delivery especially across international political boundaries, can be reduced significantly, cutting the cycle time by more than 90 percent. Cycle time ‘can be reduced through improvements along the supply chain. ? Customer Service Itcan be greatly enhanced by enabling customers to find detached information online. For example, DHL, FedExand other shippers allow customers to trace the status of their packages. Brand Corporate Image nthe Web, new comers can establish corporate image very quickly. Corporate image facilitates trust, which is necessary for direct sales. 2.15 Other Marketing Related Impacts Customization Internet marketing enables customization of products and services. If properly done, one can achieve mass customization that provides a competitive advantage and increasing the overall demand of the productsiand services. Advertising With direct marketing and customization comes one-to-one or direct advertising which is much more effective than mass advertising. Itcreates a fundamental change inthe manner in which advertising is conducted for online trades and for products and services that are ordered and shipped in traditional ways. Ordering Systems Taking orders from customers can be improved if itis done online, reducing both processing timeand mistakes. Electronic orders can be quickly routed tothe appropriate order-processing site. This saves time and reduces expenses so that sales people have more time to sell products, When ordering online, customers can configure orders and compute their costs, saving time for all parties concerned. ULM LLL “4 Zimbabwe Open Uriversiy